The next article in our Tuesday Mornings for Construction series on perpetual usufruct is devoted to the expiration of perpetual usufruct and its consequences. Despite its name, this right is a fixed-term right—established for a maximum of 99 years.
This period may be extended, however, due to the change (extension) and standardization of perpetual usufruct terms, which we wrote about last week ( #67 ). Because perpetual usufruct as we know it has been in operation for almost 60 years, we are currently only halfway through the term of the rights established at the earliest. Therefore, little is said about the expiration of perpetual usufruct and its effects, although more should be said – especially since this right can expire before its established term, and the consequences of expiration are significant.
Pursuant to the Real Estate Management Act of 21 August 1997 ("UGN"), perpetual usufruct expires upon the expiry of the period specified in the agreement granting perpetual usufruct, or before that period by termination of the agreement. However, these are not all instances in which this right expires. It also occurs as a result of expropriation, the waiver of the right by a state or local government legal entity, or upon the acquisition of ownership of the property by its perpetual usufructuary. It should also be noted that deletion of the perpetual usufruct from the land and mortgage register is not necessary for the expiration of the right of perpetual usufruct. It expires upon the occurrence of a specific event .
One of the consequences of the expiration of perpetual usufruct is, above all, that the landowner becomes the owner of the buildings and facilities. The perpetual usufructuary is then entitled to compensation for buildings and other facilities constructed by them in accordance with the agreement or acquired. It is also important to note that compensation is not due for buildings and facilities constructed contrary to the provisions of the perpetual usufruct agreement. The perpetual usufructuary is entitled to demolish such buildings and facilities (i.e., those constructed contrary to the agreement) for as long as the perpetual usufruct agreement remains in effect. After its expiration, the former perpetual usufructuary's right to demolish such buildings or facilities can only be derived from the provisions of that agreement.
The amount of remuneration due to the perpetual usufructuary should be equal to the value of these buildings and facilities determined on the date of expiry of the perpetual usufruct.
Furthermore, if the perpetual usufruct expires through termination of the agreement before the end of the period specified therein, the perpetual usufructuary is refunded the sum of the annual fees paid for the unused period of perpetual usufruct . However, according to established case law, this does not apply to the annual fee paid for the year in which the perpetual usufruct agreement was terminated.
At the same time, the fees are subject to indexation, with the maximum amount to be refunded not exceeding the value of the perpetual usufruct right as of the date of contract termination. However, it is unclear how to calculate this amount, as no provision refers to the value of the perpetual usufruct right or specifies how this value should be estimated.
Another consequence of the expiration of the right of perpetual usufruct is the expiration of the encumbrances established on it . The rights encumbering perpetual usufruct (encumbrances) primarily include: legally permitted limited property rights (mortgages, usufructs, easements), obligatory rights (leases, tenancies), as well as other personal rights and claims, provided they were subject to disclosure in the land and mortgage register. However, the provision specifying the expiration of encumbrances established on the right of perpetual usufruct (i.e., Article 241 of the Civil Code) will not apply in all circumstances. There are a number of cases in which the application of this provision is excluded. This will occur when, on the date of the real estate sales agreement, the previously established right of perpetual usufruct expires by operation of law, and when, on the date of the real estate sales agreement, the previously established right of perpetual usufruct expires by operation of law – in which case, Article 241 of the Civil Code does not apply. In both cases, mortgages and other rights on the right of perpetual usufruct do not expire but become encumbrances on the acquired real estate.
Finally, it should be noted that until recently, the expiration of perpetual usufruct rights caused numerous doubts and discrepancies in case law regarding the impact on separate ownership of premises located on real estate granted for perpetual usufruct . These discrepancies were resolved by a resolution of the Supreme Court, adopted on August 25, 2017 (III CZP 11/17) by a seven-judge panel at the request of the Commissioner for Human Rights, according to which "the expiry of the period for which the right of perpetual usufruct to land was established does not result in the expiration of the right of separate ownership to the premises located in the building situated on that land ." This resolution thus addressed the justified concerns of property owners. The Supreme Court indicated that its position was supported by important social considerations. Meeting housing needs through separate ownership of premises in buildings situated on land granted for perpetual usufruct is a widespread phenomenon. A different position, however, would result in the unacceptable loss of the right by the owner of the premises. It's worth emphasizing that the resolution in question also applies to commercial premises. The Supreme Court has indicated that separate ownership of premises constitutes a property right within the meaning of Article 64 of the Constitution. Therefore, there is no basis for differentiating the protection of property rights provided therein based on the type of property it covers. Therefore, it applies to both separate ownership of residential premises and commercial premises.
Today we invite you to read the next article on the subject of perpetual usufruct law, which will appear next week and will concern the termination and amendment of the perpetual usufruct agreement.
This alert is for informational purposes only and does not constitute legal advice.
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