The next series in our Tuesday Mornings for Construction Specialists series will be devoted to perpetual usufruct. Despite the entry into force of the Act of July 20, 2018, on the Transformation of the Right of Perpetual Usufruct of Land Developed for Housing Purposes into Ownership of Such Land , which, as of January 1, 2019, transformed the right of perpetual usufruct of land developed for housing purposes into ownership of such land, this specific form of ownership is still present in the Polish real estate market and continues to raise numerous concerns.
With this in mind, in today's article we would like to present the basic rights of perpetual usufruct holders related to the periodicity of perpetual usufruct, such as extension and standardization of terms. These rights may be particularly important for those planning to invest in real estate where perpetual usufruct terms are relatively short.
According to the Civil Code, land owned by the State Treasury, local government units, or their associations is granted perpetual usufruct for a period of ninety-nine years. In exceptional cases, when the economic purpose of perpetual usufruct does not require such a long period, it may be established for a shorter period, but no less than forty years.
One of the most important rights of the perpetual usufructuary related to the periodicity of perpetual usufruct is the right to request its extension for a further period of forty to ninety-nine years . This right can be exercised within the last five years before the expiry of the period stipulated in the agreement. However, the perpetual usufructuary may submit such a request earlier if the depreciation period for the planned investments on the usufructed land is significantly longer than the time remaining until the expiry of the period stipulated in the agreement.
The landowner generally obligated to recognize the perpetual usufructuary's request – refusal can only occur if there is a compelling public interest. The owner is then obligated to demonstrate what compelling public interest necessitated the refusal to recognize the perpetual usufructuary's request (an compelling public interest may be, for example, (i) another investment to be implemented on the property by the State Treasury or a local government unit to meet social needs within the framework of statutory obligations, (ii) a change in the zoning plan that prevents the realization of the purpose of the perpetual usufruct agreement, or (iii) the existence of statutory grounds for expropriation of the perpetual usufructuary). If the property owner refuses to extend the perpetual usufruct period, the perpetual usufructuary may seek a declaration of extension in court . If the refusal is unfounded, i.e., unrelated to the compelling public interest indicated above, upon filing the application for perpetual usufruct extension, the perpetual usufructuary acquires a claim for the property owner to enter into an agreement to extend the perpetual usufruct.
It should also be noted that an agreement extending perpetual usufruct must be executed in the form of a notarial deed, otherwise it will be null and void . Furthermore, for the perpetual usufruct to be validly extended, the agreement must be supported by an entry in the land and mortgage register .
The second important right of the perpetual usufructuary, related to the timeliness of perpetual usufruct, is the standardization of perpetual usufruct periods . If a given entity holds the right of perpetual usufruct to several properties under different land granting agreements that establish different perpetual usufruct terms, the entity may request that the landowner amend the contractual provisions to standardize the perpetual usufruct terms by adopting an average term . Generally, this right is available, in particular, to housing cooperatives under Article 35, Section 1(3) of the Act of December 15, 2000, on Housing Cooperatives . However, practice shows that, taking into account the principle of freedom of contract contained in the Civil Code, according to which "the parties concluding a contract may arrange the legal relationship at their discretion, provided that its content or purpose does not contradict the nature of the relationship, the law or the principles of social coexistence" (Article 353(1) of the Civil Code), not only a housing cooperative, but also any other entity that is a perpetual usufructuary can effectively apply for the unification of the terms of perpetual usufruct.
As with extensions, agreements to standardize perpetual usufruct terms must be executed in the form of a notarial deed, otherwise being null and void . Furthermore, given the accepted legal view that extending the perpetual usufruct period can be considered equivalent to re-granting the property for perpetual usufruct, and therefore an entry in the land and mortgage register is also required for this right to be established , the standardization of perpetual usufruct terms should be treated similarly. This means that an agreement concluded in the form of a notarial deed should be supported by an entry in the land and mortgage register.
In summary, the perpetual usufructuary has rights that allow them to influence the term of the land granted to them for perpetual usufruct. Whether these terms differ or the expiration date approaches, they have the right to request a change, and in the event of a disagreement with the owner, they can pursue their rights in court.
At the same time, we invite you to read the next article devoted to the right of perpetual usufruct, which will appear in a week and will concern the expiration of this right.
This alert is for informational purposes only and does not constitute legal advice.
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