Perpetual Usufruct in Polish LawOrigin, content and application English version
P age |2IndexExplanatory Memorandum ............................................................................... 4Introduction ....................................................................................................... 5The Perpetual Usufruct. Historical origin .......................................................... 6The Perpetual Usufruct. Configuration, dynamic and content .......................... 8Rights and duties of the usufructuary ............................................................. 11The Perpetual Usufruct. Current trends in Polish Real State Law ................... 12
P age |3BibliographyDANIEL CHOJNACKI AND OTHERS Polonia: Un país generador de oportunidades. Claves legales para lainversión, Warsaw: Polish Agencia for Enterprise Development, 2008.DELOITTE ADVISORY SP. Z.O.O. AND POLISH AGENCY FOR FOREIGN INVESTMENTS ¿Cómo hacer negocios enPolonia? Guía del inversionista en Polonia, Warsaw: 2008. ISBN 83-60049-48-3CINCO DÍAS Guía del mercado inmobiliario 2007, Madrid: Cinco Días, 2007.‘SERRANO INTERNACIONAL’ LEGAL OFFICE Aspectos administrativos, fiscales y legales de la inversióninmobiliaria en Polonia, (www.serrano.pl)ERNST & YOUNG Y DOMAŃSKI ZAKRZEWSKI PALINK Doing Business in Poland. Guía para hacer negociosen Polonia, Warsaw: 2007
P age |4 Explanatory memorandum The recent integration of Poland in the European Union, has increased the Spanishinvestment made in that country, being the Real State industry one of the fauvoritedestinations for such investment. So, in the propper examination of the Polish legal system,largely depend on the success or failure of any investment. The nature of the current Polish real state law is far from the controlled and rigidcommunist system of he past decades. However, even today there are still some legalinstitutions inherited from that period such as the perpetual usufruct. Over the next few lines, I will analyze the historical origin of this institution, itsconfiguration, and its nature, as well as its current trends and future prospects.
P age |5 Introduction The regulation made by the Polish Civil Code(Kodeks ciwilny) of property Law, can be described, ingeneral terms, as consisten with the nature of theregulation that just makes the Spanish Law. However, itis observed the existence of an institution somewherebetween property rights and a limited right ofownership (such as the use, servitude, retention, jointownership, and mortgages), known as perpetualusufruct (uzytkowanie wieczyste). In the following lines, I will analyze the theoreticaland practical implications presented by this particular legal concept, yaking into account thehistorical reasons that once identified the need of its creation, and some reasons thatcurrently have triggered the process of its progressive elimination.
P age |6 The Perpetual Usufruct Its historical origin The current configuration of the right or Perpetual Usufruct has its historical origin during the communist period, and as the final reason of its creation, the necessary stimulus that the communist Government had to give to promote housing construction on public land. Obviously, after the changes in the Polish legal system with the fall of communism, its effects on the polish legal system has been questionable. In fact, since 2005 has come into force a law that gives the possibility of converting the perpetual usufruct right to property, as I will analyze later. During the Stalinist years of the communist period (from 1948 onwards), the housing market inPoland had been virtually paralyzed by the tight control of the State carried out on the freemarketing of the soil. It has gone to establish a pre-emption law for the State against anysale referred by a landlord. This, togehther with the indiscriminate expropiation of land thatboth urban and rural areas were declared during the communist period, meant that theState were itself the sole supplier of land in the housing market.
P age |7 Population growth in Poland 1946-2008 (in thousands) + 40% The subsequent population growth experienced by the Polish cities during the decadeos 60’s and 70’s (view graphic above), forced the communist government to find alternativeways to promote construction. Under the need to control growth and urban planning ofcities, they created the Perpetual Usufruct. His concesion depended on administrativedecisions wich led to problems of arbitrariness in their adjudication. It was also necessary tofollow a slow administrative process, wich led to the country have enormous needs forconstruction of new housing.
P age |8 Perpetual Usufruct Configuration, dynamic and content Perpetual usufruct is together with the property, a subjetive relations provided inconection with a public-owned property. These, maybe placed into the administrativeboundaries of cities, or not being found within these sites, may be including in someGeneral Urban Plan. The regulation of property is found on articles 46 and following of thePolish Civil Code. Articles 232 and following of the Polish Civil Code set out the basic content of theperpetual usufruct right. It may be established by a strictly defined circle of owners (Treasuryor Territorial government authorities) in favor of another legal subject (natural or legalperson). Its constitution requires to be given in writing published and entered in the Registerof Property. As the usufructuary rights, there is no difference to held by an owner. Thus, there isabsolutely equality in this regard. With regard to the duration of the contract of constitution of the perpetual usufruct,Polish law provides for a minimum duration of 40 years, setting a maximum limit of 99. It’spossible to extend the concession of perpetual usufruct for another period of time withinthe limits set out above, having to make such a request within 5 years immediatelypreceding the termination date of the first contract.
P age |9 Content of the contract The content of the contract will vary depending on the porpoise of it, or thecharacteristics of the property. If the property in which does constitute the right contains some kind of building, theconstitution of the perpetual usufruct should be done simultaneously with the sale of allbuildings contained therein. That’s because the right of perpetual usufruct can only bepredicated on the property. Likewise, ownership of the property and everything containedtherein must lie with the same person. If the right of perpetual usufruct was granted for the purpose of constructing buildingsor facilities on the ground in question, it shall be specified in the contract the followingaspects: Commencement date and intended purpose of the work The type of building or installation to be carried The obligation of the usufructuary to take responsibility for the proper maintenance thereof The remuneration due to the usufructuary for buildings and facilities built to date of termination of the contract. Economic valuation thereof, shall be made in the extinction of the contract as the computing system agreed by the parties, or if no disposition thereof, as the present value of the buildings. The usufructuary will not be paid when the things constructed wouldn’t correspond with what was initially agreed in the contract.
P a g e | 10 In practice, this type of contract does not contain clauses like these, so it is veryimportant to examine the specific conditions on which does constitute the perpetualusufruct. The owner may terminate the contract, when the use made of the property hasbeen contrary to the clauses agreed by the parties. Dynamic of the contract At the time of constitution of the contract, the usufructuary shall pay the firstinstallment. After that, he would be obligated to pay an annual fee. The amount of the first fee, can take values of between 15% and 25% of the value ofthe land on which it is constitute the perpetual usufruct. The remaining annual installments,would take values of between 0,3% and 3% of the value of the land, and they must be payedbefore the first of march. The determination of the fee depends on the purpose for whichperpetual usufruct is constituted.
P a g e | 11 Rights and duties of the usufructuary The usufructuary is obliged to meet the payment of fees and to use its right asstipulated in the contract of perpetual usufruct constitution The usufructuary has the right not to be violated in the use and enjoyment of the property by third parties, as long as its conduct would be consistent with what was agreed in the contract. The usufructuary may dispose of and convey its right to perpetual usufruct, both inter vivos and mortis causa. With regard to the rules governing such transfers, itshall be apply by analogy Articles 237 and following of the Polish Civil Code. The buildings already constructed on the property at the time of the creation of theperpetual usufruct right, as the subsequently made therein, shall be property of theusufructuary. The property of the buildings contained in the land, and the right of perpetualusufruct on it, may not belong to two different subjects. The transfer of the ownership of thebuildings cannot be done without the corresponding transfer of the perpetual usufruct.Likewise, the right of ownership of the property (publicly owned) can only be transmitted tothe usufructuary thereof.
P a g e | 12 The Perpetual Usufruct Current trends in Polish Real State Law Currently, the housing market does not distinguish between ownership and perpetualusufruct. Both of these rights, without distinction, are the subject of property transactionsreaching the terrains the same prices, regardless of whether it is right to ownership orperpetual usufruct right. In particular, perpetual usufruct doesnot prevent the realization of real state and its successfulcommercialization. It is important to note that in October of 2005, came intoforce the Law of 29 of July of 2005 of the conversion ofperpetual usufruct right to property right. The objectivepursued by that Law is to remove from the Polish legal systemthe legal concept or perpetual usufruct. The Law has enabled aperiod of time (until December 31, 2005) to request theconversion. To apply for the conversion, it is necessary that the property on which was onperpetual usufruct right have been built or is going to be built housing or garages, or that theproperty would be a rural property. Conversion may be request by the holder of perpetualusufruct right, at the time to entry into force to law of July 29, 2005. In return for theconversion, the usufructuary must pay the property owner the amount determined byadministrative decision.