- According to media announcements, the government is planning to completely abolish perpetual usufruct
- It is worth remembering that it is a very popular form of land enjoyment in Poland, and its abolition may have far-reaching consequences
- Moreover, legal solutions which are substantively close to perpetual usufruct can be found in many European countries
The works on the draft Act on the transformation of co-perpetual usufruct of land developed for residential purposes into co-ownership, which have lasted for nearly two years, are now accelerating. From the beginning, this legislative draft raised much controversy on the property market. In the light of the current declarations by the Ministry of Investment and Development, the works go a step further, as they envisage abolition of perpetual usufruct. Media releases indicate that the Ministry has applied for consent to such solution by the European Commission. In one of interviews, Deputy Minister Artur Soboń said that perpetual usufruct is a “relic of the People’s Republic of Poland and it is time to do away with it.” The now published draft of that Act takes the first step. It provides for the abolition of perpetual usufruct in residential construction. Obviously, it was introduced in the Polish legal system in the Period of People’s Poland, but it is no exception when it comes to European legal systems. Therefore, the fundamental question is: if there are solutions similar to perpetual usufruct in different countries, why do Polish decision makers wish to significantly restrict that construction?
Only the name is unique
It is true that the name “perpetual usufruct” can be found only in the system of Polish law – however, the much more significant element is the substance of that right, which corresponds to solutions known already to Roman law, and contemporarily to many legal systems. Accordingly, in the discussion on perpetual usufruct one should concentrate on the substance and not the name originating in People’s Poland. It should be remembered that under the Civil Code only land belonging to the State Treasury and local self-government units, in principle located in cities, may be given in perpetual usufruct – under the contract, the usufructuary acquires the right of exclusive use of the land and only within such limits he may dispose of his entitlement. As a rule, land is given in perpetual usufruct for 99 years, and the usufructuary may erect buildings on the plot, which become his property. Moreover, throughout the period of perpetual usufruct, the usufructuary is obliged to pay annual fee. However, the ownership of buildings and equipment vested in the usufructuary is a right linked to perpetual usufruct. The consequences of the foregoing are manifold. For example, separation of premises in a building situated on land held in perpetual usufruct gives rise to a situation in which three interrelated rights arise: ownership of the premises; co-ownership of common parts in the building and co-perpetual usufruct of the land.
In short, perpetual usufruct is an intermediate right between “full” ownership and limited rights in rem. In practice, the State Treasury and local self-government units taking advantage of the construction may raise funds on their land. On the other hand, perpetual usufructuaries may enjoy a right very close to ownership but much “cheaper” than that. From the historical perspective, such constructions are nothing new – already ancient Romans developed legal institutions allowing to construct, enjoy and dispose of a building erected on another person’s land. In terms of substance, solutions very close to the Polish perpetual usufruct can be found in Belgium, Finland or the United Kingdom. For example, in Finland there is a “right of development,” whose holder becomes the owner of the building erected on another person’s land. Such contract is usually concluded for a period of 30-90 years. For its part, the Belgian legislator provided solutions allowing to enjoy an immovable property belonging to another entity, e.g. by erecting buildings or cultivating land.
What does the Ministry propose?
In recent days, the media announcements of the Minister of Investment proved correct as regards “very advanced” works on the transformation into ownership of perpetual usufruct relating to land on which residential and commercial premises in blocks or single-family houses are situated. Indeed, the recently published – yet another – version of the draft Act abolishing the right of perpetual usufruct provides for transformation ex lege of perpetual usufruct into ownership in case of lands intended for residential purposes. These amendments are to enter into force on 1 January 2019. Naturally, they do not mean total abolition of perpetual usufruct but only its significant restriction – in addition, in the area which gets most benefits from the discussed type of legal solutions. It is worth mentioning that for the first time a draft Act transforming perpetual usufruct into ownership of land was presented by the government in December 2016. However, it was met with severe criticism of different groups, which is why in June 2017 a new draft was put forward. It is still published on the website of the Government Legislation Centre. According to the information presented on that site, the draft has “stalled” in the Economic Committee of the Council of Ministers last October. Also that draft was received with criticism by various groups, especially local self-government units which feared losing incomes from the fees for granting land in perpetual usufruct. Therefore, the current draft – despite objections that can be voiced – must be considered a much more moderate solution than the one originally planned.
At the same time, the designers secured relatively well the interests of the existing owners of land granted in perpetual usufruct – usufructuaries will bear the cost of the transformation by paying an annual fee for a period of 20 years. According to the assumptions, the “transformation fee” is to be a kind of compensation for the lost benefits of the State Treasury and territorial self-government, and its amount will – in principle – correspond to the amount of perpetual usufruct fee calculated as on 1 January 2018.
Abolition of perpetual usufruct – a risky step
The ongoing governmental works on the draft Act do not permit its full evaluation – obviously, at that stage many solutions may still be changed. However, another draft Act transforming perpetual usufruct into the ownership right should be at least considered disturbing to the entire property market. In the first place, it must be remembered that it is a very popular form of land enjoyment in Poland, and it is difficult to consider the tenure a “relic of the People’s Republic of Poland.” There are many factors which make it attractive. First of all, one should point to economic reasons – in certain situations perpetual usufruct of land may be cheaper than its purchase. Moreover, bearing in mind locations of land held in perpetual usufruct, they are often very attractive to investors. Depriving them of the opportunity to take advantage of perpetual usufruct will result in the necessity to purchase land and, at the same time, invest much higher funds. This, in turn, will have a direct bearing on the price of apartments – which definitely is not going to facilitate their acquisition. Naturally, this does not mean that the currently applicable model of perpetual usufruct is perfect and does not call for any reforms. It is quite the opposite. However, reform and refinement of solutions which in fact have origins much older than legislation in People’s Poland is one thing and complete abolition of an institution which in many situations proves useful is another.