Property law: Perpetual usufruct - the ownership of buildings and the right to transfer
If there are any buildings on land subject to an RPU, they are always owned by the usufructuary (i.e. the holder of the RPU). If a usufructuary builds new buildings, they would also belong to the usufructuary. However, once the RPU is terminated, ownership of the buildings will transfer to the owner of the land and the usufructuary will receive compensation for the buildings equal to their market value. But compensation will only be given if the buildings were erected in compliance with the agreement granting the RPU.
Just as in ownership, an RPU is freely assignable and may be transferred to third parties. However, once an RPU is sold, the new title holder should be registered in the relevant land and mortgage register, otherwise the transfer will not become effective. The obligation to register the new RPU holder also applies when the RPU is newly established by the owner of the real property. It should be underlined that when selling an RPU to undeveloped land, the local authority will in most cases have a pre-emption right to the RPU. If this right is not observed, the sale would be deemed invalid. Therefore, it is essential to inform the local authorities about such a sale.
An RPU may only be transferred by an agreement drawn up in the form of a notarial deed. In addition, similar to ownership, the usufructuary may lease land under an RPU in whole or in part, and may encumber the property with the necessary servitudes. There are also no obstacles to encumbering an RPU with a mortgage, which is very important from the commercial point of view for real-estate investors.
RPU is clearly quite different to freehold. But it has the advantage of being much stronger than leasehold. RPU constitutes a separate category of title that can be easily used for commercial purposes. It gives the holder a good deal of security, but, still not as much as ownership.
Janusz Dzianachowski is an associate at Linklaters law firm E-mail: janusz.dzianachowski@linklaters.com
