Perpetual usufruct charges
Changes planned by the ministry
Legal Alert (22/2016)
Work on extensive amendments to the Real Estate Management Act is underway in the Ministry of Infrastructure and Construction. The changes are to affect such issues as perpetual usufruct charges, including those that currently raise considerable doubts in practice. Presented below are some of the proposed changes.
Disposal of the right of perpetual usufruct during the calendar year and the annual charge
In light of the applicable laws, there have been discrepancies in the decisions issued by courts with respect to the party to incur a portion of the annual charge for the period following the disposal of the right of perpetual usufruct (for instance, where the disposing party paid the charge for 2016 as a whole and transferred the right of perpetual usufruct in September 2016). Two prevailing views have been expressed in court decisions:
- first, that the party disposing of the right of perpetual usufruct may seek a refund of a portion of the charge paid for the part of the year following the date of its disposal of the right of perpetual usufruct from the owner of the real property (Supreme Court judgment of 12 February 2014, ref. no. IV CSK 284/13; Supreme Court decision of 10 April 2014, ref. no. I CSK 408/13; this view has also been approved by some common courts, e.g. judgment of the Regional Court in Gliwice of 25 March 2015, ref. no. III Ca 1221/14; judgment of the Regional Court in Kraków of 30 March 2015, ref. no. II Ca 2666/14) as an undue payment (unrelated to the actual usufruct of land);
- second, that the party disposing of the right of perpetual usufruct may not seek a refund of any portion of the charge which has been paid from the owner of the real property. A portion of the charge for the period following the date of disposal of the right of perpetual usufruct may be settled by the parties to the agreement whereby the right has been sold. This view has been expressed in decisions issued by some common courts (e.g. judgment of the District Court in Opole of 3 June 2014, ref. no. IX C 1497/14) and by scholars (e.g. T. Justyński, Commentary on Supreme Court Judgment of 25 November 2010, ref. no. I CSK 692/09).
In practice, agreements whereby the right of perpetual usufruct is sold relatively seldom address the issue of settlement of the charges incurred by the party that disposes of the right following the transfer of the right. Discrepancies in court decisions as to who should pay the charges for that period may easily provoke a conflict between recent commercial partners in the absence of appropriate contractual provisions governing that issue.
The proposed amendments provide for a clear resolution of the said issue. Under the planned Article 71.7 of the Real Estate Management Act, the annual perpetual usufruct charge is to be paid by the person being the perpetual usufructuary of the property as at 1 January of the year for which the charge applies, in the event that the usufructuary changes as a result of a transfer of the right of perpetual usufruct.
Such a change will eliminate doubts as to the portion of the charge due for the period following the disposal of the right of perpetual usufruct, which should have a positive effect. At the same time, it should not affect the possibility to regulate the issue of allocation of the related costs to the party disposing of and acquiring the right of perpetual usufruct in an agreement. At their discretion, the parties to the transaction may agree that the party acquiring the right will refund a portion of the charge incurred to the party disposing of the right.
Counting expenditure towards the charge
Under the existing Article 77.4 of the Real Estate Management Act, where the perpetual usufruct charge is increased, the value of expenditure incurred by the usufructuary to build technical infrastructure items after the date of the last increase counts towards the difference between the previous and the increased charge. Court decisions express the view that under the current regulations, only the portion of technical infrastructure expenditure incurred by the usufructuary after the first increase date may be taken into account (Supreme Court judgment of 11 December 2015, ref. no. III CSK 39/15). In line with this view, any expenditure incurred on technical infrastructure prior to the date of the first increase of the perpetual usufruct charge may not be considered if the charge is increased.
This position is considered inappropriate from the perspective of the constitutional principle of equality before the law (as indicated by the Ombudsman in one of his speeches) and it is frequently questioned. The draft amendments include a change to Article 77.4 of the Real Estate Management Act in this regard. It is to follow directly from the new provisions that expenditure incurred by the usufructuary before the first charge increase may be taken into account (counted towards the difference between the previous and the new charge). This solution is both favorable to usufructuaries and fully justified.
Changes in the perpetual usufruct charge calculation procedure
The perpetual usufruct charge calculation procedure still raises considerable doubts and provokes extensive discussion. At the same time, being unaware of the views expressed in the doctrine and court decisions may have severe implications for the usufructuary. The length of the proceedings related to increasing the perpetual usufruct charge may be an additional issue.
The draft amendments focus on some of the procedural aspects of the proceedings related to questioning the annual perpetual usufruct charge increase by:
- modifying the procedure for filing applications with the local board of appeal to ascertain that the charge increase is unjustified or that another amount would be justified – according to the draft amendments, the application is to be submitted through the authority increasing the charge (draft Article 78.2 of the Real Estate Management Act) and not directly to the local board of appeal, which used to forward the application to the authority increasing the charge;
- identifying the entity against which an application is filed by the usufructuary with the local board of appeal – according to the draft amendments, the application for ascertainment that the charge increase is unjustified or that another amount would be justified is to be submitted against the Treasury or a local government entity (draft Article 78.3 of the Real Estate Management Act). In light of the laws in force, this has frequently raised doubts of usufructuaries and the party has often been identified wrongly, which could even have led to dismissal of the action.
The aforesaid changes will somehow simplify and accelerate the procedure for questioning perpetual usufruct charge increases. Nevertheless, it seems that the procedure requires further-reaching changes.