Reform of property law - Long-term lease right

The long-term lease right is de ned as “an in rem right of use conferring full use and enjoyment of an immovable property by nature or by incorporation belonging to someone else [it being understood that] the long-term lessee may not do anything to diminish the value of the encumbered property, subject to normal wear and tear, obsolescence or a case of force majeure; he or she may, except where otherwise provided, change the destination of the immovable property”.

The essential features and main principles are as follows.

Temporary right

Long-term lease rights remain temporary rights, with an exception for long-term leases granted on public domain properties. The minimum duration of the long-term lease right is however reduced from 27 years to 15 years. The maximum duration remains 99 years.

As in the case of usufruct, the parties may decide to extend the duration of a long-term lease right, within the limit of 99 years. At the end of the long-term lease right, the parties may renew it by express agreement.

Prohibition on diminishing the value of the property

The long-term lessee is prohibited to reduce the value of the property, subject to normal wear and tear, obsolescence or force majeure.

“Many questions remain unsolved as to the prohibition to reduce the value of the property”

This essential feature of the long-term lease right was already present in the old Act on long-term leases and is now included in the de nition of the right. However, it is regrettable that the legislator did not take the opportunity to specify this obligation in more detail, considering the long duration for which such a right

is generally established. In particular: (i) at what point should this “value” be determined, (ii) at what point should this prohibition be veri ed, (iii) can the long-term lessee proceed to the destruction-reconstruction of the encumbered property given the long duration of his right? In this respect, we believe that the parties remain free to de ne the concept of “value”, without however being able to undermine the principle.

Obligations of the long-term lessee

The long-term lessee shall be liable for the payment of all charges and taxes and shall carry out all maintenance and major repairs during the term of his right.
During the term of his right, he may also change the destination of the encumbered property and make the improvements he considers necessary. He may also build new constructions and encumber the property.

End of the long-term lease

As in the case of a usufruct right, the buildings and plantations built by the long-term lessee become the property of the long-term lessor by accession at the end of the right; compensation is then payable by the long-term lessor. This is new: in the old Act on long-term leases, no compensation was provided for.

“The differences between commercial leases and long-term lease rights seem minor, but the exact quali cation of the contract remains important”

Increased attractiveness of the long- term lease right?

The reduction of the minimum duration to 15 years could result in an increased attractiveness of the long-term lease right in the real estate practice, in particular if compared to a (commercial) lease. The mandatory provisions applicable to a commercial lease, including the right to terminate every three years and the right to renew, the indexation and price revision, do not apply to long-term leases. However, it will remain for the parties to determine the allocation of the charges between them, as the applicable legal regimes are also essentially different on this aspect.