Belgian property law enters new era as reforms come into force
Published on 3rd Sep 2021
Overhauled rules reflect how real rights are used in the contemporary Belgian property market
The long-awaited modernisation of property laws in Belgium that came into force on 1 September 2021 is the most far-reaching reform of the country's property law since the Code Napoleon of 1804.
The legislator, on 17 March 2020, approved the act of 4 February 2020, which contained Book 3 on Goods of the new Civil Code, and introduced a property law that has been modernised, offers in-creased flexibility and integrates the (formerly scattered) property law rules into a more structured single code.
The new legislation aims to bring Belgian property law into the 21st century and takes into account the modern use of real rights by real estate professionals, while carefully balancing the recurring tension between legal certainty and contractual freedom.
Contractual freedom and limitations
To ensure flexibility, the new property law mainly contains supplementary legal provisions, from which parties can contractually deviate. Exceptions to this rule can be found in a limited number of specific provisions which the legislator explicitly qualifies as mandatory law (for example, terms of certain real rights) and in the definitions of the real rights.
If an agreement grants a real right that would not fall under such mandatory definitions, there is a potential risk of requalification of that agreement, which in turn could result in important tax consequences as well as modifications in the mutual responsibilities and compensations between parties.
In terms of real rights, what are the new mandatory definitions and what are the most important changes with regard to the usufruct right (vruchtgebruik or usufruit), building right (opstal or superficie) and long-term lease right (erfpacht or emphytéose)?
The new property law defines usufruct right as conferring "on its holder the temporary right to use and enjoy a property held by the bare owner, as a prudent and reasonable person, in accordance with the destination of that property and under the obligation to return the property at the end of the usufruct right."
In terms of duration, there is no minimum term. The maximum duration of an usufruct right granted to companies is 99 years (instead of 30 years under the old property law). The usufruct right terminates on the date agreed by the parties, and in each case upon the dissolution of the usufruct holder, which includes bankruptcy or a voluntary, legal or judicial dissolution. A merger, partial demerger or similar operation of the usufruct holder, does not however cause the usufruct right to terminate.
Bare owners and usufruct holders have to cooperate more closely and the latter is also granted rights during the period of usufruct, such as the right to a yearly visit of the property.
In addition, the bare owner, who (unless otherwise agreed) still bears the costs and responsibility for major repair works, now has the right to claim a proportional contribution of these costs from the usufruct holder.
The updated law defines a building right as "a real right granting the ownership right of volumes, whether built or not, in whole or in part, on, over or under someone else's land, for the purpose of having buildings or plants therein.”
The new property law increases the maximum duration of a building right from 50 to 99 years without any minimum term. A perpetual building right can be established for public domain purposes or in case the building right creates “property in volume”, as under the new property law, a building right is expressed in terms of volume. Hence, the holder of a building right is the owner of the volume to which his right relates.
Long-term lease right
The new legislation also defines a long-term lease right as "a real right in rem granting full use and enjoyment of another person's property that is immovable by nature or by incorporation. The long-term lessee may not do anything that would reduce the value of the immovable property, subject to normal wear and tear, age or force majeure. He may, unless otherwise stipulated, change the use of the immovable property.”
The former minimum duration of 27 years under the old property law is reduced to 15 years. In addition, under the new property law, it will be possible to establish a perpetual long-term lease right for public domain purposes (instead of the maximum term of 99 years).
The former mandatory payment of a (yearly) lease compensation has lapsed under the New Property Law. Furthermore, the preservation of the value of the immovable property is an obligation of the long-term lessee, but the legislator left the definition of “value” open to interpretation (timing of the determination of the value, what in case of demolition and reconstruction, etc). Hence, specific clauses in that regard are essential when drafting long-term lease agreements.
Real rights and the public domain
With regard to public goods, the new property law confirms that they belong to the private domain (private property of public authorities), unless they are destined for the public domain (use for all, public interest). Goods in the public domain shall not be subject to prescription (verjaring or prescription), nor shall they be the subject of accession (natrekking or accession) or of any other form of acquisition (oorspronkelijke verkrijging or originaire d'acquisition). However, a personal or real right of use may exist on public property to the extent that it does not prevent the public use of that property. As mentioned, building rights can also be perpetual, if they are established for purposes of the public domain. As mentioned, building rights and long-term lease rights can also be perpetual, if they are established for purposes of the public domain.
In order to safeguard the financing of infrastructure and other public projects, an exception is also made to the general rule that an accessory building right originating from a principal right of use to real estate with the authority to place structures or plants on it, cannot be seized or mortgaged independently of this principal right. After all, if the principal right would be administrative right of use, such as a domain concession or a domain licence, it could (as a general rule) not be seized nor mortgaged. The urgency act of 12 July 2021 therefore stipulates that the accessory building right can be seized or mortgaged independently, if the principal right is an administrative right of use.
The new property law applies to all acts of law that occur as from 1 September 2021. However – unless otherwise agreed between parties – the new property law will not apply to future consequences of an act of law that occurred prior to 1 September 2021 nor to acts of law (for example, notarial deed confirming a real right previously established by private agreement) that occur as from 1 September 2021 but which refer to a real right that was established (for example, by private agreement) prior to that date.
Furthermore, it is important to note the difference between the future "extension" of a real right versus its renewal. In case of an extension, as from 1 September 2021 of a real right established under the old property law, the latter will apply. However, in case of a renewal, as from 1 September 2021, of a real right established under the old property law, the new property law will apply.
When navigating these new sets of rules, specific care is required when establishing new or modifying existing real rights.
Osborne Clarke would be happy to assist you navigating these rules. If you have further questions on this topic, do not hesitate to contact us.
This article will be followed up by an in-depth review of some of the specific changes, including the main real rights – building rights, usufruct rights and long-term lease rights – used on the market, and of the newly established volume ownership.