Specific Aspects of the Right to Build

This article outlines some specific legal aspects of the right to build (superficies) and the related legal solutions in accordance with the existing legislation and the case law. As the topic is very broad, this article can cover only some of the typical characteristics of the right to build. Therefore it should be emphasized that each individual case is subject to a thorough individual due diligence process.

Pursuant to Article 92 of the Ownership Act (OA), the general principle is that the owner of the land is also the owner of the buildings, structures and plants (fixtures) thereon, unless agreed otherwise (the principle of accretion or the solo cedit principle). This principle is not applicable only in the cases provided for explicitly in the law. One derogation is set out in Article 63(1) OA which enables the landowner to cede the right to build on the land to another person and to allow the builder to acquire ownership rights to the building separately from the ownership of the plot of land. In accordance with Article 67 OA, the right to build on another person’s land (pursuant to Article 63(1) OA) is redeemed to the benefit of the landowner by statute of limitations if the right is not exercised within the prescriptive period of five years. Here comes the first specific aspect to be clarified, i.e. what will happen if the contract provides for the landowner to complete the building to the benefit of another person? The answer to this question is that there is no statute of limitations with regard to the right to build in this case. Furthermore, there is no statute of limitations for the right to build, which has been ceded as indemnity for alienated real estate (§ 11 of the Transitional and Final Provisions of the Territorial Planning Act).

Generally, the right to build is created by virtue of a contract or an administrative instrument. The most common case is the contract which, following the general rule set out in Article 18 of the Obligations and Contracts Act (OCA), should be given in the form of a notarial deed. In modern times, the typical arrangement is for the landowner to conclude a contract instituting the right to build for some units in the would-be building with a developer who undertakes to complete and ensure the commissioning of the whole building. The conclusion of a single contract which grants the right to build to a developer for some parts of a building consisting of a number of separate units (apartments or studios) is perhaps the most common practice. However, what are the legal implications if the developer who is granted the right to build fails to exercise this right within the five-year time limits prescribed by Article 67 of the Ownership Act? This question is answered in Interpretative Decision No. 1 of 4 May 2012 in Interpretative Case No. 1/2011 of the General Assembly of the Civil Law Colleges at the Supreme Court of Cassation. The Supreme Court of Cassation holds that the concept “exercise of the right to build” as set out in Article 67 OA means the completion of the rough-in phase of construction or the phase for which the building permission has been granted, although the building may consist of numerous separate units, some of which could possibly have been completed at that point of time. A failure to fulfil the obligation to complete the building within the agreed time limits will enable the landowner to cancel the contract on the right to build in court proceedings and to have its legal effect eliminated in this way. Moreover, even without cancelling the contract, the landowner can invoke the statute of limitations and claim ownership rights against the beneficiary of the superficies if the building has not been completed the building to its roof within the five-year period after the right to build was granted. In case the claim is granted, the right to build, because of its extinguishment by statute of limitations, will be returned to the landowner. The landowner will also acquire the fixtures thereon (units or floors of the building) because the right to build based on the single contract with the landowner cannot be exercised partially. This means that if the building has not been completed up to its roof, the right to build will be extinguished by statute of limitations in full rather than for the incomplete units only.

The question is what will happen to the rights of third parties who have purchased apartments or studios from the developer “off plan” in the unfortunate situation described in the paragraph above. The answer is that a subsequent transfer of an existing right to build is not binding on the landowner and therefore the right to build should be exercised within five years of its granting. Where this time limit is not observed, the right will be extinguished for all units when the landowner invokes the statute of limitations, regardless of whether these units have been acquired by third parties or not. In this sense, the landowner will acquire the completed part of the building pursuant to Article 92 OA and the developer will be entitled to invoke Article 72 OA (i.e. the developer is entitled to claim the amount invested in the improvements, which has increased the value of the property) in the capacity of a bona fide possessor who has acquired the right to build on valid legal grounds. However, it might be in the interest of the landowner to complete the building, while retaining the rights of the third parties whose units have already been built. Therefore, the landowner has the opportunity to exercise the right to terminate the superficies pursuant to Article 67 OA only with respect to the persons whose units have not been completed yet, i.e. to terminate the superficies only partially.

Another specific feature of the right to build relates to the point of time as from which it may be transferred. In accordance with Article 181(1) of the Territorial Planning Act, the right to build a building or a part thereof may be transferred from the time it was granted to the rough-in phase of construction works. Afterwards the disposal of the whole building or distinct parts thereof is possible. The law defines the completion of the rough-in phase as the time of acquisition of ownership rights to the units in the entire building. This is the time when the superficies property is considered to come into existence. Prior to that time, the construction project is real estate which is a part of an incomplete building which is fixed on the plot of land but it is not subject-matter to separate ownership rights and the right to build has not been exercised yet. The Territorial Planning Act gives the following definition of the term “rough-in”: a building or a structure with the surrounding walls and the roof completed and with or without the finishing works completed to a certain extent. Last but not least, there is the specific question how the completion of the rough-in phase is recognised formally. Prior to the latest amendments to the Territorial Planning Act (The Official Gazette, No. 16 of 23 February 2021), a statement had to be drawn to that effect by the municipal (district) administration. As a result of the amendments, the wording of the new Article 181(3) makes it clear that the completion of the rough-in phase is ascertained with a statement drawn up by the building supervisor in the presence of the investor, the developer, the designer and an official from the municipal administration.

The right to build on a co-owned property has its specific features and risks. Where a co-owner grants the right to build without the involvement of the other co-owner in the process, the co-owner granting the right to build disposes of more rights than he or she actually has. Nevertheless, the contract granting the right to build is not null and void. But any action of the co-owner who has granted the right to build beyond the one actually owned will not produce any legal effect and, where the construction works are completed, the co-owner who has not taken part in the granting of the right to build will acquire the relevant undivided parts of the building by accretion. There is yet another specific characteristic of this case when a co-owner undertakes construction works on the co-owner property for low-rise housing or villa construction. If this is the case, the consent of the other co-owners of the property is not required when they have completed, started or acquired rights to the relevant construction works on the property.

Insofar as the conclusion of a contract granting the right to build may take place in many variants and hence have different specific features, it is always recommendable that a lawyer be consulted in advance so as to minimize the risks.