New amendments to law regarding the issuance of building permits and changing the purpose of the perpetual usufruct right

On 15 August 2019 new, important amendments to the Building Law and the Act on Real Estate Management Act are coming into force. The amendments aim:

  • to stop the authorities from refusing to issue a building permit if its scope is incompatible with the purpose of perpetual usufruct; and
  • to establish under a statutory provision a relevant procedure for changing the purpose of perpetual usufruct, as well as fees related to such change.
The following amendments will be introduced:

Building Law

  1. The authorities will not be allowed to refuse to issue a building permit for the sole reason that the planned development is not in compliance with the purpose of perpetual usufruct;

Real Estate Management Act

  1. The authorities, and holders of perpetual usufruct, will be entitled to apply for a change of the purpose of perpetual usufruct if such purpose has changed as a result of a permanent change in the manner of use of the real estate;
  2. The holder of perpetual usufruct will also be entitled to apply for a change of the purpose of perpetual usufruct, or an establishment of such purpose if it was not defied before. With a proviso that such change or establishment is in compliance with at least one of the following acts, inter alia: (i) zoning master plan, (ii) occupancy permit, (iii) zoning permit, or (iv) notification on construction completion not opposed by the authorities;
  3. If a change of the purpose of perpetual usufruct causes a decrease in the RPU fee (i.e. the yearly fee for the perpetual usufruct), an additional one-off payment might be adjudicated, in an amount not higher that 200% of the previous RPU fee;
  4. A new yearly RPU fee related to a change of purpose of perpetual usufruct will bind beginning on 1 January, following the year in which the new RPU fee was established.
Comment

Pursuant to the newest amendment, both the authorities and holders of perpetual usufruct will be entitled to apply for a change of the purpose of perpetual usufruct in the case of a permanent change in the manner of use of the real estate. Additionally, holders of perpetual usufruct will be entitled to effectively demand a change of purpose of perpetual usufruct if at least one statutory prerequisite is satisfied, e.g. if the new purpose complies with the zoning master plan.

Although the amendment does not directly indicate how to change the purpose of perpetual usufruct, the provisions related to the RPU fee refers to "a purpose established under a mutual consent of the parties or the judgement of the court". Thus, it should be then assumed that change the purpose of perpetual usufruct should be made by a relevant agreement or a judgement replacing a consent of the parties.

The amendment also does not indicate whether it is possible to change the purpose of perpetual usufruct established by an administrative decision. Since it does not differentiate the cases based on which the purpose of perpetual usufruct was defined it should be assumed that the purposes established by an administrative decision can also be changed in form of an agreement. The application of the new regulations will be defined by the practice of the authorities and case law.

Additionally, the amendment determines that procedure of changing the purpose of perpetual usufruct may also be applied if the perpetual usufruct was established without indicating any purpose (e.g. by the sole operation of law, or without purpose defined in the agreement). In practice, this should make possible to define the purpose of perpetual usufruct and to mitigate the risk of undermining the title to a property.