Who is responsible for the maintenance and heavy repairs?
This is one of the most often negotiated items in the context of a usufruct right, long-term lease right or building right. Therefore, it is essential to know what will change (or not) with the upcoming reform of property law, and what remains to be negotiated.
Under current law, there is no definition of the concept of “heavy repairs” applicable in the context of all rights in rem. Indeed, article 606 of the old Civil Code (hereafter old CC) only gives a limited number of examples of heavy repairs in the context of a usufruct right: “Heavy repairs are those of heavy walls and ceilings, the renewal of beams and of entire roofs; also the renewal of dykes and of retaining and closing walls in their entirety. All other repairs are maintenance repairs”. These examples are outdated and should be explained in a modern way.
The new Book 3 of the new Civil Code (hereafter new CC) changes the regime of heavy repairs based on 3 principles:
The concept of “heavy repairs” is defined in a flexible manner instead of through examples. The new Book 3 contains a new, open definition of the concept of “heavy repairs”.
In the context of a usufruct right, the costs of heavy repairs are shared proportionately between the bare owner and usufructuary.
3. Immediately enforceable obligation
Under current law, there is much debate as to whether the bare owner can be obliged to carry out heavy repairs during the term of the usufruct. The new Book 3 puts an end to this debate and clearly provides that the obligation to carry out heavy repairs is immediately enforceable: the bare owner can be obliged to carry out heavy repairs during the term of the usufruct.
Pursuant to article 3.154 §1 new CC, heavy repairs are “repairs that affect the structure of the property or its inherent components, or the cost of which manifestly exceeds the products of the property”. Consequently, there are 2 categories of heavy repairs:
1. Repairs that affect the structure of the property or its inherent components
This category corresponds to the current concept of “heavy repairs”, i.e. repairs that relate to the structure of the property. The new definition however adds that these repairs can also relate to the (structure of the) inherent components of the property.
Pursuant to article 3.8 § 2 new CC an “inherent component” of a good is “a necessary element of that good which cannot be separated from it without affecting the physical or functional substance of that good”. Since this definition is based not only on a physical criterion (incorporation) but also on a functional criterion, the question is how to apply in the context of heavy repairs. Does it mean that repairs to lifts, HVAC, central heating, electricity, stairs, roof,… must all be considered as heavy repairs?
2. Repairs of which the cost manifestly exceeds the products of the property
The fact that the works have a significant financial impact is not sufficient to consider them as heavy repairs: they must manifestly exceed the products of the encumbered property. But how to apply this in practice? How to determine the value of the “products”? With what costs should “these products” be compared? At what time should this comparison be made? When are the products "manifestly" exceeded?
These questions remain unanswered. We therefore recommend clarifying the concept of "heavy repairs" in the contract and to specify what arrangements the parties wish to make with regard to repairs to e.g. lifts, HVAC, central heating.
A situation which, in our view, is not dealt with by the new legal provisions is the (partial or total) destruction. On the one side, the usufructuary has (now) the obligation to insure the full ownership of the encumbered property. On the other side, the usufructuary is released from any maintenance repairs in case of force majeure and one can question whether the (full) rebuilding can be considered a “heavy repair”. But in case the usufructuary has taken the insurance and is also the beneficiary under the insurance, he will receive the insurance indemnity. We strongly recommend to contractually agree on the applicable regime in case of destruction during the term of the usufruct (but also in case of a long-term lease right or a right to build).
Who is responsible?
Article 3.153 new CC states “the usufructuary is obliged to carry out maintenance repairs to the property subject to his usufruct right, which are necessary, in the short or long term, to preserve the value of the property, subject to normal wear and tear, age or force majeure”. Consequently, the usufructuary is not responsible for all maintenance repairs, but only for those repairs which are necessary to preserve the value of the property. In addition, the usufructuary is not responsible for repairs caused by normal wear and tear, age or force majeure.
The bare owner, for his part, is responsible for all heavy repairs. There are however 2 situations in which the bare owner is not obliged to carry out heavy repairs:
- heavy repairs regarding the constructions built by the usufructuary and temporarily owned by him by virtue of his accessory building right embodied in the usufruct right.
- heavy repairs that are solely attributable to the usufructuary. It is however unclear what "solely attributable to the usufructuary" means, e.g. if damages were caused by third parties.
In addition, Book 3 provides that if the bare owner carries out heavy repairs, he is entitled to demand from the usufructuary a proportional contribution to the cost of those works. This contribution must be calculated in proportion to the value of the usufruct versus the value of full ownership. Given the fact that the new legislation refers in this respect to concepts of inheritance law that do not apply to corporations, we recommend that the parties stipulate in the usufruct agreement whether the bare owner can claim such a contribution and, if so, how this contribution should be calculated.
3.2. Long-term lease
The new Book 3 of the new CC puts an end to the discussion about heavy repairs in the context of a long-term lease. According to the new Book 3, the long-term lessee must carry out all maintenance repairs and heavy repairs on the property subject to his long-term lease right and on the constructions that he had to build, so as not to reduce their value. In addition, the long-term lessee must also take care of all the repairs relating to the constructions that he has acquired or built without any obligation to do so, but that have become necessary for the exercise of the other existing rights in rem granted on the property.
The long-term lessor, for his part, has no obligation to carry out any repairs. Consequently, when drafting a long-term lease agreement, we recommend being careful not to place (too) far-reaching (maintenance/repair) obligations on the long-term lessor.
3.3. Building right
Since the holder of a building right is the temporary owner of the constructions he built, he is responsible for all maintenance repairs and heavy repairs with regard to these constructions that he is legally or contractually bound to do, as well as for the repairs necessary for the exercise of the other existing rights in rem.
The grantor of the building right, for his part, is responsible for all maintenance repairs and heavy repairs with regard to his constructions that he is legally or contractually bound to do, as well as for the repairs necessary for the exercise of the other existing rights in rem.
Clear contractual provisions on the maintenance and repair obligations of the parties in the context of a usufruct right, long-term lease right and building right are of the utmost importance. In doing so, we recommend to clearly define the concepts of “maintenance (repairs)” and “heavy repairs”, and to clarify which repairs fall under these concepts in any case (e.g. lifts, HVAC, central heating).
We also recommend, in the context of a usufruct, to provide whether a bare owner can recover part of the costs of the heavy repairs from the usufructuary and, if so, how such compensation should be calculated.
Regarding long-term leases, be careful to place (too) far-reaching (maintenance/repair) obligations on the long-term lessor.
Finally, for usufruct rights, long-term lease rights and building rights, the parties should contractually agree on a regime in case of (partial or total) destruction.