Pursuant to Article 232 § 1 of the Civil Code, land owned by the State Treasury and located within the administrative boundaries of cities and land owned by the State Treasury located outside those boundaries but included in the city's master plan and allocated for performance of the tasks of its economy, as well as land owned by local government units or their associations may be given in perpetual usufruct to natural and legal persons. The manner of use of the land and any potential obligations relating to its development are laid down under an agreement or decision on giving land in perpetual usufruct (see also Article 62 of the Act on Real Property Management of 21 August 1997). The above obligations apply also to the purchaser of a real property who, though not a party to the original perpetual usufruct agreement, becomes the legal successor to such party.
Should the land be used contrary to its purpose, the usufructuary may be faced with serious consequences. Pursuant to Article 240 of the Civil Code, the agreement on giving in perpetual usufruct land owned by the State Treasury or by local government units or their associations may be terminated before the expiry of its term if the perpetual usufructuary uses the land in a manner that is obviously contrary to its purpose as set forth under the agreement, including without limitation if, in violation of the agreement, the perpetual usufructuary fails to erect buildings or installations specified thereunder. The authority giving land in perpetual usufruct does not have to exercise its ultimate entitlement right away. It may exercise other rights vested in it under the Act on Real Property Management of 21 August 1997. Specifically, if the deadlines for the development of or erection on the land given in perpetual usufruct are not met, the relevant authority may impose additional annual charges on the perpetual usufructuary, in addition to the regular perpetual usufruct charge. However, before imposing additional annual charges, the authority may prescribe a period for the perpetual usufructuary in which to meet the obligations arising under the agreement or decision. It must be noted that imposition of the above charges does not correspond to the extent of the perpetual usufructuary’s fault.
The additional charge referred to above is imposed under an administrative decision. Pursuant to the statutory regulations, it amounts to 10 percent of the value of the real property assessed for the first year after the expiry of the development deadline without effect. With each subsequent year, the charge is increased by a further 10 percent increment of the real property value. In the case of agreements for giving real property in perpetual usufruct concluded back in the 1990s, terms and conditions of development or the dates for commencement and completion of construction were often not provided. These perpetual usufructuaries enjoy a privileged position.
In order to avoid the consequences of breaching the agreement, the perpetual usufructuary should take measures ahead of time to amend the terms of the agreement on giving real property in perpetual usufruct. Unfortunately, the relevant authorities are not obligated to amend or extend the real property development deadline, which is often purely discretionary, meaning that the authority cannot be forced in any way to make any such amendments. Any amendments to the agreement require to be made as a notarial deed.
The perpetual usufructuary may also argue that its failure to meet the development deadlines its due to the relevant authority’s failure to have provided the requisite technical infrastructure, the absence of which prevents the use of the installations or facilities the perpetual usufructuary had agreed to erect. However, courts adopt a very narrow interpretation of that option holding that the obligation to provide the technical infrastructure requires to be included in the agreement or in another document which expressly describes such obligation.
The authority is not required to institute the proceedings for imposition of the additional charge right after the expiry of the real property development deadline; it may just as well do it in the future. It is also worth bearing in mind that successful completion of a development provided for under the agreement after the agreed deadline does not protect the perpetual usufructuary, as the additional charge can be imposed for an earlier period.
In the light of the above, in order to avoid the negative ramification, it may be well worth taking the required measures prior to the expiry of the deadlines set forth under the agreement on giving real property in perpetual usufruct.