What types of proprietary interests in real estate can be created?
Real Estate (2nd edition)
4.1 Real property is held as:
(a) freehold – held by the registered proprietor indefinitely; or
(b) leasehold – held by the registered proprietor for the term of the lease.
4.2 The Strata Titles Registration Law (2013 Revision) provides for the registration of a strata plan against a freehold or leasehold land parcel to create individual strata lots, each of which is registered with its own derivative title and the remainder held as ‘common property’ by a strata corporation. Strata titles are often used as a mechanism to govern multi-unit developments, such as office buildings, shopping centres and condominium developments.
4.3 The Registered Land Law (2018 Revision) allows for the registration of a volumetric plan against land parcel, a mechanism which allows the subdivision of a parcel into several three dimensional parcels.
4.4 A contractual licence can also be used to allow occupation or use of real property, but this is a personal right and does not create a registerable interest.
Land tenure is most frequently freehold.
Leasehold tenure in the form of a long-term ground lease with in rem interest and a duration ranging between 18 and 99 years does also exist and could be used in order to enable the tenant to obtain a third-party's financing of the development of the leased plot of land.
This ground lease could be either a ‘emphyteusis’ (bail emphythéotique) or a construction lease (bail à construction) if the tenant undertakes to erect a building which will revert to the landlord at the end of the lease.
Freeholds can be owned by one or several owners, whether in the form of a co-ownership (copropriété), a division into volumes (division en volumes) or, less frequently, a joint- ownership (indivision).
Buildings in co-ownerships are divided into private and common areas, the private areas being those reserved for the exclusive use of each particular co owner whereas the common areas are those which are used by all co-owners (for example, the soil, foundations, main walls, lifts, stairways, technical plant rooms, etc.). All the co-owners belong to an association (syndicat). The general meeting of the co-owners appoints a manager (syndic) who alone has the right to represent the association vis-à-vis third parties. The bye-laws of the association (réglement de copropriété) define the various parts of the building subject to co-ownership, govern the relations between the various co-owners and set out the responsibility of each co-owner for a proportionate part of the service charges of the building.
The division into volumes is a legal technique consisting in dissociating the ownership of the various parts of a building, at different levels above and below the natural ground, horizontally and vertically, each fraction being geometrically defined in three dimensions, by reference to plans, transversal plans and levels, without the existence of common areas between these different fractions or volumes. The volume concept enables "slicing" to be carried out so that different owners own different parts of the building. Some of volumes may be in fact without limit in height as they include the airspace.
As between the various volumes, there are usually various easements in favour of them and burdening them such as rights of support, rights for passing pipes and ducts etc.
All the owners of volumes may be members of an association which is created to be the owner of given volumes (for the example, the ones comprising the sub-soil and the technical plant room) and/or to be responsible for the management for any parts of the building and its equipment (including the volumes of which it is the owner) which benefit all the volumes.
In general, under German law, ownership of land cannot be separated from ownership to the buildings on it. Yet, there are a few exceptions as outlined below.
Further there is no full equivalent to the common law concept of "proprietary interest" in German law. German real estate law rather differentiates between the following ownership concepts:
- Absolute ownership (Volleigentum): An absolute owner of a plot of land has generally unlimited ownership rights regarding the surface and the space above and below as well as any buildings erected on it. The absolute ownership can be held by several people together in co-ownership where each of the owners then owns a certain percentage (not a physical piece) of the property.
- Condominium ownership (Wohnungseigentum): For a condominium ownership it is necessary that an apartment or another definable unit of a building has been declared as a condominium under the Condominium Act (Wohnungseigentumsgesetz, WEG). In that case an absolute ownership upon the condominium can be awarded. The owners of the condominiums in a building are sharing the ownership of common used areas pro rata.
- Heritable building right (Erbbaurecht): The absolute owner of a plot of land can grant such a right to a third person under the Heritable Building Rights Act (Erbbaurechtsgesetz) up to 99 years. The person then is entitled to erect a building on the land and is owner of the building, thus the owner of the land remains in his position.
Apart from leasehold interests, other types of proprietary interests include easements, leases (for a term more than 3 years), tenancies (for a term less than 3 years), mortgages and beneficial interests under a trust.
1. Rights that may be registered in the land registry
The following rights may be registered in the land registry (thereby creating in rem protection):
a) ownership title (in respect of the entire real property or a specific ownership ratio, thereby creating joint ownership);
b) asset management right in respect of state-owned or local municipality-owned real property (in respect of the entire real property, or a specific ratio, or specific area thereof) ;
c) permanent right of use for members of housing cooperatives (in respect of the entire apartment) ;
d) land use right on the basis of agreement or court decision (in respect of the entire real property, or a specific area thereof) ;
e) usufruct (in respect of the entire real property, or a specific ratio or specific area thereof) ;
f) right of use (in respect of the entire real property, or specific area thereof) ;
g) easement rights (in respect of the entire real property, or specific area thereof) ;
h) public interest usage rights, e.g. cable rights, right of use for the placement of power supply equipment, water drainage and mining easement rights (in respect of the entire real property, or a specific area thereof) ;
i) right of first refusal and right of repurchase, option to buy and the right to sell (in respect of the entire real property or a specific ownership ratio, may be established for a definite period of time) ;
j) right of support and life annuity (in respect of the entire real property or a specific ownership ratio) ;
k) mortgage, independent lien, including converted independent liens (in respect of the entire real property or a specific ownership ratio) ;
l) enforcement right (in respect of the entire real property or a specific ownership ratio).
There are other rights and proprietary interests that may be created with respect to a real restate (such as the right to lease), but those cannot be registered in the land registry.
2. Facts that may be recorded in the land registry
Only the following property-related facts may be recorded in the real estate register:
a) an indication that the right-holder is a minor, placed under conservatorship;
b) an indication that the right-holder is undergoing liquidation, dissolution;
c) removal of a branch or representative office of a foreign-registered company from the register of companies;
d) commencement of expropriation proceedings;
e) commencement of parcel reconfiguration proceedings;
f) commencement of land survey and mapping procedures, or procedures for correcting errors in area calculations;
g) commencement of land classification procedures;
h) filing of an appeal, prosecutor’s intervention, prosecutorial action, supervisory action against a resolution of the land registry office;
i) a petition filed for judicial review of a court decision or an application for revision, serving as basis for or related to registration, recording or data update;
j) the legal character of the real property;
k) dismissal of an application or request for registration, recording or data update;
l) construction or demolition of a superstructure;
m) suspension of land registry proceedings;
n) the extent and nature of permanent environmental damage established by definitive administrative decision or final court ruling;
o) restriction of ownership title based on a court decision;
p) ban on parcel reconfiguration and construction, and other construction-related restrictions imposed on the basis of court or regulatory decision, any mandatory construction order provided for in the Act on the Formation and Protection of the Built Environment, and obligations relating to zoning on the basis of decisions adopted within local jurisdiction or under administrative agreement;
q) on the basis of contract or testamentary disposition, or on the basis of court or regulatory decision: restraint on alienation and encumbrance, restraint on alienation, other restrictions relating to the right of disposition;
r) commencement of lawsuits or criminal proceedings specified in the Land Registry Act;
s) scheduling of an auction or public offering;
t) attachment, sequestration, and the freezing of assets in connection with the implementation of restrictive measures imposed by the EU and the UN Security Council relating to liquid assets and other financial interests;
u) sale with retention of title;
v) prior ranking arrangement for mortgage (independent lien);
w) waiver of the right of disposition of prior ranking arrangement for mortgage;
x) alteration of ranking;
y) the approval or amendment of the bylaws subject to the affirmative vote by the majority of all unit owners representing at least two-thirds of the entire ownership share concerning the transfer of common property under the Condominium Act, including the time when adopted or amended;
z) the opening of probate proceedings, if reiterated according to the Land Registry Act;
aa) land use rights exercised under contract;
bb) ownership rights on assets managed under fiduciary asset management contract;
cc) submission of a contract for the transfer of ownership of land;
dd) financial leasing arrangements;
ee) national monument;
ff) historical monument;
gg) debt consolidation procedures opened in respect of right-holder natural persons;
hh) termination of proceedings.
Failure to register the facts described in points a)-n) and ee)-hh) above shall have no bearing on the legal effect of such facts. In the event of failure to register the facts described in points o)-dd) above, the right-holder of record may not enforce them against a bona fide third party making the acquisition for consideration.
There are the following types of proprietary interests:
- Ordinary ownership: this entails full ownership over a real estate asset with the owner having the right to fully and exclusively enjoy and dispose of the asset.
- Co-ownership: Co-ownership exists when various persons are joint owners of a real estate asset. Co-owners have equal rights to use the entire asset and they have to contribute to the necessary expenses in proportion to their respective interests in the property. There is a right of partition ("acción de división") of the common property, as long as such a partition does not render the property useless. In this latter case, the property would have to be sold and the proceeds distributed among the co-owners in proportion to their shares. On the other hand, co-owners have a legal right of repurchase ("retracto de comuneros") over the shares of the other co-owners, in the event that the latter wish to dispose of such shares. This right must be exercised within nine days of learning of the sale or of the registration of the sale by any third party at the Land Registry, whichever happens first.
The co-ownership may be set up by voluntary act (e.g. by purchasing a property jointly) or, more commonly, by testamentary provision.
In general terms, any act of mere administration may be carried out by a majority decision of the co-owners, but all acts involving an "alteration" to the property (e.g. sale, encumbrance) will need unanimous consent. On the other hand, the law permits the coowners to enter into an agreement stipulating that they will not divide the property for a term not exceeding ten years, extendable by agreement of the parties.
- Horizontal property: the so-called "horizontal property" (propiedad horizontal) regime is a very common form of co-ownership of property in Spain, which combines full ownership and common ownership. By means of the horizontal property regime a multi-story building is divided into several different units, fully owned by different persons, each of them representing a separate piece of the property, title to which may be recorded individually and separately at the Land Registry. The common areas serving the separate units (i.e. corridors, stairways, lobby, elevators, gardens, services, etc.) are owned jointly by all owners of the units under a condominium of owners ("comunidad de propietarios") regime.
The "comunidad de propietarios/propiedad horizontal" regime must be set up by a document (normally executed before a Notary) which will divide the property or development into separate units and will describe both the entire property or development and each of the individual units. For the document to be enforceable vis-à-vis third parties it must be registered at the Land Registry.
In contrast to the position under the co-ownership ("comunidad de bienes") regime, the members of the "comunidad de propietarios" do not have a right to request the partition of the property, since it has in effect already been divided up. On the other hand, they may sell separately or otherwise encumber their property in the respective units and the new owner will be subject to the same rights and obligations as the previous owner in relation to the enjoyment of the unit and the common areas.
In order for the owners to manage the common property, they may (and normally do) approve the by-laws ("Estatutos") establishing the general rules which govern the condominium. The by-laws must be registered at the Land Registry if they are to be enforceable vis-à-vis third parties. According to the law, the condominium of owners are managed by the owners' assembly which will have to approve most actions (repairs, improvements, services, etc.) and service charges. The owners must elect a Chairman from amongst their members and may appoint a professional manager, with no requirement for the manager to be an owner of one of the units in the building (usually an independent professional is appointed), and whose main obligations are to supervise the upkeep of the common areas and to prepare and submit for the assembly's approval the budget for annual expenses.
Condominiums of owners are not only frequent in the case of residential buildings but also in the case of commercial properties, such as shopping centres or retail parks.
Freehold: Where the owners are dominant owners of the property in perpetuity with no obligation to make any payment to or seek consent from any other person and all other rights and interests in the property emanate from the owner. The absolute ownership of the owner is subject to some statutory restrictions e.g. on excavation and mining and extent of construction.
Leasehold/Tenancy: Where the lessee/tenant has possession and use and income of the property for a fixed term or even in perpetuity, on condition that he pays rent and observes and performs the terms and conditions of the lease, and the lessor has the right to terminate the lease and take back possession, unless the tenant can claim protection from eviction under rent control legislation.
Licensee/Occupancy Rights: Where a person is permitted by the owner or by the lessee/tenant (provided the terms of lease/tenancy permit the lessee/tenant to do so) to carry on a specified activity on the property of the owner/lessee on specified conditions.
Common Ownership: Where a building is owned by a Co-operative Society or Limited Company or Association of Apartment Owners/Condominium and individual apartments/offices/premises are acquired and used by Members/Shareholders/Apartment Owners on certain conditions.
Irish property can be held under freehold title which confers absolute ownership, or a leasehold title which confers ownership for the period of years granted by the relevant lease and held from the owner of the freehold or the owner of the superior leasehold title in the relevant property. A leasehold interest is based on a contractual relationship between the lessor/landlord and the lessee/tenant.
In Russia, there are the following main types of proprietary interests in real estate:
- Freehold (ownership rights), which entitles the owner is to use, possess and dispose of its real estate assets at its sole discretion for an indefinite time. Several owners may have freehold rights to property, which can be either share-based (in this case each owner may sell its interest in the property subject to the pre-emptory rights of other owners) or joint (statutory joint ownership arises generally in cases of spousal property; in this case the owners can dispose of the property only subject to mutual agreement of the parties).
- Leasehold rights, which entitle the tenant to possess and/or use real estate. Leasehold is based on the respective contract with the owner.
For information on further interests/burdens that can be attached over real property, see also Q12.
The most common form of ownership is the freehold interest, which includes the ownership of the ground of a specific plot of land and of any construction on such plot. Such type of ownership is unlimited in time. There can be either one sole owner or several co-owners who own such real estate jointly and proportionally to their percentage of co-ownership.
The condominium type of ownership, the so-called Propriété par étage, is another common form of freehold ownership for apartments or mixed-use buildings that permits different owners to jointly own a specific plot of land, but with exclusive rights of ownership on specific parts of the building(s) constructed on such plot. It is commonly used by promoters to conduct large real estate developments as it permits the separate sale of each apartment, office and/or commercial space of a building to different buyers.
Finally, the building lease ownership (droit de superficie) is also a possible form of ownership but it is much less common in practice. It permits the dissociation of the ownership of the ground of a specific plot of land from the ownership of any construction on such plot, in a similar way to the leasehold ownership as it is known in Common law countries. The building lease ownership is limited in time. It is a long term easement registered on a specific plot in the land registry, which allows the beneficiary of such easement to construct and own a building on a plot of land owned by a different owner. If a building lease right is granted by the owner of a plot for a period exceeding thirty years, the building lease right can be registered at the land registry as a specific real estate independently from the plot on which the right is granted. This type of ownership is mostly used in industrial development zones for plots owned by the Confederation or other public authorities to support the development of certain industries in such zones.
There are three main proprietary interests:
- Freehold: where the owner owns the property in perpetuity. A freehold most commonly includes the land, the airspace above the land and any building on that land, but parties are free to agree other arrangements (for example a freehold could include only land and airspace within certain defined limits, or could just be of airspace or just of land),
- Commonhold: where a building is split into a number of units. The common parts of the building are owned in perpetuity by a commonhold association. The owner owns a unit in perpetuity (rather like a freehold interest) and is a member of the association. Though commonhold interests were introduced in 2004 and were intended for use with apartment blocks, few such interests have been created. Most apartments are instead owned through leasehold interests (see below).
- Leasehold: where the owner (tenant) is granted a lease of an agreed area for a fixed term. There is no minimum or maximum term and the lease can include renewal rights. Leases granted for more than seven years must be registered at the Land Registry. Subject to the terms of the lease, the tenant of a leasehold interest can, in turn, grant a further lease of all or part of the land/building (for a period less than the term of their lease). This means that chains of subsidiary leasehold interests can be created.
The main proprietary interests in real estate that can be created are:
- Fee Estate: where the owner owns the real property, typically in perpetuity. The fee estate commonly includes the land, the development rights relating to airspace above the land, and any buildings or other improvements on that land, but the parties are free to agree to other arrangements. For example, a fee estate could include only land and airspace with certain defined limits or could only include an interest in land or airspace.
- Leasehold Estate: where the tenant is granted a lease of an agreed area for a fixed term. With very few exceptions, there is no minimum or maximum term and the lease can include renewal rights. In some cases, a lease is granted in the entirety of the fee owner's estate, often referred to as a ground lease. Ground leases are typically for significantly longer terms than leases of designated space at a property. The tenant under a ground lease will typically seek to record a memorandum of the ground lease in order to put all interested parties on notice with respect to the tenant's interest in the property, and protect its interest from being subordinated to the rights and interests of subsequent purchasers of the property or interests therein. Subject to the terms of the lease, the tenant can, in turn, grant a lease of all or a portion of its leased premises (for a period not to exceed the term of its lease), which is referred to as a sublease.
- Tenancies in Common: where a property is owned by more than one person (referred to as a "co-tenant"), with each co-tenant having an undivided interest in the entire property. A co-tenant's ownership interest in the property is reflected as a percentage and the ownership percentage among co-tenants need not be equal. Each co-tenant, however, has the same right to possess the property as the other co-tenants, regardless of ownership percentage. The parties to such arrangement often enter into a "tenancy in common agreement" which outlines their respective rights and responsibilities to each other with respect to the applicable property.
- Condominium Ownership: a type of fee estate where land and improvements are split into a number of units. Each unit is a distinct property and includes an undivided interest in the overall property's common elements. The condominium regime allows multiple owners to own and use distinct portions of a property while collectively sharing ownership of the common facilities of the property, for which each unit owner is responsible for paying a proportionate share of expenses (referred to as common charges). Unit owners typically have the right to sell, mortgage, lease or alter their unit, however, such rights may be limited in some way by the documents creating and governing the condominium.
- Cooperative Ownership: where a corporation owns the property, and individual owners own shares of such corporation and are granted a "proprietary lease" leasing a particular unit of the property. The number of shares of the corporation that each owner holds is typically proportionate to the size of the unit leased to the cooperative shareholder. Similar to condominium ownership, cooperative shareholders have shared rights to use the property's common elements, for which each owner is responsible for paying a proportionate share of maintenance expenses. Cooperatives, however, often impose restrictions on the sale of unit (which is effectuated through a sale of shares and an assignment of the proprietary lease) as well as restrictions on the rights of a cooperative shareholder to alter their unit. The use of cooperative ownership structures are most commonly found in the Greater New York metropolitan area and the midwestern region of the U.S.
Civil statutes in Mexico provide for the following proprietary interests:
Rights in rem
- Fee simple, which grants absolute ownership on real property for indefinite duration (perpetuity).
- Rights which limit absolute ownership on real property:
- Usufruct, whereby the owner of certain property conveys the right to use and enjoy such property (or part of it) to the beneficiary – “usufructuario” (including everything it may produce). If the beneficiary is an individual, the usufruct may be for a life-time term; for entities, the maximum term is limited to 20 years.
- Easement, which grants the right to use, enjoy and/or pass through the real property of a third party for a specific and limited purpose, within a part of the property, without owning or possessing it.
- Mortgage, which grants a lender a security interest in real estate to secure an obligation.
- Use and occupancy rights (“derecho de uso”), which are similar to usufruct (right to use land) but with no right to benefit from the products of the real property.
Rights in personam
- Leasehold interests (landlord/tenant law).
- Beneficial interests under a real estate trust (the trustee would be the titleholder to the property).
- Other in personam agreements between the owner and the corresponding beneficiary (i.e. commodatum, which is the right to use real property for no consideration).
The main and common way to hold a real estate is ownership. On the other hand there are some other rights in rem which serve the right owner to hold the real estate. These easement rights are usufruct, right of habitation, right of construction, right of way, right of natural resources, right of construction. These rights can be established by registration to the land registry records. Some of the most common rights can be listed as follows:
Usufruct (usage right) is the closest right to ownership in terms of the rights granted to its holder. A holder of usufruct right can possess and use the land but not dispose like the owner. On the other hand the usage of this right can be transferred to third parties.
Right of habitation allows the holder to use the real estate only for residential purposes. In other words, in case the real estate is an office or a land, the right of habitation can not be established. It is a highly personal right that cannot be neither leased nor transferred.
Right of construction allows the holder to construct a building on and/or under the real estate and to use the building during the term of the right.
Right of way can arise under the law or by means of a mutual agreement between the relevant parties. This right grants its owner the right to use the land of a neighbour for passing purposes.
Right of natural resources grants its holder the right to use natural resources, like water, which are situated underneath another person’s real estate.
Other than that, the right of encumbrance and liens are also accepted as rights in rem however they don’t grant a direct possession of the real estate its owner.
Additionally, rights arising from preliminary sale agreement or lease agreement, pre-emption rights, right of purchase, right of re-purchase are purely contractual rights. However such rights may be annotated to the relevant land registry and thereby be asserted against third parties.
In addition to ownership rights, the following may be created over real estate: (i) usufruct, which confers the power to temporarily use and enjoy another’s property, (ii) use and tenement, which allows to use a property, (iii) surface, which permits the surface owner to temporarily build a separate property on or under the ground surface, (iv) easement, which makes it possible to impose an encumbrance on the servient estate, for the benefit of the dominant estate; and (v) mortgage, which is a security interest created on immovable property to secure the payment of a debt.
The aforementioned are numerus clausus rights which are recognized in Peruvian civil legislation.
The notion of “proprietary interest” finds no proper equivalent under Italian law. However, ownership rights in relation to real estate may differ as follows:
- (Absolute) ownership: It is the right to use and dispose of an asset in a full and exclusive manner. In practice, in relation to a real estate asset, such right may be limited by several circumstances (e.g. due to laws protecting assets having an artistic or cultural value, building laws, environmental laws, etc.), by means of a contractual agreement (e.g. a lease or bailment agreement) or by virtue of limited in rem rights (such as easements, usufruct, etc.)
- Joint ownership or co-ownership (comunione): Similar to the notion of “joint tenancy” under common law, it is the ownership right of a whole asset shared by two or more persons, each for an ideal quota of such asset. The creation and dissolution of the joint ownership, as well as the use and rights of the co-owners, is regulated by the Italian civil code.
- Condominium (condominio negli edifici): It is a special kind of joint ownership related to real estate, which is created when, in a certain building, independent units owned by several persons (each of such persons having an “absolute” ownership right on the respective units) coexist with common parts which are structurally and functionally connected with the complex of such independent units (e.g. the foundations of such building, lifts, stairs, water plants, etc.). In this case, such common parts are co-owned by all the owners of the independent units on the basis of quotas (so-called millesimi) determined on the basis of the value of each independent unit compared to the value of the whole building. The regulation of the rights and duties of the co-owners of the common parts (condomini), as well as the management of such common parts, is provided by a specific section of the Italian civil code and largely refers to a specific condominium regulation to be adopted pursuant to the law.
Absolute ownership is enjoyed by the owner of freehold property. A freehold owner is entitled to possess, use, exploit and enjoy the immovable property free of interference from third parties. A title deed is issued by the land registry in the name of each owner of freehold property. A person can own the whole of the freehold property or an undivided share of such property. The right of ownership granted by such title of freehold property lasts in perpetuity. When and if the title of a freehold property is conveyed in any way (sale, donation, inheritance etc), the right passes to the new registered owner of such title.
A leasehold owner enjoys a lot of the rights of a freehold owner with certain limitations. Such limitations and generally the terms that govern the agreement between the lessor and lessee, are provided in the lease agreement. The immovable property is leased for a fixed period of time. In certain lease agreements, one of the terms of the agreement may be the right of the lessee to renew the lease for another period of time. A lease can be registered at the land registry when the period of such lease exceeds 15 years and the land registry keeps a record for this purpose. The registration of the lease must be completed within 3 months from the signing of the lease agreement. The lessee has the right to sublease as long as this is not expressly prohibited in the original lease.
Certain rights are registered at the land registry and become part of the title of the immovable property. Those rights are “rights in rem” which means rights enforceable against everyone. Such rights are “the life interest”, which means the right conferred to a person other than the registered owner of the immovable property, to use and enjoy the property until his/her death, the right of easement etc.
Some “rights in personam” can be created in relation to immovable property. These rights are enforceable only against the counterparty in a contractual relationship.
Under the laws of Japan, an entity or person that owns property has the right to freely use, obtain profit from, and dispose of the property. In relation to ownership, the Civil Code allows multiple entities or people to own a property together, which is called co-ownership (kyoyumochibun-ken). The basic rules regarding co-ownership are stated in the Civil Code. It is also possible to enter into a co-ownership agreement among the co-owners and agree how to use, manage, and modify the property. It should be noted that there are some restrictions under the law; for instance, co-owners are unable to agree not to demand the partition of property over five years.
The Act on Building Unit Ownership, etc. allows for part of the property, which shall be structurally divided and can be used as if the part is single property, to be the subject of unit-ownership (kubunshoyu-ken) or other proprietary interest. Generally, bylaws stipulating the rules including the management of the building and common space are established in accordance with the Act. Consequently, it is essential to review the co-ownership agreement or bylaws if acquiring co-ownership or unit-ownership.
It is also common for mainly tax reasons (including acquisition tax and registration tax) to have such types of ownership as beneficiary interests. A trust agreement is generally agreed between a trustee and the owner of a property. Based on the trust agreement, the trustee holds the ownership of the property for the benefit of the entity as the beneficiary.
(2) Use of property
There are several types of rights in relation to property use under the Civil Code, mainly, leasing rights (chinshaku-ken) and superficies (chijo-ken). Leasing rights are the most common types of rights to use property and governed not only by the Civil Code but also the Act on Land and Building Leases, which provides lease right holders with legal protection. For instance, a standard leasing agreement cannot be terminated unless the lessor has “justifiable grounds” under the Act and gives at least six months’ notice of termination to the lessee regardless of the terms of the leasing agreement (please refer to Question No. 15).
The Act allows the leasing right to be perfected once, in respect of the building lease the lessee obtains the possession of a building or in respect of a land lease, the ownership of the building is registered. Instead, it is also possible to register leasing rights for perfection although the registration of a leasing right is uncommon due to the registration fee.
(3) Security interests
A mortgage (Teito-ken) or pledge (Shichi-ken) is a common security interest that can be created over real property. Please refer to Question No. 19.
Thai law does not properly define ‘proprietary interests’. There are several rights in property applicable in Thailand, however, and below we provide a synopsis of common rights or interests in real estate which create or later create ownership thereof.
(i) Freehold interest
The most common type of proprietary interest, the owner has absolute ownership of the surface of the land and the space above and below as well as any buildings constructed thereon (with respect to a building, only in the event that it is not registered in the name of another owner, see point 5 below.)
Another form of freehold interest in real estate is the rights in a condominium – each unit in the building belongs to a different owner who also has joint ownership in the common area.
(ii) Adverse possession
Ownership in real estate will be created by law if someone holds such real estate in possession in a peaceful and open manner for a period of 10 years with the intention to obtain ownership.
Real property rights include the right to ownership (Article 999 CC); easement rights/servitudes (Article 1118 CC); and the right to mortgage (Article 1257 CC).
The main types of in rem rights over real estate are:
- ownership (sole ownership, co-ownership and condominium ownership);
- right to build;
- right to use;
- еasements (servitudes)
Ownership is the right to possess, use and dispose of property. The ownership is not limited by a specific term. The right may be acquired through legal transaction, prescription or other means provided by the law. The right of ownership shall be lost if another person acquires it or if the owner renounces it. An owner of an immovable property shall not perform such acts in its property which create obstacles, greater than the usual, for the use of an adjacent property.
The right of ownership may belong jointly to two or more persons - the state, municipalities and other entities and individuals. The shares of the persons shall be deemed equal until proven otherwise. Each joint owner shall participate in the benefits and burdens of the common property in proportion with its share. In case of co-ownership over a real estate the co-owner can transfer its title to a third person only after proving that the other co-owners refused to buy it under the same conditions.
The owner may cede to another person the right to construct a building on its land, whereby the other person becomes owner of the building (right to build). The owner of the land may also transfer independently from the land the ownership of an already existing building. Ownership of a building independently from the underlying land may also be created through voluntary partition. The owner of a building may use the land to the extent that is necessary for the use of the building according to its purpose, unless the act with which the right is ceded provides otherwise. This right may be limited by term. After the expiration of the term the ownership of the building shall pass gratuitously to the owner of the land.
The right to use includes the right to use the property in accordance with its purpose and the right to the benefits thereof without causing any essential changes to it. This right is not transferable. The user should pay the expenses related to the use, including taxes and other charges, maintain the property in the state in which it was received, and return the property to the owner after the termination of the right to use.
The easement is an in rem right set up in favour of an owner of a property with respect to another person’s property. The easement is usually set up with respect to two adjacent properties, although it is not necessarily the rule. This right may be limited by term.
It should be noted that through leases can be provided contractual and not in rem rights. Similarly, the mortgages are considered by the Bulgarian legal doctrine as a form of security - a creditor whose debt is secured by a mortgage shall be entitled to be satisfied preferentially from the mortgaged property's price, whoever its owner might be.
The standard type of real estate ownership in Brazilian Law is full title, also known as fee simple in other countries. In general, such interest grants the owner the complete and exclusive right to possess, enjoy, reclaim and dispose of the property, notwithstanding other burdens or third party rights (as easements) that may eventually exist upon the property.
A second type of property (emphytheusis) grants the holder domain similar to full title or, in some cases, occupation rights, but the Federal government or private parties own an interest upon the real estate which leads to additional annual property tax (fôro) and transfer tax being due (laudêmio).
As an alternative to full title ownership, a long-term right of use to a property called site leasehold right (Sw: tomträtt) may be granted under Swedish law, legally constructed to essentially be comparable to ownership (from the site leaseholders perspective). A site leaseholder may grant leases and other usufructs on and mortgage the property in the same way as an owner with full title. A site leasehold is granted for a property in its entirety, generally for a longer time period (normally 20-60 years per term) against a yearly fee. Site leaseholds were introduced in order to enable public property owners, such as the state and municipalities, to retain the long-term market value increase of the land while still being able to distribute land for private interests (both residential and commercial). Site leaseholds can only be granted on publically owned land.
Site leaseholds may only be terminated by the property owner (not by the site leaseholder) in certain legally stipulated instances, and a valid termination generally entitles the site leaseholder to compensation from the property owner. A site leasehold can be transferred freely without the consent of the property owner and the same formal requirements apply for the transfer of site leaseholds as when land is transferred.
The accompanying table summarises the various types of land title in Indonesia.
Registered Land Rights
Right of Ownership – Hak Milik (“HM”)
HM is the most extensive form of land title in Indonesia that can be owned by individuals. It is the closest equivalent to the common law concept of freehold. HM can be granted over state land (tanah negara).
- Indonesian citizens
- Certain Indonesian legal entities determined by the Indonesian Government that engage in certain sectors, such as religious and social sectors
Right to Build – Hak Guna Bangunan (“HGB”)
HGB allows its holder to build, construct and use the land and buildings on the land. This is the most extensive form of land title in Indonesia available for foreign-controlled Indonesian legal entities (PMA companies). HGB can be granted over state, HPL or HM certificated land.
Maximum 30 years and extendable for 20 years. Multiple renewals and extensions permitted.
- Indonesian citizens
- Indonesian legal entities, including PMA companies
Right to Use – Hak Pakai (“HP”)
HP allows its holder to use a plot of land (including, subject to permitting requirements, the right to construct buildings) and/or collect produce derived from such land.
HP can be granted over state, HPL or HM certificated land.
Foreign citizens residing in Indonesia may be granted an HP (subject to certain requirements) derived from conversion of HM or HGB when they purchase a residential home.
Over state land
Maximum 25 years and extendable for 20 years. Multiple renewals and extensions permitted.
HP is granted for a term determined on a case-by-case basis to Indonesian government institutions, representatives of foreign states or international organizations, and religious or social institutions.
Maximum 25 years, with any extension requiring a new agreement with the Indonesian landowner holding the HM title.
For foreign citizens residing in Indonesia
- A HP which is derived from conversion of a HM: Maximum 30 years and can be extended for 20 years and renewed for 30 years.
- A HP which is derived from conversion of a HGB: valid for the remaining term of the HGB and can be extended for 20 years and renewed for 30 years.
- Indonesian citizens
- Indonesian legal entities, including PMA companies
- National and regional government institutions
- Social and religious organisations
- Foreign citizens residing in Indonesia
- Foreign companies with a representative office in Indonesia
- Representatives of foreign states and international organisations (eg diplomats/ embassies)
Right to Manage – Hak Pengelolaan (“HPL”)
An HPL is granted for operating an industrial or housing estate. It is granted by a government decision (penetapan pemerintah) allowing the holder to use a plot of land for its own purposes Examples include land used for a port or airport.
Determined on a case-by-case basis
- Indonesian government institutions or agencies including regional government institutions
- State-owned companies and regional government-owned companies
- Companies wholly owned by the government
- Government authorities (e.g., port authority)
Right to Cultivate – Hak Guna Usaha (“HGU”)
An HGU is granted for the purpose of agriculture, fisheries or animal husbandry. An HGU can be granted over state land.
Maximum 35 years and extendable for 25 years. Multiple renewals and extensions permitted.
- Indonesian citizens
- Indonesian legal entities, including PMA companies
Strata Title – Hak Milik atas Satuan Rumah Susun (“HMSRS”)
An HMSRS grants its holder right of ownership over (a) individual units and (b) common areas (ie common parts, common objects and common land).
An HMSRS can be granted over (i) HM; (ii) HGB/HP over state land; (iii) HGB/HP over HPL; (iv) utilisation of state/local land or utilisation of donated land (pendayagunaan tanah wakaf).
The term of the HMSRS title follows the term of the underlying land title, except for the utilization of state/local land or utilization of donated land, which will be valid for 60 years.
- Indonesian citizens
- Indonesian legal entities
- PMA companies, subject to certain requirements below
- Foreign citizens residing in Indonesia, subject to certain requirements.
Right to Use Strata Title – Hak Pakai atas Satuan Rumah Susun (“HPSRS”)
An HPSRS is a title derived from conversion of HMSRS for resident foreigners who purchase apartment units in Indonesia.
For new apartment units: Maximum 30 years, and can be extended for 20 years and renewed for 30 years.
For second-hand apartment units: valid for the remaining term of the HMSRS and can then be extended for 20 years and renewed for 30 years.
Foreign citizens residing in Indonesia, subject to certain requirements.
A resident foreigner may purchase a new or previously owned apartment unit with HMSRS title built on land with an HGB or HPL title, and the HMSRS title will automatically convert to an HPSRS title. If the foreigner later sells the apartment unit to an Indonesian citizen, the HPSRS title will automatically revert to its original HMSRS title.