Legal System of Civil Law in the Netherlands
Acquisition of property rights
Real property rights of Dutch civil law (‘closed system’)
Real property rights always relate to an absolute power over an object
that can be effectuated and enforced against everyone. Dutch property
law only recognizes eight different real property rights. It’s not
possible to create other real property rights than these. A person who
wants to get a real property right in an object has to choose for one
of the eight real property rights offered by law. Also the content of
each real property right is for the most part regulated by law. Consequently,
the real property rights form among themselves a closed system of mainly
mandatory law.
Real property rights in a movable or immovable thing are always derived
from a right of ownership of that thing. Ownership is the most comprehensive
real property right. The owner has all possible powers over his property.
As a result he may grant someone else the right to use it for some time.
This can be done by an agreement in which he gives another person a right
of use of his thing. But in that case this other person simply has obtained
a debt-claim against the owner personally, not a right in the thing
itself. As soon as the owner loses his right of ownership of the thing,
the debt-claim of the other person (creditor) is lost too. It can’t
be enforced against the original owner, since he no longer has any powers
over the thing, and it can’t be enforced against the new owner of
the thing either, because this person is not accountable for the debts
(obligations) of his predecessor in title. This effect can be avoided
by establishing a real property right in the thing in favour of that other
person. The owner then must split off certain powers of his right of ownership
and grant them to this other person in the framework of an acknowledged
real property right. This other person then has acquired a real property
right in the thing itself, that he can uphold against everyone, including
the owner of the thing and persons who might obtain the ownership thereof
from him afterwards. This means that his right want be lost when the original
owner passes his right of ownership of the thing to someone else.
The owner of an immovable thing may split off the following real property
rights of his right of ownership:
• long leasehold
• easement
• usufruct
• apartment right
• right of superficies
• mortgage
Each of these real property rights has its own content and each of them
grants its proprietor specific powers over the encumbered thing of the
owner. Of course the owner has to respect these rights of the proprietor,
but so do others, irrespective of what will happen with the encumbered
thing.
The owner of a movable thing can split off no more than two different
real property rights of his right of ownership:
• usufruct
• pledge
Dutch property law doesn’t make it possible to vest other real property
rights on movable property.
Besides a movable or immovable thing, also a debt-claim
derived from an obligation may be the object of a property right of
a third party. The creditor, to whom the debt-claim belongs, may transfer
it to someone else, unless the debtor has negotiated otherwise. If
the creditor doesn’t want to assign his debt-claim definitively or
completely to someone else, he may also grant another person a right
of use of it, meaning that this other person is allowed to collect
a part of the indebted performance from the debtor (this happens for
instance at the conclusion of a licence agreement with respect to
a specific territory). But where this other person wants to obtain
a right that is to be exercised irrespective of the person to whom
the debt-claim belongs, he has to choose for a limited property
right that has been split off of the debt-claim in such a way that its
proprietor is able to uphold his position against a possible liquidator
in the bankruptcy of the creditor to whom the debt-claim belongs and against
his own creditors. Only two of such property rights can be established
on a debt-claim:
• usufruct
• pledge
A pledge and usufruct taken from a debt-claim have, contrary
to limited real property rights derived from a right of ownership,
no real effect. The creditor is not able to grant the limited proprietor
more rights and powers than he has himself according to his debt-claim.
This means that he can only grant a limited proprietor (usufructuary,
pledgee) some rights and powers embedded in his debt-claim to be enforced
against this specific debtor. The limited proprietor can only uphold
his usufruct or pledge against this debtor, in the sense that this
particular debtor has to perform some parts of the debt to the limited
proprietor, instead of to his creditor. Within the legal sphere of
the creditor the split off usufruct or pledge nonetheless has some
real effect. If the usufructuary or pledgee would only have obtained
a debt-claim against the creditor, for instance to tolerate
that the usufructuary or pledgee collects the performance of the debtor
in the place of the creditor, he would have lost his possibility to
demand compliance when the creditor would go bankrupt or his property,
including his debt-claim against the debtor, would be seized
and foreclosed by one of his own creditors. De usufructuary and pledgee
would in that case only have an ordinary debt-claim that would not grant
them any priority at the sale under execution of the creditor's property,
not even with regard to the performance that the creditor would receive
from his debtor. Like other unsecured creditors they would only obtain
a small percentage of the value of their debt-claim from the net sale proceeds,
which proceeds include the performance received from the debtor. But
since the usufructuary and pledgee have put there claim against the
creditor in the framework of a usufruct and, respectively, a pledge,
they aren't harmed by the bankruptcy of the creditor (proprietor of
the debt-claim that has been encumbered with the usufruct or pledge), nor
by a foreclosure of his property. They are able to maintain their
usufruct and pledge on the creditor's debt-claim in full. Therefore they
remain exclusively entitled to the rights and powers against the debtor
that were already split off of the debt-claim. As a result they
want just receive a small percentage of the value of their debt-claim,
but they are able to collect the entire performance which the debtor
is indebted to the creditor as far as it is covered by their split
off limited property right. However, when the debtor of the encumbered debt-claim goes bankrupt, the creditor could no longer demand full performance
of his debt-claim, but would be satisfied only for a small percentage of
the value of it. In the same way now the usufructuary and pledgee
will only be satisfied for a small percentage of the value of their
right, given the fact that the debt-claim from which their limited property
right is derived, has no real effect itself. Therefore one can't say
that they have a limited real property right.
As mentioned earlier, Dutch property law makes a distinction between
real property rights on the one hand and debt-claims derived from an obligation
on the other. From their nature debt-claims only have effect against
one specific person, the debtor. He is the only person who has to perform
the obligation. When looking at real property rights, no direct debtor
can be named. Every person coming into contact with the encumbered object
(a thing or a debt-claim) has to respect the real property rights that are
vested on it. The proprietor of such a real property right may take legal
measures against each person who violates his right. He may demand, if
need be in court, that a person who disturbs him in exercising his rights
and powers over the object, immediately stops his unlawful behaviour.
In addition he may demand that the offender repairs the damage done. One
could say that every person on this planet in a way is a debtor of the
proprietor of a real property right. All these persons have the obligation
to withhold themselves from using the object to which the real property
right is attached in a way contrary to the rights and powers imbedded
in that real property right. Thus, all these ‘debtors’ have
the obligation not to disturb the proprietor in the exercise of his rights
and powers over the encumbered object. In this concept the proprietor
of a real property right has as many debtors as there are people. This,
however, is an artificial way of thinking, which denies the specific character
of a real property right. A specific debtor, to be nominated in advance,
is lacking. For this reason, when explaining the effect of real property
rights, one speaks of a right in an object itself, and not of an infinite
number of obligations with fictitious debtors.
The fact that the proprietor of a real property right maintains no personal
relationship with those who have to respect his right (all the people
of the world), has consequences for the way in which the law approaches
someone who acts in violation of someone else’s real property right.
Because no obligation exists between the proprietor of the real property
right and the person who has dishonoured it, in the sense that there's
no legal bond (obligation) as between a creditor and his debtor, such
an offence cannot be labelled as a failure in the performance of a debt,
nor as a breach of contract or a default of the offender. A violation
of someone else's real property right produces other effects. The law
has stated in general terms that a person who violates someone else’s
rights commits an unlawful act against this other person, which, when
there’s no justification for his violation, can be attributed to
him and makes him liable for damages. In other words: a violation of someone
else’s real property right is considered to be a tortious act of
the offender against the proprietor (Article 6:162 DCC). As soon as this
tortious act has set in, an obligation between the proprietor and the
offender comes to existence by operation of law, which forces the offender
to repair the damage that his unlawful act has caused. Although the obligation
arises automatically from law, usually the tortfeasor will deny any liability,
so the court has to determine whether a tortious act has been committed
and, if so, how its impact must be repaired. The obligation to repair
the damage may, for instance, impose a duty upon the tortfeasor to pay
a sum of money to the proprietor as a financial compensation for the loss
suffered. But it may also impose a duty to return the object to its legitimate
proprietor, to restore the situation in its original condition, to withhold
from further violating behaviour or to make a public apology or rectification.
Since the tortious act has created an obligation, the proprietor of the
violated real property right can uphold his debt-claim only against the tortfeasor
in person. His debt-claim is as such an independent valuable right, that belongs
to him beyond the real property right that was violated. A person may,
evidently, at the same time possess different debt-claims and real property
rights. The owner of a car, which was damaged by another person as a result
of a traffic accident, remains also afterwards the owner of the (damaged)
car. He can uphold his right of ownership against everyone. But besides
this real property right in the car, he has a debt-claim too against the person
who violated his property, being the person who, according to law, was
responsible for the damage brought about by the road accident (tortious
act).
Real property rights, possession and holdership
Like in most continental law systems based on Roman law the legal words
‘possession’ and ‘ownership’ do not have the same
meaning in Dutch property law. Ownership is a real property right in a
movable or immovable thing. The law indicates that the owner has virtually
all powers over the object he owns, irrespective of the question whether
it is under his actual control. When the owner has granted another person
a right of use of his property, it may in fact be under control of this
other person. Nonetheless the owner still maintains his right of ownership.
Although possession may also imply some legal rights, it refers foremost
to an actual state concerning a specific object. Possession is the legally
known situation in which a person holds an object as if it forms his property
by actually keeping it under his control as if it belongs to him. The
mere fact that the thing is under control of a specific person, is not
the only important part. It’s crucial too that this person has to
act and present himself towards others as the owner of the thing in his
power.
In this sense ‘possession’ has to be distinguished as well
from ‘holdership’ as used in Dutch property law. Holdership
refers to the situation that a person holds and even might actually control
an object, but with the intention to keep it for someone else. The holder
has the object in his actual power, but he acknowledges at the same time
that he himself has no real property right in it, or at least not the
principal property right, because the object belongs to someone else who
has granted him a right of use. Whether someone holds an object for his
own (‘possession’) or for someone else (‘holdership’)
has to be determined on the basis of common opinion. The actual facts
as they appear are decisive, with due observance of the rule that when
a person has started to hold an object for someone else by virtue of a
legal relationship (like an agreement), he continues doing so on the same
legal basis, as long as this situation has not appeared to have changed,
either as a result of an action of him for whom he holds the object, or
as a result of contradicting the right of this person (Article 3:111 DCC).
So when someone has rented a car, he holds it for
another person, the lessor, who owns the car according to law, although
the lessee has factual control over the vehicle. The lessee holds
the car keys, he drives the car during the day and he parks it in
his garage for the night. The facts seem to indicate that he holds
the car for himself as if it is his property. But that’s not
the case. The vehicle registration certificate, with which a person
can prove his ownership of a car, is still in the hands of the lessor.
Moreover, the lessee periodically shall pay a rent to the lessor.
By doing so, he continuously admits that the lessor in reality owns
the car and that he simply holds it for him. His position, therefore,
has to be qualified as ‘holdership’. The legal relationship
between the lessee and lessor is governed by the rules of law on lease
agreements and of obligations in general, and not by the rules of
possession. But what if the lessee after a while no longer pays the
indebted rent, while he presents himself towards other people, including
the lessor, as the owner of the car? Can he convert his holdership
along these lines into possession? In principle he can, but only when
the real owner does not oppose to this change of attitude. One may
assume that the owner after a while will react when the lessee stops
paying the rent. If the lessee, after being summoned for this purpose,
still doesn’t restart payment, the lessor will undoubtedly take
back the car as his property. The court shall award a legal claim
filed by him to this end. Only when the legal owner doesn’t
react at all to the changed attitude of the lessee, the holdership
will convert after a while into possession. This, however, still doesn’t
mean that the lessee has become the owner of the car in stead of the
lessor. As said before, the law makes a distinction between ownership
and possession. The fact that someone has the factual control over
an object and that he appears to be its owner, does not mean that
he is recognized as such by law. Nevertheless, a person who ‘possess’
a thing of someone else in the before mentioned sense of the word,
may after course of time acquire by operation of law the right of
ownership of that thing, namely when the real owner for a number of
years did not undertake any legal actions against him to recover his
property.
Usually the owner of a thing is also the one who presents himself as
the person to whom this object belongs. Since he has the ownership of
the object, he will exercise the powers that are included in his right.
As a result he not only is the owner, but he feels and acts as such too.
So as a rule the object shall be in ‘possession’ of its owner.
But now and again a person acts as if he is the owner of an object, while
according to law someone else has the right of ownership thereof. This
may happen when someone has stolen an object. The thief intends to keep
the stolen object for himself. He presents himself to the outside world
as the owner of the stolen thing. But according to law he is not, because
the right of ownership has not passed to him in conformity with the legal
requirements set by law for a passage of property. A mere loss of possession,
in other words, does not necessarily bring about the loss of ownership.
In the event of a theft, for instance, the owner loses possession, but
not his right of ownership.
It’s also possible that someone thinks he owns an object, but according
to law he does not. This may occur when an object is transferred to him,
but afterwards it becomes clear that the transfer or the agreement on
which it was based, was invalid, so that the law cannot recognize the
acquiring party as the new owner of the object. Nevertheless, it is conceivable
that the acquiring party in the meantime has presented himself as the
owner of the object, simply because he thought he was. During this time
he had possession of the object, but (often in retrospect) not the right
of ownership of it.
When the right of ownership and possession of an object are not united
in one and the same person, the legal owner can demand that the possessor
hands over the object to him, so that he regains the actual control over
it as well as its possession. But the law has linked a few legal effects
to the mere possession of an object. So, although possession is not a
real property right, the law has attached certain legal rights to it that
must be observed by others, including the legal owner.
First of all the possessor is regarded to be the owner of the object
he possesses, until someone else proves he has a better right in it. This
legal presumption makes that the legal owner has the burden of proof with
regard to his legal claim to regain the object. But when the legal owner
succeeds in proving his better right, the possessor must give the object
back to him. With this, he has lost his possession as well.
Another important effect of having the possession of an object relates
to the possibility to obtain the right of ownership of that object after
some time through an acquisitive prescription. The possessor who continuously
has possessed an object during three years (possession in good faith of
a movable object), ten years (possession in good faith of an immovable
property) or twenty years (possession in bad faith of a movable or immovable
object) automatically obtains the ownership of the object that he possessed
for such a long time. The real owner should have reclaimed his property
in time. By not opposing for several years, he has lost his right of ownership.
The law has granted it to the possessor of the thing.
An object is possessed in good faith when the possessor, at the moment
of obtaining his possession, believed and in the circumstances reasonably
could have believed that, according to law, he was entitled to the object.
Once a possessor is in good faith, he remains to have this legal status,
irrespective of his knowledge afterwards. When a person has bought a house
and reasonably may assume that all the land within the fence surrounding
the premises forms a part of his property, he shall use all of it as if
it belongs to him, even when a part of it was in reality the property
of his neighbour. Provided that he could not have known, by examining
the public registers for registered property, that this part did not belong
to the land plot he bought, he has obtained the possession of that part
in good faith. If his neighbour doesn’t reclaim this part of his
property during a period of ten years, the ownership of it will by operation
of law pass to the possessor. The former owner has lost his right in it
and can no longer claim it back. In order to calculate the length of this
prescription period, the possessor may add the time that his legal predecessor
was in possession of the object to the period during which he himself
has had possession. Therefore the neighbour, who wants to prevent that
he loses his right of ownership of this part of his land, has to summon
the possessor to return his property and, if the possessor does not comply,
file a legal claim to regain control over this part of his property within
ten years from the day after he has lost the factual control over his
property to someone who presents himself, towards him and the outside
world, as its owner. The prescription period in this example is ten years
because the new owner of the house (or his legal predecessor) reasonably
could have thought that he owned the concerned part within the fenced
off property. It’s also possible that the new owner of a house deliberately
places a new fence on a piece of land, even though he knows that this
strip belongs to his neighbour. By extending his garden with the strip
of land and by fencing it off and using it for his own purposes, he not
only has the factual control over the strip, but he acts towards everyone,
including his neighbour, as if he owns it. Although he obtained the possession
of the strip in bad faith, he will, after having had the continuous possession
for twenty years, acquire the right of ownership, provided that his neighbour
doesn’t reclaim it before the applying prescription period has elapsed
(in that case a new prescription period starts to run). So even a thief
of a valuable painting will, after a continuous possession of twenty years,
become its legal owner. The real owner has lost his property by operation
of law and can no longer claim it back. This certainly is a strange legal
consequence, that can't be justified by the fact that the real owner has
lost his possession of the painting for such a long period without reclaiming
it in the mean time, since he didn't know who had stolen his property,
so he was unable to claim it back from him. Nevertheless in the Netherlands
this rule still applies in favour of thieves and crooks, unless an object
has been stolen that was recognized as European or national cultural heritage
(Article 3:310a and 3:310b DCC).
Accession to property
An important rule of Dutch property law concerns the fact that a right
of ownership can only surround a thing as a whole, and not one of its
parts. In this respect the principle of ‘accession to property’
plays a major part. This principle indicates that, as far as the law does
not provide otherwise, the owner of a thing is the owner of all its components
(Article 5:3 DCC). This means that the owner of a thing by operation of
law will become the owner of all parts forming a component of that thing,
irrespective of the fact to whom these parts belonged prior to the moment
that hey became a component of another main thing. This principle is binding
and refers to the factual situation of material and tangible objects.
It cannot be set aside by parties by agreement. Just the factual situation
decides whether a material object is a thing or a component of another
thing, regardless of what parties may have agreed upon.
In order to determine if a material and tangible object forms a thing
in itself or merely a component of another thing, Article 3:4 DCC describes
what has to be regarded as a component. All that, according to general
accepted views (‘common opinion’) forms a part of a thing,
is a component of that thing. According to common opinion a house, a car,
a ship and an overcoat form separate things. The parts from which these
things are composed, merely are a component thereof. According to common
opinion, the balcony forms a component of the house, the headlights are
a component of the car and a button is a component of the overcoat.
But in addition, there is a second rule to determine whether a material
object is an independent thing in itself or a component of another thing.
This rule is to be found in Article 3:4 DCC, stating that a thing attached
to another principal thing in such a way that it can't be separated of
it without causing meaningful damage to one of the involved items, becomes
a component of the principal thing too. This second rule is of importance
for material objects which do not already according to common opinion
form a component of another thing. A bronze sculpture, placed in the garden
of a house, is not an object that specifically, by its nature, forms a
part of the garden or the house. So one can’t say that common opinion
qualifies it as a component of the house and garden. It isn’t attached
either in such a way to the soil of the garden that it can’t be
taken away without causing meaningful damage to either the soil or the
sculpture. This means that it is a (movable) separate thing of its own.
If this sculpture would be attached to a brick wall of the house by screws,
it still wouldn’t have become a component of the house. By unscrewing
it from the wall, no damage would be done, while it still would not be
regarded by common opinion as a specific part of the house. But when the
sculpture would be permanently attached to the wall by bone cement, it
would have become a component of the house by virtue of the second rule,
since now it is impossible to separate it without causing meaningful damage,
either to the sculpture or to the house.
One has to notice that the two rules must be applied next and in addition
to one another. So it isn’t necessary that a part is attached to
another object in order to call it a component. The roof tiles can be
removed easily, without causing damage to the roof (house) or the tiles.
Nevertheless, as long as the roof tiles are placed on the whole roof of
the house, they form a component of that house, because consistent with
common opinion the house is the principal thing and the roof tiles form
a part of it. On the other hand, it is possible that a material object
can be qualified under both rules as a component. Usually a balcony, for
instance, cannot be separated from the house without causing damage, but
it’s also regarded as on object which in particular forms a part
of the house. For the purpose of the principle of accession, however,
this makes no difference.
The law distinguishes two different rules with regard to the accession
of property, depending on whether it involves a movable or an immovable
thing.
If a movable thing becomes a component of another movable thing that
has to be regarded as the principal thing, then the ownership of the movable
thing passes to the owner of the principal thing (Article 5:14 (1) DCC).
The principal thing is the thing of which the value exceeds the value
of the other thing considerably or the thing that is regarded by generally
accepted views (common opinion) as the principal thing (Article 5:14 (3)
DCC). According to common opinion a car is a thing of its own. The parts
from which a car is built, like its tires, windows, seats, driving wheel,
motor unit and so on, form a component of the car. They cannot be regarded
as a separate thing, even though it is possible to remove them easily
from the principal thing. A right of ownership can only surround a thing
as a whole, that is to say, a material and tangible object which according
to one of the rules of accession (common opinion or unbreakable attachment)
has to be regarded as an independent and separate thing in itself. A right
of ownership cannot be vested on one simple component of such a thing,
but only on the complete thing as a whole, with all its parts and components.
The same applies to other rights in rem, thus to limited real property
rights in a thing, this contrary to a debt-claim, which indeed
may be related to just one of the components of a thing. It is not possible
for parties to derogate from this principle rule. The reason is obvious.
Rights of ownerships and limited real rights in a thing can be enforced
against everyone, regardless who owns the thing. This means that they
have to be published in accordance with the rules set for this purpose
by law. And although these rules make it possible to express sufficiently
if a right in rem is vested on a thing and, if so, to whom it belongs,
it would become to complicated, especially where it concerns movable things,
to express by means of the chosen form of publication that certain parts
of the thing belong to someone else. Third parties would not be able to
keep things apart. For this reason the entire thing always is the object
of a right of ownership or a limited property right in a thing. Parties
cannot agree differently. If they do so, this has no real effect, in the
sense that it has no result towards third persons. The effect that parties
intended to accomplish, is not acknowledged by law. With regard to debt-claims
granting a right of use of a thing, this is different. Since only the
involved debtor and creditor have to be aware of the existence and content
of the debt-claim, there is no objection if they point out solely a single
component of a thing as the object of their debt-claim, for instance just one
of the tires of a car. Contrary to rights of ownerships and limited real
rights in a thing, debt-claims therefore may be related purely to a component
of a thing. For that matter, the same applies to limited property rights
in such a debt-claim. They follow the nature of the object of which they have
been split off. If this object, the debt-claim, only relates to a component
of a thing, then also the limited property rights drawn from that specific debt-claim, either directly or indirectly, are always related solely to this
explicit component.
Example:
A car is, according to common opinion, an independent movable thing
of its own. Someone will have a right of ownership of it. The same
applies to the tires held on stock at a shop for car supplies. The
owner of that shop will be the owner of all materials which are displayed
there as a separate movable thing. But as soon as such tires become
a component of someone else’s car, these tires no longer form
a separate movable thing of their own, but a part of a larger principal
thing, the car. This means that it is no longer possible to have an
independent right of ownership of these tires. According to common
opinion there is only one thing, the car, of which the tires now form
a component. Therefore there can only be one right of ownership, namely
of the car, as being the independent thing. Parties cannot get around
this principle, no matter what they do. Only the law decides who has
a right of ownership of a thing. So when an object, in line with common
opinion, forms a component of a larger thing, for instance because
the tires are placed on the car, making it a component of this thing,
the owner of that thing will always be the owner too of all its components.
And although the content of limited real rights derived from a right
of ownership of a thing is more restricted than the content of the
right of ownership itself, the object for both property rights is
the same, namely the entire thing. As far as parties have agreed differently,
this only creates an obligation between them, which forces the owner
of the principal thing to separate a specific component from the thing
and make it an independent and separate thing of its own. After a
component has been separated by the owner of the principal thing (only
he is entitled to do so), it no longer forms a part of the principal
thing. This owner now has two independent things, both covered by
their own right of ownership. The owner of the former component, now
being an independent thing in itself, is only as of that moment capable
of passing this right in rem to someone else by fulfilling the necessary
requirements for publication. He is now able to hand over this separate
thing to the acquiring party, who can bring it under his control,
this apart from the main thing from which it has been separated earlier.
In this way the acquiring party is able to express towards the outside
world that he has a right in rem in the separated thing. As long as
a part forms a component of the principal thing, the owner of the
principal thing cannot grant the other person a right of ownership
of (or any other limited property right in) that component, because
the acquiring party would not be able to publish his acquired right
of ownership in such a way that third persons would be able to detect
it as such.
With regard to immovable things the principle of accession to property
works slightly different, due to the fact that these things cannot be
removed and may be attached permanently to the land. The starting point
is always the right of ownership of a land plot. The land is at all times
the principal thing, which means that it is the thing that is surrounded
by the right of ownership of the person who is registered as its owner
in the registers for registered property. Article 5:20 paragraph 1 DCC
implies that the right of ownership of land comprises, as far as the law
does not stipulate differently, the topsoil and all buildings and constructions
permanently attached to the soil, either directly or through a connection
with another building or construction, unless they are a component of
another person’s immovable thing. Also plants and trees connected
to the soil are a component of the land. But in addition, all what according
to common opinion forms a component of the land or of its unbreakable
attached components (a building is for example such a component), is a
component as well of the principal thing (land) (Article 3:4 DCC). Because
of this, the tiles on the roof of a house are a component of the house,
which in itself is a component of the land. Therefore, the owner of the
land is automatically also the owner of the roof tiles. His right of ownership
encloses the entire immovable thing, including all its components. The
owner cannot stipulate differently. As long as a roof tile is actually
placed on the roof, this tile falls within the scope of the right of ownership
of the owner of the land. No other person than the owner is entitled to
remove it or to make it a separate thing of its own.
But the system for publication of rights in rem related to immovable
things differs from that related to movable things. The right of ownership
of an immovable thing is published by means of registration in the registers
for immovable property. The same applies to limited real rights drawn
from a right of ownership in such an immovable thing. In two ways the
previous effects of the principle of accession to property can be undone.
Firstly, by establishing a right of superficies. This makes it possible
to separate a construction on the land from the land itself, not factually,
but legally. The owner of the land still maintains his right of ownership
of the full land, but with regard to a specific component, for instance
a house on his land, he has granted someone else a property right in rem
exclusively related to that house. The proprietor of a right of superficies
may regard himself as the sole owner of the house, despite that it is
unbreakably attached to the land. According to Dutch law, however, he
has obtained a limited property right on the land of the owner and not
an independent right of ownership of the house.
Another method to break through the principle of accession to property
is by the establishment of an apartment right. This principle also implicates
that the owner of a building by operation of law is the owner of all its
components, therefore of all the rooms and apartments within that building.
Yet, by creating an apartment right it is possible to grant a third person
a right in rem with regard to one or more apartments separately. The proprietor
of such an apartment right has the same powers with regard to his apartment
as an owner. But once more, according to Dutch law, he has not obtained
a right of ownership of an apartment, but a limited property right in
the building, related to a specific apartment.
The above mentioned rules and principles must always be kept in mind
when studying Dutch property law.
Juridical facts leading to acquisition of property
It is clear that a person may not regard himself freely as the proprietor
of something. Such a system would lead to conflicts between the alleged
proprietors and therefore to a chaotic and unjust society in which only
the most aggressive persons would have their way. For this reason the
law sets rules which have to be observed by everyone and it makes sure
that property (a ‘property right’) can only be obtained if
it is acquired in accordance with a procedure imposed by law. Only when
this procedure has been followed, the law acknowledges that a person has
acquired a property right in, for instance, a movable or immovable thing
or a debt-claim. When someone has obtained property in any other way, for example
through stealing, threat or blackmail, then the law will not accept his
property right. According to law, this person has not acquired any property
right in the object under his control and the real proprietor is entitled
to take it back from him, if necessary assisted by the force of the police
acting on behalf of the proprietor.
The law entails various statutory provisions indicating how property
may come to existence and how people may obtain a property right in it.
It regulates which person may call himself the proprietor of a newly formed
thing. It also shows how already existing property rights may pass to
someone else in such a way that the passage of legal entitlement is recognized
as such by law. People have to observe these rules. They are not able
to invent their own rules for acquiring or passing property, since interests
of third persons and the society as a whole are always involved too. If
parties want to effectuate any (change in the) legal position towards
property, they must fulfil all legal requirements for the acquisition
or alienation of property. Otherwise their actions will not have the intended
effect. The law simply won’t recognize their operation as a valid
acquirement of property, so in spite of all efforts made, according to
law all remains as it was.
Some of the legal grounds of acquisition of property, like confiscation
and expropriation (dispossession), can be found in public law. The most
important grounds, though, are based in civil law. In particular the Dutch
Civil Code entails many juridical facts leading to the constitution or
passage of a property right. They will be commented on this internet site.
Original and derivative acquisition of property
The different grounds of acquisition are divided into two groups, namely
in original and derivative acquisitions.
Original acquisition is the acquisition of property without reference
to a previous entitlement of another person. Original acquisition creates
a new property right, either because new things are formed that will belong
to someone or because existing things without an owner are seized in possession
by a specific person who treats them as his property, with the effect
that the law grants him a property right in the thing. It is possible
as well that a thing previously was owned by someone, who has abandoned
his property right in it. This property right then has ceased to exist.
If another person after a while takes possession again of the abandoned
thing, then by operation of law he has created a new original property
right of his own. He did not acquire the earlier existing property right
of the former owner of the thing, since that property right had already
ended. Merely the fact that the new owner has taken possession of the
abandoned thing, is a juridical fact to which the law responds by creating
a new property right.
Examples of original acquisitions are the perception
of fruits (‘vruchttrekking’), specification (‘zaakvorming’),
connection (‘verbinding’), fusion (‘samensmelting’),
mixing (‘vermenging’), separation (‘afscheiding’),
occupancy (‘toe-eigening’) and finding (‘vinderschap’).
Accession to property (‘natrekking’) is usually regarded
as a way of original acquisition too. But in fact accession does not lead
to the constitution of a new property right. In reality only the object
to which a property right is linked expands. When a house is built on
a piece of land, the owner of that land becomes by accession automatically
the owner of that house as well. But he has not acquired a separate new
property right in it. He still has just one right of ownership, that of
the land, but this land now includes an additional component, namely the
house built on it. Only the object of the right of ownership has grown.
Derivative acquisition covers all situations where the proprietor has
acquired a property right in an object that he has derived from a previous
title holder. No new property right is formed, but an existing property
right has been taken over from a previous proprietor, either entirely
or a part of it that was granted to him. Because the acquiring party has
derived his property right from someone who already was entitled to that
property, he has to reckon with the existence of possible rights in rem
of others, which already might have been vested on the acquired object.
So it is possible he doesn’t obtain all powers and rights in the
acquired object under his control, because third persons may invoke an
already existing real property right or a qualitative obligation which
he has to respect.
This means that there is a considerable difference between an original
and derivative acquisition of a movable or immovable thing. When the acquisition
is original, the right acquired to the thing becomes property of its own,
which by its nature must be unqualified and unlimited, and since no one
but the acquiring party has any right to the thing, he must have the whole
right of disposing of it. The acquiring party knows for sure that the
thing can’t have been encumbered with any real property rights of
others. But with regard to a derivative acquisition, it may be different,
for the person from whom the thing is acquired may not have an unlimited
right to it himself, but for instance only a limited property right, which
means that the acquiring party did not obtain the thing in full property,
but merely limited powers and rights in it. Or the person from whom the
thing is acquired may have alienated it with certain reservations of right,
for example because he already had granted others a right in rem in the
thing. Again the acquiring party may have obtained the thing fully under
control, but all the same it’s possible that he has not obtained
all the rights and powers over it, due to the fact that there may be other
proprietors who are able to exercise their rights in the thing against
him.
Examples of derivative acquisition are: succession
by inheritance (‘erfopvolging’), a joining of estates
under a marriage in community of property (‘boedelmenging’)
and a merger of properties through a merger or split up of legal persons
(‘fusie’ en ‘splitsing’). These ways of derivative
acquisition involve an acquisition under universal title. The acquiring
party obtains (a share in) the entire property of his legal predecessor,
therefore not only (a share in) his assets and rights but also (an
equal share in) his liabilities. Other examples of derivative acquisitions
concern acquisitions under particular title. The acquiring party obtains
from his legal predecessor merely one particular asset or property
right in it, although he has to respect rights in rem of others that
were already vested on the acquired object when he obtained it. Examples
of this type of acquisition of an of assets at an apportionment of
a community of property (‘verdeling’), the determination
of the boundary between two land plots (‘grensbepaling van een
erf’), the transfer of property (‘overdracht’) and
the transfer of a contractual position (‘contractsoverneming’).
Creation, passage and loss of property rights
A right of ownership is a property right. The same has to be said of
a debt-claim belonging to a creditor. They both form the most important
property rights of Dutch civil law. All rights which are derived from
either the right of ownership or a debt-claim, are property rights as well
(Article 3:1 DCC). How a right of ownership or a debt-claim may arise, will
be examined firstly. As soon as a new property right is created, that
is not derived from someone else, one speaks of an original acquisition
of property.
Subsequently, it will be shown how new limited property rights can be
split off of a right of ownership or of a debt-claim. In this way new property
rights may be shaped. It’s even possible to split off a limited
property right of another limited property right that in itself already
had been split off of a right of ownership or a debt-claim. A new property
right may also be created when the proprietor of a right of ownership,
a limited property right or a debt-claim grants someone else a right of use
in personam. This other person then has obtained a debt-claim,
which in itself is a property right too, on the understanding that it
can only be enforced against one specific person, namely against the debtor.
In this way various debt-claims may arise. In these situations the created
property right, whether it’s a limited property right or a debt-claim,
is always derived from someone else. This other person has either have
split off a limited property right of an already existing property right
or he has granted someone else a debt-claim to obtain a performance that is
related to an already existing property right. Therefore, strictly spoken,
this involves a derivative acquisition of property.
An existing property right (right of ownership, limited property right, debt-claim) forms a part of the property of its proprietor (natural or legal
person). As a rule it can move over to someone else’s property,
usually in exchange for a counter performance, like a financial sum. There
are various ways in which the entitlement to a property right may pass
from one person to another. Again, in al these situations, the property
right is obtained from someone else and therefore the acquisition has
to be regarded as a derivative acquisition of property, either under universal
or under particular title.
An existing property right may cease to exist. A debt-claim, for instance,
ends as soon as the performance, to which the creditor is entitled, has
been carried out properly. After the creditor has received the indebted
performance, he can’t debt-claim it again. Property rights may also end
on the expiry of a fixed period or the fulfilment of a specific condition.
Furthermore a property right ends when the thing, to which it is attached,
is destroyed or damaged in such a way that it no longer has any use or
value. Property rights may also end when the juridical act which has created
it, is nullified or appears to be null and void from the start, in which
case the property right legally never existed.
Passage of property rights under universal or particular
title of succession
An existing property right, whether it’s a right of ownership,
a limited property right or a debt-claim, belongs to someone, its
proprietor. It forms a part of his property. In general an existing property
right may pass to someone else in order to form a part of his property.
Provided that the legal requirements for such a passage are observed,
the law will recognize that the property right has moved from one proprietor
to another, who, as of then, may exercise all the powers in it. This means
that the new proprietor may use and enforce, if necessary with assistance
of the judicial authorities and police, his powers, either against the
whole world (if real property rights are passed on) or against the original
debtor (when debt-claims are alienated).
A property right may in various ways pass from one proprietor to another.
The new proprietor takes over an existing right from someone else, so
in all events it concerns a derivative acquisition. The property right
may be acquired under universal title or under particular title. In the
first concept the proprietor obtains (a share in) the entire property
of his legal predecessor. For this reason he usually acquires not only
(a share in) more than one property right, but also (in) all the legal
duties and obligations of his predecessor. It is not possible to stipulate
otherwise. He has just one possibility: to refuse or to accept the complete
package. He can’t pick out just one or more property rights or leave
out one or more debts or obligations. Dutch property law identifies three
grounds of acquisition under universal title: succession by inheritance
(‘erfopvolging’), joining of estates under matrimonial law
(‘boedelmenging’) and joining or separation of properties
through a merger or split up of legal persons (‘fusie’ and
‘splitsing’).
Where the new proprietor obtains just one specific property right, he
acquires it under particular title. He will only receive this specific
property right, with all the duties and obligations immediately attached
to it (because of possible limited real property rights or qualitative
obligations on it of others that he has to respect), but he doesn’t
acquire any other property rights of his legal predecessor, nor any other
legal duties or obligations, neither in full nor by means of a share.
All other derivative ways of acquisition than the three earlier mentioned
acquisitions under universal title represent an acquisition under particular
title. The most important are the apportionment of a community of property
(‘verdeling’), the transfer of property (‘overdracht’)
and the transfer of a contractual position (‘contractsoverneming’).
Although the creation of a limited property right is theoretically not
a way of derivative acquisition, since an entirely new property right
comes to existence, it can nevertheless be regarded as such, if one considers
that in fact it concerns a split off of a limited number of powers of
an already existing property right, which are granted for a specific time
to another person with real effect and will return to the principal proprietor
afterwards. The only difference with a transfer is that not all powers
embedded in an already existing property right, thus an entire property
right, are transferred to the acquiring party, but merely a few of these
powers, and possibly for a limited period of time. Not surprisingly the
legal requirements for establishing a limited property right are exactly
the same as for the transfer of the property right of which the limited
property right has been split off.
Acquisition under universal title
Characterising for an acquisition under universal title is that the legal
successor passes his entire estate to one or more successors in title,
therefore all his assets (property rights and other valuable rights) and
all his legal duties and obligations. If there is just one successor in
title, this person will obtain the entire estate of his legal predecessor,
which is added to his own property. All these assets and debts of both
properties form together his new estate. This means that the creditor
of a debt that was taken over from the legal predecessor can be recovered
from all assets of the successor in title, regardless whether he has obtained
them from his predecessor or has been imposed by it previously on his
own or even afterwards in another way. But usually there are two or more
successors involved in an acquisition under universal title. Then they
all receive an equal share in the estate of the predecessor, therefore
in all his assets and all his obligations. Although such a share immediately
belongs to the personal estate of the involved successors, it is usually
treated separately, awaiting for the moment on which the debts of the
legal predecessor will be paid off and the remaining assets will be apportioned
to the different co-successors in title, each in proportion to the value
of their shares. Only after an asset, previously belonging to the legal
predecessor, has been appointed and transferred to one of the involved
successors, this person will have obtained a full right in it, solely
belonging to him. The other successors in title have lost their share
in it. Because the bond with the co-successors is broken for ever, the
asset will be treated as of then as a normal property right belonging
to the estate of the person to whom it was apportioned.
Acquisition under universal title out of an inheritance
An person who is called as heir to the estate of a deceased person, acquires
under universal title a share in all assets and liabilities belonging
to that estate. The assets and liabilities of the deceased's estate together
form a community of preoperty as long as the assets have not yet been
divided and apportioned to the individual heirs.
Example:
Arnoud, a single father, has three children: Margiet, Christel and
Marc. When he dies, his estate consists of assets with a total value
of € 1,500,000 and debts with a total importance of € 300,000.
He leaves his entire estate to his three children. The heirs, Margriet,
Christel and Marc, accept the inheritance of their father. Each of
them acquires as a result a share of 1/3 in each individual asset
from Arnoud’s estate and is liable towards the creditors of
his father for 1/3 of each individual debt belonging to Arnoud’s
estate. The value of the share of each heir in the estate therefore
is 1/3 of € 1,500,000 - € 300,000 = € 400,000. It is
not possible, when acquiring something under universal title, to obtain
solely the assets or just some of the assets of the legal predecessor,
without receiving an equal share in his debts and obligations. When
Marc doesn’t want to get involved with the debts of his father,
he may reject the inheritance completely. In that case he want obtain
anything from his father’s estate. But when he accepts the inheritance,
then he can’t demand or stipulate that he’ll acquire merely
one or more of the assets of the estate, not even in cooperation with
the other heirs. Only when all debts from Arnoud’s estate are
settled, the heirs may, at the apportionment of the remaining property,
agree that Marc receives one or more specific assets. But then the
acquisition of these assets by Marc doesn’t occur under universal
title, but under particular title in cooperation with his co-heirs.
Prior to the apportionment of the remaining assets of the estate,
Marc has acquired under universal title, just as Margriet and Christel
have, a share of 1/3 in Arnoud’s entire estate.
There’s an easy explanation for the fact that an acquisition under
universal title has the effect that the successors at all times obtain
the entire property, thus all assets and obligation of the legal predecessor,
each to equal proportions. In such event the legal predecessor always
passes over his entire estate to someone else. If he would be able to
grant the other person only his assets, his creditors would in fact lose
the ability to recover their debt-claim from the property of their debtor.
After the assets are alienated to someone else, the property of the legal
predecessor would only consist of debts and obligations. But since these
are attached to the creditor personally, the successors under universal
title could not be held responsible for them. The heirs would solely have
acquired the assets, while the creditors of their legal predecessor still
would have to turn to their own debtor to debt-claim performance, although
he no longer owns any valuable property with which he could satisfy his
debts.
In general the legal predecessor who passes on property under universal
title, does not get a counter performance for it in return, which would
flow in the property of the legal predecessor as an equal compensation
for the loss of assets. Normally, under such circumstances, the creditors
of the legal predecessor would be able to nullify the transfer of the
assets on the basis of fraudulent conveyance (Article 3:45 DCC), this
in order to return the assets to the property of their own debtor to preserve
their recovery rights. But sometimes this is not a convenient solution.
There may be valid reasons to pass all assets of a person to someone else,
for instance when the proprietor dies. Because the deceased proprietor
no longer can hold the assets himself, it is logical that he wants to
leave them to his children or to his other heirs or legatees. This is
a normal desire that as such is recognized by law as a legitimate ground.
But to guarantee that the recovery rights of the creditors of the deceased
proprietor are not harmed, the law had to order too that the heirs of
the proprietor not only receive the assets from the deceased’s estate,
but also his debts and obligations. So an heir who wants to receive any
assets from the deceased’s estate, has to accept an equal portion
of the debts into the bargain. This means at the same time that the creditors
of the deceased are entitled to recover their debt-claim, in proportion to
the share of each heir in the deceased’s estate, from the property
of these heirs, which now includes the assets acquired under universal
title from the deceased’s estate. Nevertheless, this may be a disadvantage
to these creditors when an heir has many other personal creditors of his
own, who are equally entitled to recover their debt-claims from his property.
In order to keep away from such a situation, the creditors of the deceased
have the right to postpone the apportionment of the deceased estate as
long as their debt-claims have not been fully recovered from it. By postponing
the apportionment, they are able to preserve the same opportunities to
recover their debt-claims as they had before the moment that the property of
their debtor passed under universal title to the heirs. Before the passage
under universal title they could only recover their debt-claims from the property
of their debtor, i.e. the deceased. After the passage under universal
title they are at least still able to recover their debt-claims from that same
property, namely the not apportioned estate of the deceased, but in addition
they may turn to the property of the heirs, although then they’ll
encounter competition from the personal creditors of the heir himself.
Example:
Suppose that Arnoud, the testator in the previous example, would be
able to pass only his assets to his three children, Margriet, Christel
and Marc. These heirs would then be enriched for an amount of €
500,000 each. As an heir they do not have to deliver a counter performance
on behalf of the estate of the deceased. Consequently, the estate
of Arnoud would be left with debts of a total sum of € 300,000.
But because there are no assets left in Arnoud’s estate, his
creditors would never get satisfied. That’s why an acquisition
under universal title always involves the entire property of the legal
predecessor.
Suppose that Arnoud had only one creditor, the bank, to whom he owed
an unsecured debt of € 300.000. The bank is entitled to demand
from each heir, for instance from Margriet, that she pays off her
share of her father’s debt, therefore a sum of € 100.000.
So Margriet not only acquires assets with a value of € 500,000,
but also debts with an importance of (1/3 of € 300,000 =) €
100,000. Suppose that Margriet had, prior to the acquisition under
universal title, assets of her own with a value of € 100.000
and debts with an importance of € 50,000. After her father’s
estate has been apportioned to her and her sister and brother, her
own property will consist of assets with a value of (€ 500,000
+ € 100,000 =) € 600,000 and debts with an importance of
(€ 100,000 + € 50,000 =) € 150,000. She possess enough
property to pay off all her debts, including the debt of € 100,000
to the bank which was imposed on her under universal title at the
acceptance of her father’s inheritance.
But what if her brother Marc, prior to the death of his father, would
own assets of his own with a value of € 200,000, but had unsecured
debts with an importance of € 800,000 to his former commercial
partner. After the passage under universal title Marc is only liable
for his father’s debt towards the bank to the extent of an equal
part thereof, being an amount of € 100,000. After the apportionment
of his father’s estate his property will enclose assets with
a value of (€ 500,000 + € 200,000 =) € 700,000 and
debts with an importance of (€ 100,000 + € 800,000 =) €
900,000. Therefore Marc has more debts (€ 900,000) than assets
(€ 700,000). As a result the bank cannot recover its entire debt-claim
of € 100,000 from Marc’s property, whereas the former commercial
partner, who prior to the death of Marc’s father could only
recover € 100.000 of his debt-claim of € 800.000, now will be
satisfied for much more. The creditor of the deceased father, the
bank, has the possibility to stop this result by demanding that the
apportionment of the estate will be postponed until its entire debt-claim
of € 300,000 is satisfied out of Arnoud’s estate, existing
of assets with a value of € 1,500,000.
Acquisition under universal title because of a
marriage under a marital community of property
For the same reason the conclusion of a marriage under a marital community
of property leads to a joining of two properties under universal title.
The marital community of property is constituted by all assets and debts
of the husband and all assets and debts of his wife, without the exclusion
of one or more assets or debts. The creditors of the husband are, as soon
as the marriage has been concluded, entitled to recover their debt-claim from
all assets of the marital community of property, irrespective whether
these were brought in by the husband, their original debtor, or by his
wife. The same applies, of course, to the creditors of the wife. If, for
instance, the husband would be able to bring solely his assets into the
community of property, the marriage could have negative effects for his
creditors.
Example:
Joep and Merel want to get married. They do not make a prenuptial
marriage agreement, so the marriage will by operation of Dutch law
result in a marital community of property consisting of all assets
and debts of both spouses. Prior to the marriage, Joep owned assets
with a value of € 100,000. He was liable towards the bank for
an unsecured debt of € 100,000. Before she got married, Merel
had a savings account with a value of € 20,000. She had no debts
at all. After the marriage a marital community of property comes to
existence including assets with a total value of (€ 100,000 +
€ 20,000 =) € 120,000 and debts for an amount of €
100,000. When Joep doesn’t pay off his debt, the bank is allowed
to recover its debt-claim from the entire marital community of property.
The recovery rights of the bank have not been damaged by the marriage.
Suppose, on the other hand, it would be possible for Joep to bring
into the marital community of property only his assets. After the
marriage, he still would be liable towards the bank for a sum of €
100,000. But because his debts were not brought into the marital community
of property, the bank could only recover its debt-claim from the property
of its debtor, Joep, and not directly from the assets of the entire
community of property or from the property of Merel. The property
of Joep would have decreased due to the marriage. Prior to it, he
owned assets with a value of € 100,000. After the marriage, he
only holds a share in the marital community of property representing
half of the value of all its assets. The marital community of property
still consists of assets with a total value of € 120,000. Joep’s
share in it represents thus a value of € 60,000. But he still
would owe a debt to the bank of € 100,000, for which his spouse
would not be liable. This would mean that the recovery rights of the
bank would have been harmed due to the marriage. To avoid this result,
the law has qualified the joining of properties of spouses within
one marital community of property as an acquisition under universal
title, so that not only the assets of both spouses, but also their
debts always fall in the marital community.
This, however, does not guarantee that the creditors of the future spouses
can never be harmed by the marriage at all. Although they still may recover
their debt-claims from the assets of their debtor and even from the assets
which were brought in by his spouse, they have to compete after the conclusion
of the marriage with the creditors of that spouse when trying to recover
their debt-claims from all assets of the marital community of property. So
if their debtor marries someone whose property includes more debts than
assets, their recovery rights will in effect diminish. The creditors have
no means to stop this result. The law has explicitly accepted this possible
consequence, since the freedom for future spouses to marry into a marital
community of property and to shape their family live in this way is valued
more highly than the financial interests of their creditors.
Example:
Suppose that Merel would have had debts up to a sum of € 200,000.
The marital community of property then would consist of assets with
a value of € 120,000 and debts with an importance of € 300,000.
Although the bank is able to recover its debt-claim of € 100,000 from
all the assets of the marital community of property, it will now encounter,
in doing so, the recovery rights of the original creditors of Merel.
This means that the bank’s recovery rights have been damaged
severely. Prior to the marriage the bank could recover its debt-claim (€
100,000) from all assets of Joep (value € 100,000), while afterwards,
although there has been an acquisition under universal title, it must
compete with the other creditors in the recovery of all debt-claims with
a total importance of € 300,000, which all have to be settled
from the community assets with an overall value of € 120,000.
The bank’s debt-claim will be satisfied for only € 40,000. Even
though the recovery rights of the bank were damaged due to the marriage,
the bank has no right to nullify the marriage on the ground of fraudulent
conveyance (Article 3:45 DCC), nor on any other impediment to the
marriage. In practice, however, under these circumstances the prospective
spouse of the one whose property entails more debts than assets will
not be prepared to marry under a marital community of property, but
will demand that a prenuptial marriage agreement is drawn up in order
to avoid that he will become – in a roundabout way – liable
for the enormous debts of his future spouse. If that occurs, the recovery
rights of the creditors of both spouses will not be affected by the
marriage at all. They remain as they were before the marriage.
Acquisition under universal title in the event
of a legal merger or spilt up involving two or more legal persons
The same thought lies behind the third ground for an acquisition under
universal title: a legal merger of two or more legal persons. Such a merger
(or split up) may be necessary or desirable for business reasons. But
again, the law wants to prevent that a legal person is able to transfer
solely his assets to another legal person, and not his debts, because
this would mean that the creditors of the first legal person would be
left with an empty shell, since they would not be able to claim performance
of the other legal person who has obtained all valuable assets. Debt-claims are attached to the debtor personally. Therefore this other legal
person, whether he already existed as a separate legal entity or has been
incorporated especially in view of the legal merger, always acquires under
universal title all assets and all debts of all legal persons involved
in the merger. When an existing legal person is split up into two or more
separate legal persons, each of them will, in proportion to the acquired
assets, obtain as well a proportional part of the already existing debts
of the split up legal person. It is not possible to leave all debts in
the split up legal person behind and to transfer all its assets to the
newly formed entity.
Example:
Pietersen BV (Ltd) is a legal person. It’s assets represent
a value of € 2,000,000, whereas its debts correspond to an equal
amount of € 2,000.000. The shareholders and the board of directors
want to make a fresh new start. They establish a new private limited
company, called De Vries BV (Ltd). A merger would mean that the newly
formed company would absorb all assets and debts of Pietersen BV.
So this will get the shareholders nowhere. They consider a split up.
But this would mean that De Vries BV would automatically acquire the
debts of Pietersen BV in proportion to the acquired assets. In the
end this wouldn’t make a difference either. The board of directors
of De Vries BV, having the same members as the board of directors
of Pietersen BV, prefers another solution. They sell the assets of
Pietersen BV, with a total value of € 2,000.000, to De Vries
BV, for a purchase price of € 300.000. After this transaction
Pietersen BV will hold assets with a value of € 300,000 (debt-claim against De Vries BV for the payment of the transferred assets)
but also still all debts to an amount of € 2,000,000. The assets
of De Vries BV, on the other hand, will be worth € 2,000,000,
while there’s only a debt of € 300,000 to Pietersen BV
(payment of the price of the transferred assets). Pietersen BV is
no longer capable of paying its debts and is declared bankrupt. De
Vries BV pays € 300,000 to the liquidator in the bankruptcy of
Pietersen BV and the shareholders think that they have made a smart
deal. They now own shares in a limited company that is worth €
1,700,000. The shares in Pietersen BV were worthless, because the
debts of this legal person were as high as the value of its assets.
The liquidator in the bankruptcy of Pietersen BV finds it hard to
explain why Pietersen BV has sold assets with a value of € 2,000.000
for only € 300,000 to another limited company with the same directors
and shareholders. Therefore he nullifies the sale agreement between
Pietersen BV and De Vries BV, so that the assets of De Vries BV are
regarded (with retroactive effect) to have always stayed within the
property of Pietersen BV. After that, he sells these assets on a public
sale under execution for € 1,500,000. Together with the received
purchase price from De Vries BV a sum of € 1,800,000 is available
for the creditors of Pietersen BV (total of their debt-claims € 2,000,000).
Maybe the missing sum of € 200,000 can be recovered from the
members of the board of directors.
Acquisition under particular title
Property can be obtained also in another way than under universal title
of succession. When the acquiring party only receives a property right
in one specific asset of his legal predecessor, and not a share in his
entire property (assets and liabilities), one speaks of an acquisition
under particular title. The acquiring party solely gets a property right
in one asset, without taking over one or more debts of the former owner
of that asset. The buyer who has obtained the ownership of the sold object,
doesn’t obtain as well a proportional part of the debts of the seller’s
property. As a rule none of the debts of his legal predecessor pass to
him, not even debts of which the performance was related to the acquired
asset. The same applies when an object is delivered on another legal basis,
like a donation, or when the acquiring party merely has obtained a right
of use (debt-claim) in someone else’s asset. No existing debts
of the other party are taken over.
Nevertheless, the acquiring party must observe the
rights in rem that are attached to the received object itself. If,
prior to the acquisition under particular title, the alienator already
had granted a limited property right in the object to a third person,
then this third person may uphold it against everyone and consequently
also against the new owner of the object. The acquiring party therefore
obtains an object with limited possibilities, since he must respect
the powers which the proprietor of this limited property right may
exercise over it. But he is not bound by any obligations (debts) of
his legal predecessor, not even those which specifically relate to
the acquired object, like a debt resulting from a right of use of
the object. This debt of his legal predecessor isn’t attached
to the received object itself, but to the debtor (alienator) personally.
So it is left behind as his obligation. The new owner may deny that
the creditor with an obligatory right of use keeps exercising his
powers over his object. Again, it has to be said that already existing
limited real rights in the object could have been detected by the
acquiring party at the moment of acquisition, while debt-claims,
due to a lack of publication, could not. So it’s defendable
that the acquiring party is not bound by the debts of his legal predecessor
as he could not have anticipated on their existence. But there are
three important exceptions to this rule. A party who has acquired
under particular title an object that already was leased out by the
previous owner, has to respect the debts of his legal predecessor
as far as they result from the existing lease agreement, even though
this agreement wasn’t published at all. The same applies to
obligations derived from a farm lease agreement and, as far as the
acquiring party has obtained business assets which together form an
enterprise or an independent part of such enterprise, obligations
from existing employment agreements.
When an asset has passed to someone else under particular title of succession
it has left the property of the alienator for good. This could affect
the recovery rights of the alienator’s creditors too. Yet, this
danger is less present than at an acquisition under universal title. At
an acquisition under particular title usually not all assets of the alienator
will pass to someone else’s property, as in the case of an acquisition
under universal title. This generally means that the alienator still has
sufficient other assets with which he is able to pay off his debts. Moreover,
the alienator, as a rule, obtains an equally valuable counter performance
from the person who has acquired his asset. One asset indeed leaves his
property, but at the same time another asset of equal value is brought
into it. On the balance the value of his property stays the same. At an
acquisition under universal title the acquiring party doesn’t have
to pay a counter performance to the alienator at all, which means that
nothing fills up the gap that the alienated assets have left in his property.
Only by anchoring an equal part of the debts to the alienated assets,
the recovery rights of the alienator’s creditors can be protected.
That’s why, at an acquisition under universal title, even after
the assets have passed to someone else’s property, these creditors
may recover an equal part of their debt-claims from these particular assets.
All the same, also an acquisition under particular title may harm the
recovery rights of the alienator’s creditors, especially when the
alienator doesn’t receive any counter performance in return for
his asset or he receives a counter performance of far less value. As long
as his other assets are sufficient to cover his debts, he may donate an
asset to his friend or a family member or he may accept a less valuable
counter performance from anyone he pleases. His creditors are still able
to recover their debt-claims entirely from the remaining assets. But when such
a transaction is made at a moment that his property already entails more
debts than assets or when such a transaction will have as result that
his property becomes insufficient to cover all his existing debts, his
creditors may react to it. The law provides them the right to nullify
the transactions which the debtor has voluntarily entered into and which
have harmed or will harm their recovery rights. If a debtor, although
legally not obliged to do so, performs a juridical act, while he knew
or should have known that it will harm the opportunities of his creditors
to recover their debt-claims from his property, then this juridical act is
voidable on the ground of ‘fraudulent conveyance’ (Article
3:45 DCC). This ground of voidability can be invoked by every creditor
who’s opportunities to recoup himself are harmed by this juridical
act, irrespective of the fact if his debt-claim already existed before the
juridical act in question was performed or if it came to existence afterwards.
After the debtor has been declared bankrupt, the liquidator has even more
possibilities to nullify transactions that have unreasonably harmed the
recovery rights of the creditors.
The most important grounds of acquisitions under particular title are
a transfer of property, the creation of a limited property right, the
transfer of a contractual position and the apportionment of a community
of property.
Transfer of property
A transfer is a juridical act under which an alienator with power of
disposition delivers an existing property right to another person, the
acquiring party, by performing all necessary requirements for the publication
of the entitlement of the acquiring party, in such a way that the law
acknowledges the acquiring party indeed as the new proprietor of the transferred
property right. A valid transfer of a property right requires that the
underlying object is delivered to another person under a valid legal basis
by someone who has power of disposition to do so (Article 3:84 DCC). This
means that a transfer, in order to be recognized as a valid passage of
property, must meet the following three legal requirements.
First of all the transfer must have been performed by a transferor with
power of disposition over the transferred object. This requirement is
founded on the plainest dictates of common sense, adopted in all systems
of law, that no one can transfer a right to another which he has not himself
(‘nemo plus juris ad alienum transfers potest quam ipse habet’).
The law can’t accept a transfer when the transferred property right
didn’t belong to the transferor or when there was an obstacle for
the proprietor preventing him from exercising his power of disposition,
for instance a seizure or a mortgage that was already vested on the transferred
object.
Yet, if the acquiring party in good faith obtained
a property right from a person lacking power of disposition, he is
protected by law (Article 3:86 DCC). If the real proprietor has not
adequately published his property right, this to ensure that third
persons are able to see that he is the only person with power of disposition,
then he must bear the risk if someone else on reasonable grounds has
assumed that a person without power of disposition was entitled to
transfer the object to him. The acquiring party who acted in good
faith can’t be blamed for this lack of publication. How could
he have known, given that the real owner did not publish his property
right correctly, that he was dealing with a transferor without power
of disposition? The real owner could have prevented causing this mistake
if he would had published his property right effectively. The same
applies when the real proprietor of an object due to a seizure or
a pledge or mortgage isn’t entitled to dispose of his property,
but still has the possibility to do so, because the creditor who seized
the object or the pledgee or mortgagee failed to publish his right
properly. A third party acquiring the encumbered object without being
able to recognize the seizure or the real security right vested on
it, may reasonably have thought that he obtained an unencumbered object
from a fully competent proprietor. In these situations the interests
of the third party are valued more highly than the interests of the
seizer or secured creditor who, due to a lack of publication of his
(security) right, has lost his powers. The seizer or secured creditor
may claim damages from the proprietor who transferred the property
without his authorization, but he can’t claim the transferred
property back from the third party who acquired it in good faith.
Only when the third party has not paid a counter performance to the
unauthorized transferor, the interests of the seizer or secured creditor
prevail.
The second requirement for an effective transfer deals with the necessity
of a valid legal basis. ‘Legal basis’ is the official term
indicating the reason for the passage of property. The law can only accept
a transfer if it is based on a valid reason. The most common reason is
the mutual intention of the transferor and transferee to make the latter
the new proprietor of the transferred property right, which intention
is preset by parties in an agreement, like a sale contract or donation
agreement. The law obeys this wish, provided that the agreement has been
concluded in accordance with all legal requirements and, of course, that
the remaining two requirements for a valid transfer are met as well. The
agreement between parties then forms the legal basis for the transfer.
It justifies why the law, after all publication formalities have been
fulfilled, should accept the transferee as the new proprietor. Although
an agreement usually serves as legal basis for a transfer, other legal
sources for obligations may play this role as well, like a tortious act
which has produced an obligation to pay damages. In fact the obligation
for the tortfeasor to pay a sum of money as compensatory damages is the
legal basis for the transfer of the money he owns up until that moment,
to the person who has suffered damage and who will have to obtain an entitlement
in it with real effect. In such instance the law acknowledges this obligation
as a legal basis for the transfer of money because in this approach the
damage that someone has suffered will be largely repaired in an appropriate
way by the payment of money. Other obligations, arising directly from
law, that may as well create a legal basis for a transfer of property,
are an undue performance and an unjustified enrichment. The recipient
is obliged to return the object he has obtained without any legal justification
or with which he has been enriched at the cost of the other. The received
object, however, was en still is his property when the obligation to return
it came to existence. In order to comply with this obligation, imposed
on him by law, he has to transfer the received object back to the person
who previously had transferred it to him. An obligation may also come
to existence when a party to an agreement has rescinded this agreement
on the ground of a breach of contract by the opposite party. The rescission
itself has no retroactive effect. The law does not presume that the transfer
has never happened. Even after the rescission of the agreement, a transfer
based on it, remains intact. The rescission merely produces an obligation
for the party who has received the object under this transfer, to transfer
it back to its original owner or, if this is no longer possible, to pay
compensatory damages in money. As far as the opposite party is still able
to transfer the received object back to its original proprietor, such
an obligation may function as a legal basis for this transfer. The same
applies when he has to pay a sum of money as compensatory damages.
The fact that an obligation arising from law or
agreement generally forms the legal basis for a transfer means that
there is a close connection between the law of obligations and contracts
on the one hand and property law on the other. Contrary to a rescission
of an agreement, a nullification of a null and void or voidable agreement
does have retroactive effect. When the agreement from which the obligation
results, appears to be invalid from the start (null and void) or it
has been nullified after some time with retroactive effect on the
basis of a ground of voidabiity, this will also affect the transfer
resulting from this agreement, since this means that the required
legal basis has never existed. As a consequence, according to law
there has never been a valid transfer of property between the two
involved parties, regardless under whose control the object actually
remains at the moment that the legal basis appears to be invalid.
But what if, prior to this moment, the transferee already had transferred
the object to a third person? In retrospect the transferee wasn’t
allowed to do so, because, after the legal basis for his own acquisition
has been removed (with retroactive effect), he appears to have never
obtained a property right in the acquired object himself. So, in retrospect,
he missed the necessary power of disposition. This means that when
he transferred the object to a third party, not all requirements for
a valid transfer were met. This would indicate that the third party,
according to law, never obtained any entitlement in the transferred
property right at all. But in such events the third party usually
couldn’t have known that the person who had transferred the
object to him, lacked power of disposition. The fact that the first
transfer was null and void or has been nullified with retroactive
effect only has come to surface after the object has been transferred
to a third party. The parties to the first transfer will nearly always
have fulfilled all requirements which are necessary to make public
to the world that the transferee as of a specific moment has become
the new proprietor of the object. Only afterwards the legal basis
falls away, which makes this first transfer invalid and which leads
to the result that the transferee has never acquired any property
right in the object, despite of what he and the first transferor have
announced to others by means of publication (delivery). In that situation,
a third party, who has acquired a property right in that object from
this transferee, could hardly ever had been aware that his counterparty,
according to law, had no power of disposition. So, an invalid legal
basis for the first transfer makes that there has never been a transfer
of property between the first transferor and the first transferee,
but if the first transferee, although according to law not competent
to do so, has in the intervening time transferred the object to someone
else who acquired the object in good faith, this third party will
be protected by law against the fact that the person who has delivered
the object to him appears, in retrospect, to miss the necessary power
of disposition.
A third requirement for a valid transfer is a delivery of the transferred
object in the legally required way. This requirement is connected with
the fundamental principle that third persons at all times must be able
to retrieve who has a real property right in an object which gives this
person the right to exercise certain powers over it, enforceable against
everyone, and which gives him power of disposition, so he is allowed to
alienate the underlying object to other persons. For this reason a right
of ownership of an immovable thing must be published in the public registers
for registered property. The same applies to limited real rights in such
things. Third persons must at all times be able to know who owns a house
or land plot or who has a limited property right on it. So when another
person has acquired such rights on the basis of a transfer, this change
of entitlement must be shown by means of a corresponding registration
in these registers as well. The new owner or limited proprietor must be
recorded in the public registers as such, so that everyone can see that
from a specific moment in time he owns the house or land plot or has acquired
a limited property right in it. The formalities that the transferor and
transferee have to observe in order to publish the fact that the transferee
has become the new proprietor of a property right in immovable property,
outline the necessary delivery. The transferor and transferee must ask
a notary to make a notarial deed of transfer, which will be registered
in the public registers for registered property. Only after this registration
has been made, the transfer is completed. Each person consulting these
registers, can now become aware of the fact that the immovable property
belongs to another owner or that it has been encumbered with a limited
property right which is enforceable against everyone.
The publication of real property rights in a movable thing occurs by
exercising actual power over that thing. The person who keeps a movable
thing under his control, may be regarded by others as the person who owns
it. Hence, the way in which real property rights in a movable thing are
published, is by actually holding it in control. Other persons may, according
to law, assume that the person holding a movable thing in his power owns
it or at least has acquired a pledge or usufruct on it (a pledge and a
usufruct are the only possible limited real rights in movable things).
So, obviously, the formalities to deliver a movable thing consist of actions
which allow the transferee to take actual control over that thing in order
to enable him to present himself towards all other people as its new proprietor
(new owner, pledgee or usufructuary). After the transferor has handed
over the movable thing to the transferee, everyone may assume that, because
the transferee holds the object in his power, he is the owner (or pledgee
or usufructary).
Just like any other independent property right, a debt-claim can
be transferred to someone else. The creditor may himself collect the performance
which the debtor owes to him, but he may also grant the entitlement to
it to another person, who as of then will be regarded by law as the new
creditor, having an enforceable right against the original debtor to demand
the indebted performance from him.
Although a debt-claim has no real effect, since it has to be observed
exclusively by the involved debtor, it’s obvious that the one person
liable for it, namely this debtor, must at all times know to whom he has
to perform his obligation. This means that the required publication must
be tuned to his knowledge. On the other hand: since no other persons than
this specific debtor can be held accountable for the performance of his
obligation, it’s sufficient when only this debtor knows to whom
the debt-claim belongs, therefore who is entitled to demand the
indebted performance from him. For this reason the publication of property
rights in debt-claims purely effects the debtor himself, and no
one else.
When an obligation comes to existence the debtor will always be aware
towards whom he is engaged to fulfil the indebted performance. Where the
obligation is derived from an agreement between the debtor and creditor,
this agreement automatically implies that the debtor has accepted to perform
his obligation to his counterparty. So his counterparty to the agreement
will be the proprietor of the debt-claim, unless he has explicitly appointed
another person to this end. Where the obligation is immediately set by
law, as in the case of a tortious act, an undue performance or an unjustified
enrichment, usually the person who has suffered a disadvantage as a result
(injured person, performer of an undue performance, person who has been
impoverished) will turn to the tortfeaser, the recipient of the undue
performance or the unjustifiably enriched person. The law automatically
imposes a debt on these persons as soon as the facts meet the legal requirements
for these sources of obligations. The debtor, who has been approached
by the disadvantaged person, may immediately recognize his debt-claim and perform
the indebted obligation to him. It’s possible too that he will deny
his liability. In that case the court must decide whether an obligation
has arisen from law on the basis of one of these legal grounds. If the
court awards the claim of the disadvantaged person, the debtor will again
automatically know to whom he has to perform his debt. The publication
of a debt-claim is guaranteed this way.
But what if the original creditor decides to transfer his debt-claim against
the debtor to another person. The necessity that the debtor always must
be able to know to whom he has to perform his obligation, implies that
the old and new creditor must inform him of the passage of the debt-claim.
If the transfer concerns a debt-claim to name, the transferor (old creditor)
and transferee (new creditor) have to draw op a private deed of assignment
and notify the debtor of the transfer of the debt-claim, with indication of
the identity of the new creditor. This notification is necessary to make
the new creditor indeed the new proprietor of the debt-claim. As
soon as the debtor has received the notification of assignment, he knows
that he is committed to a new creditor. The formalities for such a delivery
resemble the formalities for the delivery of a real property right in
an immovable thing, with the difference that the notification of the transfer,
in view of the nature of the debt-claim, only has to be addressed
to the debtor who has to carry out the chargeable performance and not,
as in the case of immovable property, to the whole world, this is to say,
to all people who could possibly come across the immovable thing and have
to observe the powers of persons with a real property right in it.
When a debt-claim is made to order or to bearer, the debtor has accepted in
advance that he has to pay his debt to any person who will show him the
negotiable instrument at the agreed moment. If a creditor wants to transfer
such a debt-claim to a third party, he merely has to hand over the negotiable
instrument to him. With this instrument the third party is able to present
himself to the debtor as the (final) creditor to whom the debt must be
paid. The formalities of such a delivery show resemblance with the delivery
of a real property right in a movable thing. In both cases the object,
with which the existence of the property right is published, is brought
under control of the new proprietor, enabling him to present himself towards
each person who might encounter that object as the (new) proprietor.
The second mentioned requirement for a transfer, the existence of a valid
legal basis, makes sense because it’s possible that parties have
fulfilled all other requirements, yet without having the intention to
alienate any property to one of them. If, for instance, Jan, the owner
of a watch, wants to borrow it for a while to his close friend Peter,
who puts it at his wrist, one could say that Jan has brought the watch
under control of his friend Peter, who is able to present himself towards
the outside world as the new owner of the watch. This delivery would have
been carried out by the owner of the watch, Jan, therefore by a person
with power of disposition. But still no transfer of ownership of the watch
has occurred. Jan and Peter never intended this, so a valid legal basis
for such a transfer is absent. Where not all three requirements of a valid
transfer are met, the law can’t recognize the actual situation as
a passage of property, even when all facts seem to point in this direction.
Jan still owns the watch, even when it’s at the arm of Peter.
Establishment of limited (real) property rights
The law makes it possible for the owner of a movable or immovable thing
to split off one or more powers of his property right and to grant these
powers with 'real effect' to someone else, on the understanding that parties
have to choose for one of the standard frameworks which the law provides
for this purpose. A split off exists of a transfer of some of the powers
which are enclosed in an already existing right of ownership to another
person, leaving the remaining powers at the owner. The split off powers
must be captured in one of the seven standard forms that are available,
next to a right of ownership, for this purpose and be published as a limited
real property right in the legally required way to ensure its existence
and real effect. The split off itself is called the establishment of a
limited real right. The separated limited real right is vested on the
right of ownership. This means that the right of ownership only represent
the remaining powers (with real effect) during the time that the limited
real right exists.
Since the establishment of a limited real right is nothing else than
the (temporary) transfer of some of the powers of a right of ownership,
the formalities to create such a limited property right are the same as
those for the transfer of a full right of ownership to a new proprietor,
yet restricted, of course, to certain powers, and possibly to a fixed
period of time. Article 3:98 DCC makes clear that the statutory provisions
for the transfer of property rights apply accordingly to the establishment
of limited (real) property rights. This means that the establishment of
a limited real right requires that the encumbered object is delivered
to another person under a valid legal basis by someone who has power of
disposition over that object (Article 3:84 DCC). The legal requirements
for establishing a limited real right are therefore exactly the same as
for a transfer of the entire encumbered property.
Solely the owner (proprietor of right of ownership) of the to be encumbered
property right has the necessary power of disposition. As a result no
other person is allowed to vest a limited real right on the movable or
immoble thing, that is to say on the right of ownership in that thing.
If this happens anyway, the limited proprietor has acquired his right
from a person without power of disposition, so that not all legal requirements
for a valid establishment are fulfilled. The law will not accept that
a limited real right has been established, unless the person who acquired
it acted in good faith. A person who, in good faith, acquired a limited
real right from someone without power of disposition is protected by law
in the same way as a person who, in good faith, acquired a full property
right by virtue of a transfer. Only when the owner has failed to publish
his property right correctly, it’s conceivable that the limited
proprietor did not have to know that the person who granted him his right
was unauthorized to do so. Only then it is possible that he acquired his
limited real right in good faith.
Usually an obligation serves as legal basis for the establishment of
a limited property right. This obligation may be derived from an agreement
between the main proprietor and the limited proprietor or from another
legal ground, like an undue performance or an unjustified enrichment or
a judgment of the court. When the bank grants a loan to its client, it
will almost certainly demand collateral, for instance by stipulating a
mortgage or pledge in the loan agreement. Then this loan agreement produces
the obligation which forces the client of the bank to establish a real
security right on behalf of that bank. When two neighbours have a dispute
over a right of access, the court may order that one of them has to give
the other an easement. In that case a court order serves as legal basis
for the establishment of this limited real right. Without a valid legal
basis, no valid limited real right can be established.
Also the formalities necessary to actually bring about the limited real
right are exactly the same as for a delivery that is necessary to accomplish
a valid transfer of the underlying property. They serve the same purpose:
third persons must always be able to determine if a limited real right,
being a right that is enforceable against everyone, has been vested on
another property right and, if so, to whom it belongs and which powers
it entails. Because limited real rights can be upheld against everyone,
third parties having acquired a property right will be bound by already
existing limited real rights in the acquired object. So when someone intends
to acquire a movable or immovable thing, for instance an inventory or
a house, he wants to ensure beforehand that he can’t be confronted
afterwards with already existing limited real rights of others. For the
reason that limited real rights have real effect, the law demands that
they are published properly by means of observing the formalities which
are set for the delivery of the right of ownership of the thing, that
also intend to make the transfer of that thing known to the people who
it may concern.
If the encumbered object is an immovable thing, the formalities for the
establishment of a limited real right in such a thing consist of the making
of a notarial deed of establishment between the principal owner and the
limited proprietor and its registration in the public registers for registered
property. After the limited real right has been made public, everyone
at least has the possibility to ascertain whether such a limited real
right has been vested on the immovable thing. An immovable thing may be
encumbered with the following limited real rights: long leasehold, easement,
apartment right, right of superficies, usufruct and mortgage.
Not more than two kinds of limited real rights may be vested on movable
things: a usufruct and a pledge. The formalities to establish these rights
are once again the same as for a delivery of the encumbered movable thing
itself. The owner must bring the movable thing in the power of the usufructuary
or pledgee. A usufruct is usually established on a movable thing as part
of a usufruct on the entire property of a person, as in the case of a
usufruct of the surviving spouse on the estate of his deceased partner.
His partner’s estate may include a house and land and all movable
things that are present in that house. The usufruct on the house and land
is established by registration of a notarial deed in the public registers
for registered property. It allows the usufructuary to use the house and
land and to live there. When the usufructuary moves in the house, he will
automatically exercise the actual power over all movable things in it.
By taking control of these movable things in this way, the usufruct on
these movable objects is established. But although the usufructuary has
the encumbered movable things under his control, he has not acquired a
right of ownership of them. The legal basis which allows him to take control
of the movable things and to use and enjoy them, is not a passage of property.
Therefore one can’t speak of a transfer of movable things to the
usufructuary.
A pledge on a movable thing is established similar. A pawnbroker will
only lend money to someone when this person hands over a movable thing
to him as security for the debt-claim. The pawnbroker doesn’t own the
thing that is handed over to him. There is no legal basis for that, but
solely for the creation of a pledge. He is neither allowed to sell the
pledged thing. Only if the owner fails to pay back the loan, the pawnbroker
may sell the pledged thing in order to recoup himself out of the sale
proceeds. In the same way a pledge is vested on other movable things,
like paintings, jewellery, household effects, inventory, machines, goods
in stock, cars, animals and so on. The fact that the pledged thing is
under control of the pledgee ensures him that its owner no longer is able
to present himself to others as a person with power of disposition. It
prevents that the pledgee can lose his pledge to a third party who acquired
the movable thing in good faith from the owner. But often the pledgee
doesn’t want to keep the pledged things in custody. A bank has no
room to store all assets that are pledged to it by its clients. The owner,
on the other hand, wants to keep using his machines, inventory, goods
in stock, cars et cetera. He needs these assets to run his business. The
law has provided a solution for this problem by means of the establishment
of a ‘non-possessory pledge’. A pledge may for this reason
be vested also by notarial deed or by a registered private deed, without
the necessity of bringing the pledged movable thing in the actual power
of the pledgee. The pledged thing, for instance a machine, remains under
the actual control of its owner, who may keep using it, but who, by virtue
to his legal relationship with the pledgee, is not allowed to transfer
it to someone else.
One has to keep in mind that the notarial deed or
the registered private deed, establishing a non-possessory pledge,
isn’t published in any way. So third parties can’t know
if such a deed has been drawn up and therefore neither if a non-possessory
pledge has been established on a certain movable asset. They can’t
consult any public register for this purpose. And although the private
deed must be registered in order to be valid, it’s only recorded
as such by the Tax Authorities, in the sense that a tax official puts
a stamp on it as proof that it existed at a certain date. After the
private deed has been stamped, it is send back to the pledgee. It
is not published in any public register, whereas the information stored
by the Tax Authorities is not accessible to the public. This means
that this kind of pledge may be risky for the pledgee. The owner has
the pledged thing still under his control and, because of that, he
is in a position in which he could transfer it, although not authorized
to do so, to a third person. Because the pledgee has not taken control
of the pledged thing, his limited property right has not been published
as it should. As a result it’s not visible for third persons
that the movable thing has been encumbered with a non-possessory pledge.
The fact that the owner still holds the movable thing himself, seems
to indicate the opposite. When a third person acquires a property
right in that thing from its owner, he may assume that he has received
it from a person with power of disposition and free from any limited
property rights. Provided he acted in good faith at the moment that
the movable thing was brought under his control, he is protected by
law. He has obtained a full right of ownership of the thing and may
ignore the non-possessory pledge of which he could not have been aware.
The pledgee has lost his non-possessory pledge. Although a pledge
has real effect and normally would follow the pledged object, irrespective
of who owns it, its proprietor (the pledgee) can’t enforce it
any more against the new owner who acquired the pledged thing in good
faith.
Two limited property rights can be split off of a debt-claim:
a usufruct and a pledge. The formalities for establishing these limited
property rights are the same as for the delivery of a debt-claim
itself. Where it concerns a pledge on a debt-claim to name, the creditor and
usufructuary or pledgee, respectively, have to draw up a private deed
and notify the debtor that a usufruct or pledge has been established on
the debt-claim, mentioning at the same time the identity of the usufructuary
or pledgee. This way of publication ensures that the debtor knows that
he has to perform his obligation, as of that moment, to the usufructuary
or the pledgee. When the pledge is vested on a debt-claim to order or to bearer,
the creditor has to hand over the negotiable instrument to the usufructuary
or pledgee. Usually parties write on the negotiable instrument that the
person who is actually holding this paper is entitled to do so on the
basis of a usufruct or pledge.
A pledge on a debt-claim to name may be established also by means of a notarial
deed or a registered private deed, without notifying the debtor of the
fact that a pledge has been vested on the debt-claim. Such a pledge is known
as an ‘undisclosed pledge’. It isn’t published in any
way. There is, for instance, no public register which may be consulted
to verify whether a debt-claim has been encumbered with a pledge. When parties
have chosen for an undisclosed pledge, the required private deed will
be sent to the Tax Authorities, where a tax official puts a stamp on it
and returns it to the pledgee. The debtor is not aware of this procedure.
As long as the establishment of the undisclosed pledge has not been announced
to him, he may and must pay his debt to his creditor. When the creditor
fails to comply with his own obligation towards the pledgee, the pledgee
is allowed to notify the debtor after all that a pledge has been established
on the debt-claim of the creditor. From that moment the undisclosed pledge
is transformed into a disclosed pledge, so that the debtor is compelled
to perform his obligation to the pledgee, instead of to his creditor.
The same procedure has to be followed when a limited real (property)
right is split off of another property right than a right of ownership
(or a debt-claim), for instance when a mortgage or easement
is vested on a long leasehold. Decisive are always the formalities
to be observed at a transfer of the underlying object (movable or
immovable thing, debt-claim to name, to bearer or to order).
This means, for instance, that a mortgage on a long leasehold is established
by drawing up a notarial deed between the leaseholder, granting the
mortgage on his limited property right, and the mortagee, acquiring
a mortgage on the leasehold, followed by the registration of this
deed in the public registers for immovable property. These registers
not only show that an immovable thing (land plot) has been encumbered
with a long leasehold, but also that this long leasehold in its turn
has been encumbered with a mortgage.
Apportionment of a community of property
Another way to acquire property is through an apportionment of assets
coming from a community of property. Persons who jointly own property,
each have a share in the separate assets of this community of property.
So when a community of property includes two similar things, the co-proprietor
do not each own one thing, but theu both have a share (one half) in the
two things jointly. When the community of property ends, its assets will
be divided among the participating co-proprietors. Each of the co-proprietors
will obtain a number of assets for himself. As of then he is the sole
proprietor of this asset. This way of acquiring property rights is called
apportionment.
Natural persons and legal persons may form a community of property with
each other. Sometimes such a community of property is instituted by law,
as in the case where a man and a woman enter into a marriage under a marital
community of property or when a natural person dies and leaves his estate
to a number of heirs, each having a share in the assets of the deceased’s
estate.
People may also voluntarily enter into a community of property, for instance
when two or more natural persons or legal persons start a commercial partnership.
Under the present law this partnership is merely an agreement between
the participating partners. But usually these partners not only bring
in their working capacity, but also several assets, like machines, business
inventory and money. The law specifies that these assets together form
the joint property of all participating partners. Each partner holds an
equal or unequal share in it. In course of time, during the existence
of the commercial partnership, other assets will join this community of
property, and earlier assets will be removed from it as a result of transactions
performed in the ordinary conduct of business of the commercial partnership
Finally, it is quite common that persons, cohabiting together unmarried,
obtain joint property besides their personal properties, for instance
when they buy a house together. Then also this single house forms a community
of property between them.
A co-proprietor in a community of property not only
has a share in the community assets, but in addition several assets
of his own. Except when spouses are married under a full marital community
of property, the co-proprietors will nearly always have, besides their
share in the community of property, private property. Heirs not only
have a share in the estate of the deceased, but they also posses property
of themselves, obtained before they were called to the inheritance.
The same applies to partners in a commercial partnership. Besides
their share in the partnership’s community of property, they
each will posses their own house, household effects, private bank
account and so on. Legally the assets of a community of property must
be separated from the personal assets of the co-proprietors. A community
of property is subject to specific rules of law, tuned to the special
position in which the co-proprietors stand towards each other. The
law regulates the power of disposition of the co-proprietors over
the community assets, but also who of them is allowed to administer
(manage) these assets and who may enter into obligations which may
be recovered from their joint property. One of the special rules,
issued for a community of property, is that debts entered into by
one or more co-proprietors, having a connection with the community
of property, may be recovered firstly from the joint assets. Another
important rule is that the co-proprietors each have a share in all
assets of the community and as a result also in the community of property
as a whole.
Like everything, a community of property may come to an end. This occurs,
for instance, when the marriage takes an end due to a divorce or the death
of one of the spouses or when the partners in a commercial partnership
decide to finish their joint business affairs. At some point also the
heirs, having a share in the deceased’s estate, want to be released
from their mutual bond. When co-proprietors want to end the community
of property all joint assets and debts must be divided in accordance with
the value of the share of each participating co-proprietor. The co-proprietors
are towards the creditors liable for the joint debts, i.e. debts having
a connection with the community of property, each co-proprietor either
for a specific part of the debt or joint and several for the whole joint
obligation. After the end of the legal relationship which made the creation
of a community of property logical, they don’t want to be involved
with each other any more. The divorced spouses both will go their own
way. The same applies to the former partners in a commercial partnership,
to unmarried persons living together and to the heirs of an estate. They
want to exclude the possibility that they may be held responsible by the
creditor for a (part of the) joint debt which, within the mutual relationship
between the co-proprietors, because of their internal arrangements only
concerns one of them. Therefore each of the co-proprietors is entitled
to demand that the joint debts will be settled first from the assets belonging
to the community of property, before any division of assets takes place.
Also the creditors with a debt-claim recoverable from the community of assets
may demand this in court. After all joint debts are satisfied, each of
the co-proprietors still has a share in the remaining assets of the community
of property. The value of these assets will be estimated. The different
assets will be apportioned to the co-proprietors in proportion to the
value of their share. After the co-proprietors have jointly divided the
remaining assets among themselves, they have created a joint obligation
towards each other. According to this obligation each co-proprietor is
obliged to deliver his share in a divided asset to the co-proprietor who
has been appointed to receive it in full. This co-proprietor already held
a share of his own in the assets that was assigned to him. In order to
make him the full proprietor of this asset, the other co-proprietors must
each deliver their share in that asset to him. Yet, the division itself
doesn’t bring about the transfer of the shares. The joint decision
regarding the division of the community assets merely forms the legal
basis on which the transfer of the different shares may be executed. Under
Dutch civil law a ‘division’ is each juridical act, performed
by all co-proprietors jointly, either in person or by representation,
intending to assign one or more assets of the community of property to
one of the involved co-proprietors (Article 3:182 DCC). A division may
have any form, so it can be made verbally, tacitly or in writing (Article
3:183 (1) DCC). But to pass the shares in the divided asset to the appointed
co-proprietor, thus to make him the sole proprietor of that asset, it
is still necessary that all shares are delivered to him in accordance
with the formalities set by law for a transfer of property rights (Article
186 (1) DCC). Only after all co-proprietors have delivered the assigned
asset to the appointed co-proprietor in the way as prescribed for this
type of asset by law, that co-proprietor will have acquired a full property
right in the involved asset. From that moment the others no longer have
a share in it. It is this act, whereby the other co-proprietors on the
basis of a division agreement (legal basis) deliver their shares in an
individual asset to one of the involved co-proprietors, that is called
an apportionment. Like a transfer it entails three necessary elements:
the delivery of the assigned asset to another person (the appointed co-proprietor)
under a valid legal basis (the division agreement) by someone who has
power of disposition over that object (the joint co-proprietors each with
regard to their own share).
Example:
Marc and Wilma are married in a full marital community of property,
which consists of a house with a value of € 200,000, household
effects with a value of € 60,000 and a joint savings account
of € 100,000. There are two joint debts, namely an obligation
to pay back a loan of € 80,000 to the bank, which is covered
by a mortgage on the house, and a tax debt of € 40,000. During
their marriage Marc and Wilma held an equal share (half) in the house,
the household effects and the savings account. The total value of
all assets amounts up to € 360,000. Since the joint debts can
be recovered from all community assets, Marc and Wilma are both, within
their mutual relationship, liable for an equal part of all debts.
The total debts represent a value of € 120,000. The married has
ended by divorce. The marital community of property must be divided
between the participating co-proprietors, therefore between Marc and
Wilma, in proportion to the value of their shares. The value of Marc’s
share is ½ of (€ 360,000 - € 120,000 =) € 120,000.
Of course, in this case, Wilma’s share has the same value. They
both decide that Marc may keep living in the house. For tax reasons
the loan to the bank will not be settled immediately, but the costs
will be paid by Marc solely. Therefore Marc shall obtain the house
(€ 200,000) and the household effects (€ 60.000) as well
as the secured debt to the bank (€ 80,000). He has now received
a total value of € 180.000. Wilma will receive all other assets,
this is to say in this case, the savings accounts of € 100,000.
Mutually they agree that Marc solely has to pay off the tax debt of
€ 40,000. In the end € 140,000 has been divided to Marc,
whereas Wilma has received only € 100,000, even though she was
entitled to a share of € 120,000. Marc and Wilma make an arrangement
stating that Marc still owes Wilma an extra sum of € 20,000.
Wilma therefore receives a value of (€ 100,000 of the savings
account + € 20.000 being the value of the debt-claim against
Marc =) € 120,000. Marc is entitled to a value of (€ 200,000
for the house + € 60,000 for the household effects - € 80,000
in connection to the debt to the bank - € 40.000 in connection
to the tax debt - € 20,000 in connection to the obligation to
Wilma =) € 120,000.
As mentioned before, the division agreement itself does not accomplish
a passage of the divided and assigned assets to the various co-proprietors
individually. This agreement merely forms the legal basis for the delivery
which completes the apportionment and makes the appointed co-proprietor
the sole proprietor of the delivered asset. The answer to the question
which delivery formalities have to be observed, depends on the nature
of the apportioned asset. Once more the same rules apply as in case of
a delivery based on a transfer of property. As far as an apportioned asset
was encumbered with a limited property right of a third party, not being
one of the co-proprietors, the sole proprietor has to respect this right
after he has acquired the full ownership of an asset. Of course, this
will have decreased the estimated value of that asset, so that the co-proprietors
have to take this into account at the division of the community assets
among themselves.
Example:
Marc and Wilma had decided that Marc will acquire the house as well
as the debt to the bank, because this debt was secured by a mortgage
on that house. In order to make Marc the sole owner of the house,
this asset must be delivered to him by means of notarial deed between
him and Wilma, followed by the registration of this deed in the pubic
registers for registred property. Now the whole world is able to see
that the house belongs to Marc exclusively. If the bank agrees to
this, Wilma will be released from her liability for the joint debt
to the bank. If not, she will stay liable towards the bank for the
performance of this debt, although within her mutual relationship
to Marc he is the one who has to carry this burden. Sometimes a co-proprietor
stipulates for this reason a real security right, for instance a second
mortgage on the house. Wilma may demand such security for her debt-claim
of € 20,000 against Marc. If she wants to receive this kind of
security, she must ask for it during the negotiations leading to the
division agreement. As soon as Marc has moved into the house, that
is to say as soon as Wilma no longer has access to it, the household
effects will be delivered to him as well. He is, as of then, the only
person exercising actual power over these movable things. The savings
account will be delivered to Wilma by means of a mutual declaration
of Marc and Wilma (private deed of assignment) to the bank, stating
that their mutual account, as of a specific date, will solely belong
to Wilma. So the bank knows that in future only Wilma is entitled
to the money on this savings account and that Marc is no longer permitted
to draw any money from it.
Acquisitive prescription
Prescription is a means of acquiring property rights or a means of being
released from legal duties and obligations, in both cases exclusively
by the expiration of time and the fulfilment of specific factual requirements
fixed by law. Prescription is called acquisitive in the first case and
extinctive in the second. Both are based on the fact that the proprietor
for a long time has failed to act against an existing situation which
is in conflict with his property right. After some years he has lost his
right to demand that the factual situation is restored in the legally
correct state. A distinction has to be made between two concepts of prescription.
In the first concept – the extinctive prescription - the proprietor
has not lost his property right after the prescription period has lapsed,
but solely the adjoining right of action which enabled him to enforce
his property right in court. Therefore he can no longer legally claim
that the other person has to respect his property right, for instance
that he performs an obligation. The other person may put the extinctive
prescription forward as a defence. An extinctive prescription is known
in Anglo-American law as a limitation of actions, which only bars the
remedy, but does not extinguish the right itself.
The second concept - an acquisitive prescription, known in Anglo-American
law as adverse possession -, deals with another matter. It’s a legal
ground on which a property right in someone else’s thing can be
acquired by exercising the continued and regular possession of that thing
during a long period of time, although this was in violation of an existing
property right of the real proprietor and done without his permission.
When a specific prescription period, fixed by law, has expired, the possessor
obtains by operation of law a property right in the thing which he so
long possessed, whereas the real proprietor, who did not stand up against
the not allowed interference of the possessor, automatically has lost
his property right in that thing.
When the Dutch Civil Code uses the term prescription
it may refer to an acquisitive prescription as well as an extinctive
prescription, depending on the context and the effects of the prescription
in the given circumstances. There are various similarities and differences
between the two concepts of prescription. They are comparable in the
sense that the same rules apply to the calculation of the prescription
period and to the suspension and interruption of prescription in general.
They both create legal effects purely on the basis of factual circumstances,
without a mutual intention of the involved persons. And they both
do not render any vested rights as long as the prescriptive period
has not run its full course. However, acquisitive and extinctive prescription
do differ in the way that the first is based essentially on possession
by the person pleading it, whilst, on the other hand, extinctive prescription
is based on the inaction of the creditor or proprietor. Moreover,
acquisitive prescription grants a right of action as well as a defence,
whilst extinctive prescription, despite it is only granting a defence,
is wider in application since acquisitive prescription operates only
with regard to real property rights.
A person who has possessed another person’s movable or immovable
thing for a fixed number of years, without any suitable objection of the
real proprietor, acquires the right of ownership of that thing by operation
of law. The legal reality has to be brought in line with the factual situation
as it appears for a long time, which is defendable since the real proprietor,
although competent to do so, has never performed any actions to restore
the factual situation into the legally right state. The legal conception
of prescription (‘verjaring’) serves legal security. At a
certain point the legal reality must be adapted to the optical, factual
reality. By incorporating an acquisitive prescription in the Civil Code,
the legislature has made it easier too for the owner to prove his title.
It prevents that the owner must trace back all preceding owners to assure
that they all have acquired their title legitimately and in conformity
with legal requirements. One single defect in the entitlements within
the chain of previous owners would otherwise have meant that the present
owner has not acquired his property lawfully from an alienator with power
of disposition and that he, in fact, never has become the owner himself,
unless he would be protected by law due to his good faith. The concept
of prescription, therefore, gives the owner another opportunity to prove
his title, simply by referring to the fact that he and his predecessors
in title have had the involved object at least for a fixed number of years
in possession.
The duration of the period of uninterrupted possession, required for
an acquisitive prescription, depends on the question whether the possessor
acted in good faith or not when he took possession of the thing and whether
that thing is movable or immovable. When the possessor acted in good faith,
in the sense that he reasonably could have believed that the thing belonged
to him, he must hold the thing continuously in possession for at least
three years (movable things) or ten years (immovable things) before he
can call himself its owner (Article 3:99 DCC). Where he acted in bad faith,
in the sense that he reasonably ought to have known that the thing did
not belong to him when he took possession of it, he shall acquire the
ownership of it only after a continuous possession of twenty years, regardless
whether it concerns a movable or an immovable object (Article 3:105 in
connection with Article 3:306 DCC). Decisive for the question whether
the possessor has obtained his possession in good or bad faith is only
what he reasonably ought to have known at the moment when he started to
possess the thing in the legal meaning of the word. If he reasonably could
have thought that he owned the thing, then he is and will remain to be
in good faith, even when he discovers after a few days that he has been
mistaken because the thing belongs to someone else. Where it is not reasonable
to say, in the given circumstances, that he could have believed he owned
the thing when he took possession of it, he has acted in bad faith en
will be treated as such during the entire prescription period.
In two ways the expiration of the prescription period may be stopped.
Firstly when the possessor loses possession of the object. Acquisitive
prescription requires the continuous possession of the thing concerned.
So if the possessor loses possession of it before the prescription period
has expired, he can’t acquire a right of ownership on this legal
ground. When he regains possession of the thing after a while, an entirely
new prescription period starts to run for the full three, ten or twenty
years, without the possibility to add the previous period of possession
to it. Nevertheless, an involuntary loss of possession does not interrupt
a running prescription period, provided that the possessor within one
year recovers possession or at least has started legal proceedings in
order to regain possession (Article 3:103 DCC).
Secondly, the real proprietor may interrupt the expiration of a running
prescription period by claiming his property back. Although the possessor
holds the thing in possession, he is not yet its owner. As long as the
prescription period has not expired, the real proprietor is entitled to
use all legal actions that the law provides to him to reclaim his property.
A prescription period is interrupted by a legal claim which is filed to
this end in court, but also by any other action from the real proprietor
with the purpose to get his property back (Article 3:104 (1) in connection
with Article 3:316 (1) DCC). This means that also a letter of formal notice,
in which the proprietor reserves all his rights in the thing, will interrupt
the prescription period, but on the condition that the proprietor files
a legal claim in court within one year afterwards (Article 3:317 (2) DCC).
Where a prescription period has been interrupted correctly, an entirely
new prescription period starts to run for the full three, ten or twenty
years. During legal proceedings the course of the prescription period
is suspended.
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