February 02, 2024

Right to build and right to build contract

The right to build is one of the fundamental institutes of the so-called real law (the law that regulates relations on real estate and movable property – things) that allows the holder of that right to build, be the owner and owner of the built building on someone else’s land. In the Croatian legal system, this right is regulated in detail by the Law on Ownership and Other Real Rights. This article will deal with the legal framework of construction rights, emphasizing its definition, method of establishment, duration, differences in relation to ownership of real estate, ways of termination and advantages over the sale of real estate.

Definition and elements of construction law

The right to build is defined as a limited real right on someone’s land that authorizes its holder to have his own building on the surface of that land or under it, and the everyday owner of that land is obliged to suffer it. The right to build allows the construction and possession of buildings or other structures on someone else’s land. The right to build is legally equated with real estate. The content of this right includes the possibility of building, modifying existing structures, as well as holders and traffic rights. A building that is built, or which is to be built, on land that is burdened with the right to build is belonging to that right, as if it were land. The right to build is inseparable from the land on which it is established.

The right to build may be sold or transferred to third parties, as well as real estate, unless otherwise stipulated in the contract. The right to build can also be burdened with a mortgage, so the bank should look at the right to build as a separate property, and the financing of the construction of the building on the right to build can be secured through a mortgage loan.

Fee for the right to build

Whoever is the holder of the right to build is also the owner of the building belonging to his right, and with respect to land that is burdened by the right of construction, he has the authority and duties of a prolific undertaker; any provision to the contrary is null and void. Therefore, the contract cannot be contracted otherwise.

The holder of the right to build is obliged to pay the land owner a monthly fee for the land in the amount of the average rent for such land, if nothing else is specified. On the other hand, the fee can be arranged differently, such as a fixed one-time fee, annual fee or free of charge. With regard to the contracting of compensation, the freedom of contract shall apply.

Establishment (establishment) of the right to build

The right to build can be established on the basis of a legal transaction (contract) or by a court decision. It is important to emphasize that for the validity of the contract on the establishment of the right to build, registration in the land register is mandatory, thus ensuring the public and legal certainty of this right.

The contract on the right to build must necessarily contain the land registry markings of the land on which the right to build is established, a description of the building and the dimensions of the building intended to be built, the purpose of the building, the provisions on the fee for the right to build, the expiration date of the right to build, the termination of the right to build and the compensation for zgarda, and all other business agreements depending on the specific project and business plan.

The right to build is established by double registration of this right in the land register, by its registration as a burden on the land it burdens and by its registration as a special land registry body in the newly established land register folio.

The registration of the right of construction in the land register as a burden on the land it burdens is possible only on the basis of a written statement of the will of its owner to burden his land thereby; but if the right to build would prejudice the already registered limited real rights on land that would be burdened by the right to build, it can be registered only with the consent of the authorized persons of those rights.

The building, if built, will be inscribed as if it were built on the right of construction. The holder of the construction rights will be entered in the title deed of the new cartridge, and this, unless the owner of the land has otherwise specified, the owner will be registered as the holder of this right.

Duration and termination of construction rights

The right to build can be established for a certain period of time, but the law does not specify the maximum shelf life of the right to build. After the expiration of this period, the right to build could be restored by a new contract establishing the right to build, otherwise it is deleted and the land again becomes the exclusive property of the owner of the land. When it stops, the right to build must be deleted from the land register.

The right to build can also end with the abolition. If a building is not built on the right of construction within twenty years from the foundation of this right, the owner of the encumbered property may demand that it be abolished; if it is not specifically specified, the decision on the abolition will be made by the court at the request of the owner of the burdened property, regardless of the legal basis on which the right to build was founded.

The right of construction on which the building was built, but has been demolished to the point that it cannot be used for the purpose for which it was intended, shall cease from abolition as if the building had not been built, if it had not been rebuilt within six years at least to the extent that it is most necessary to serve its former principal purpose.

Consequences of cessation

With the cessation of the right to build, it becomes the affiliation of the land what the right of construction was legally separated from the land. The relationship between the owner of the land and the person whose right to build has ceased will be appropriately governed by the rules by which relations are judged after the cessation of the right of usufruct, unless something specifically specified is specified.

The owner is obliged to give the person to whom the right to build has ceased to be as much compensation for the building as much as his real estate in traffic is more valuable with that building than without it. In any case, it is recommended that the contract elaborates in detail the rules on the payment of compensation for the building after the termination of the construction rights, as well as in case of termination of the contract. In some contracts, for example, the obligation to remove the building is contracted, then that the building passes to the owner of the land without compensation, as well as the obligation for the expert to assess the value of the land with and without the building, so that the land owner pays the difference in value as compensation for the building.

The difference between construction rights and property ownership

The main difference between the right to build and the ownership of real estate lies in the fact that the right of construction allows the possession and use of buildings on someone else’s land, while the ownership of real estate includes the right to land and everything that is permanently connected with it. The right to build represents a limited right in rem in rem in relation to the full right of ownership.

Advantages of building rights over the sale of real estate

The right to build offers flexibility and financial viability in situations where construction on someone else’s land is a more affordable option. In addition, it allows the exploitation of land without the need for its full acquisition, which can be useful in cases where the purchase of land is financially unprofitable.

Conclusion

The right to build is an important instrument in the legal transaction of real estate, enabling the exploitation of land while preserving ownership rights over it.

If you need a Croatian lawyer for legal advice or drafting a contract on the establishment of construction rights, feel free to contact us at:

info@odvjetnik-bistrovic.hr

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