Property Law

Property Law

> Legal relationships between persons and things / rights

Enforceable against the whole world (erga omnes)

More formalities, more or less extensive

> Requirements for transfer of ownership

> Mandatory rules

- Fixed rules and settled principles, not based on what is ‘fair, just and reasonable’

Law of obligations

> Legal relationships between persons

- Relative rights, personal rights, rights in personam

> Only binding on parties (inter partes)

> Few formalities 

> Freedom of contract

Principle of droit de suite

If you have a property right over an object, your right will follow the object

Nemo plus principle

A person cannot transfer something that he himself does not have

- To transfer a thing, the transferor must have the privilege to dispose of that

thing

- If you do not have property rights, you cannot transfer them to someone else

Principle of priority

- The oldest property right takes precedence over a later property rights in case of competing claims

- Usufruct = a legal right that allows someone to use and benefit from another person's property without owning it 

Principle of specificity

Property rights only exist in respect to specific things

- As property rights are relevant for the whole world, it has to be sufficiently clear which object you actually own

- If it is unclear or cannot be established over which object ownership rights exists, a right of ownership does not exist → Only specific things can be owned

Right of separation

The holder of a property right is able to enforce his property right despite the fact that the possessor or holder of the item is bankrupt

- The bankruptcy administrator must respect the property rights of third parties

Principle of publicity

The creation or transfer of property rights usually requires a form of publicity

- If not published, 3rd parties are often protected against real rights they did not know existed → Principle of 3rd party protection

Numerus clausus

It is only possible to create and enforce those specific property rights that have been established in law, e.g., property rights that the legislator has offered in the relevant civil codes

- If a right is not on the list, it can be a right, but not a property right → The list is closed

- Typenzwang: Which property rights can be created?

- Typenfixierung: What content can a property right have?

- If you have a specific right, it has a certain content which you cannot deviate from → You cannot include in that right what you please, but have to stick to the content

- What rights exist and what are their contents? → Depends on national systems

Unity principle

That what in common opinion is regarded as a unit is treated as such in law

Ownership vs Possession

Ownership

- Right over a thing

- Property right

Possession

- Direct/indirect control over a thing

- Pretention of ownership

Combination (accessio)

• Art. 5:14, par. 1 Dutch Civil Code 

- When does something become ‘part’ of a thing?

• Art. 3:4 Dutch Civil Code

• Art. 2370 French Civil Code

• §93 German Civil Code

• Art. VIII. – 5:203(1)

• Art. VIII. – 5:203(2)

‘The principal thing’

- Art. 5:14, par. 3 Dutch Civil Code 

If both criteria clash, if it is difficult to determine → Common opinion prevails

→ Indicators: Essence, function/subordinate part, value (not decisive)

Commingling (commixtio/confusio) 

Art. 5:15 Dutch Civil Code

§948 German Civil Code

art. 624-16 French Commercial Code

Art. VIII. – 5:202(1)

Production (specificatio) 

The creation of a new thing

• Who owns the new thing? Owners original materials? The person creating the thing? 

Art. 5:16 Dutch Civil Code

§ 950 German Civil Code

Art. VIII. – 5:201(1)

How to acquire ownership

> Original acquisition

- A new property right comes into existence

- Example: production

> Derivative acquisition

- The property right is derived from a predecessor

- Most important example: transfer 

Transfer systems

Three relevant elements, of which two or three are required for a valid transfer:

• Right of disposal 

• Legal basis (causa traditionis), usually a contract

• Delivery

In general the right of disposal is essential, but exceptionally a transfer by a person without right of disposal can be valid

Distinctions in transfer systems

- Consensual system versus tradition system → about delivery

- Abstract system versus causal system → about title

Consensual system

Solo consensu rule: The agreement/consensus between the parties alone causes the transfer, and ownership can be passed by a sales contract alone

- The consensual system is always causal!

Tradition System

The obligation does not transfer ownership → Ownership is transferred only when a delivery is made

Delivery: A formal act that makes ownership pass from one party to another

Tradition systems sometimes differentiate between obligatory and real agreements:

-Obligatory: Not only gives rise to rights and obligations, but also triggers the proprietary effects in the agreement → Obliges the transferor to transfer property rights

-Real: Affects the transfer of property rights → The transferor must have the power to dispose of the property rights which are the object of the real agreement

-Consensual systems do not differentiate between these two types of agreements

Causal System

- A causal transfer system requires a valid legal ground (causa traditionis) for a valid transfer

- Avoidance or nullity of the causa traditionis invalidates the transfer → ownership remains with the original party 

- If there is something wrong with the title, the transfer fails

- A consensual system is necessarily causal

- In a consensual system, the contract itself passes ownership, and without a contract there is no transfer

Abstract System

- Not necessary to have a valid title/legal basis on which to base a transfer on

- Tradition systems can be causal or abstract, as they distinguish between the underlying contract (causa traditionis) and the delivery that effectuates the transfer

If the transfer is dependent on the contract → causal system,

if not → abstract system

In abstract systems avoidance of the causa traditionis does not automatically revert the ownership to the transferor, but an obligation to retransfer arises on the basis of unjustified enrichment

Exceptions:

- Fraud and duress (Fehleridentität; identity of defect)

- Parties may deviate from the abstraction principle (ius dispositivum).

Systems of Countries

> German law: abstract tradition system

> Dutch law: causal tradition system

> French law: causal consensual system

Possession

The actual physical control over a property or object, combined with the intent to control it, regardless of who holds the formal title

> Relationship ownership and possession

- Easier to establish ownership if you have possession

> Importance of possession

- Requirement for transfer (delivery of movables)

- Presumption of ownership

- Acquisitive prescription etc

The Right of Disposal

-Relevant in terms of third party protection → Nemo plus principle

-In order to transfer a thing, the transferor must have the right to dispose of that thing

-In general, the owner has the power to dispose

-However, it may happen that a non-owner has the right of disposal

-E.g., the trustee in bankruptcy often has the right to dispose of

another’s property

- Third party protection: an act of disposal by a person who lacks the right to dispose is invalid and no transfer occurs

-However, German, French, English and Dutch law all offer some form of protection for the intended transferee

Right of Disposal - DCFR

> Art. VIII. – 3:101 DCFR

- Other requirements than the right of disposal fulfilled → art. VIII. – 3:101(1)(a)

- Delivery or delivery alternative → art. VIII. –3:101(1)(b)

• Acquisition through mere ‘agreement’ not protected

• Transferee already in possession → only protection of possession acquired from transferor; art. VIII. – 3:101(3)

- For value: art. VIII. – 3:101(1)(b)

- Good faith: art. VIII. – 3:101(1)(d)

• Exception: stolen goods; art. VIII. – 3:101(3)

• Exception to the exception: stolen goods purchased in regular shop 

Claim

The right of one person (creditor) to demand of another person (debtor) a performance (to do, omit or give something)

Assignability - DCFR

Art. III.– 5:105(1): main rule

Art. III. – 5:108(1)

Art. III-5:109: exception on assignability

Act of Assignment - DCFR

Art. III. – 5:102: Definitions

Art. III. – 5:104: Basic requirements + No notice to debtor required

Position debtor - DCFR

Art. III.–5:119: Performance to person who is not the creditor

What if the debtor does not trust the notice of assignment he receives from the (purported) assignee? 

Art. III. 5:120(3)
Art. III. 5:120(4)

Art. III.– 5:108

Article III.– 5:116 DCFR

Acquisitive Prescription 

Legal method for gaining ownership of property by using or possessing it openly for a required number of years without the owner's objection. 

- Needed because of legal certainty

• If the true owner does not possess the thing, the legal situation is different than how it is seen from the outside world

  • The possessor is often assumed to be the owner

  • True owner can revindicate his ownership and acquire possession again 

    • Legal situation matches the view of the outside world

Acquisitive Prescription - DCFR

Art. VIII.-4:101: Basic rule

1. An owner-possessor acquires ownership by continuous possession of goods: 

   1. for a period of ten years, provided that the possessor, throughout the whole period, possesses in good faith; or 

   2. for a period of thirty years.

Requirements

1. Possession as an owner → Art. VIII.-1:205 & 206

2. For a specified period of time 

• Depends on good faith

• 10 or 30 years

3. Dependence on whether they are in good faith

Good faith 

Art. VIII.-4:101 (2) 

The possessor beliefs they are the owner and they are reasonably justified in that belief 

• Good faith is presumed 

  • In cases of land, depends on the land register

    • Public record you can check, assumed that individuals check it

  • No acquisition by prescription for the thief → Art. VIII.-4:101(3)

Protection of the property of the original owner - Requirements

• Lawfulness (prescribed by law)

- Limitation Act and Land Registration Act

• Public interest (legitimate aim) 

• Proportionality (fair balance) 

  • Control of the use of property, not deprivation of property

• Wide margin of appreciation 

Ownership and limited rights 

Partial legal rights held by a non-owner over property that belongs to someone else 

• They have erga omnes effect 

  • Applicable against the whole world

    • Can also be invoked against the owner 

• Property law principles apply 

• Relationship ownership - limited right 

NL: Art. 3:98 DCC

Art. 3:84 DCC

Germany: § 1032 BGB 

Ownership and limited rights - DCFR

Art. VIII.-1:204: Limited proprietary rights

- security rights

-rights to use

- rights to acquire in the sense of VIII. – 2:307

- trust-related rights

Prior tempore rule 

The earlier security right has priority over subsequent security rights

Registration system 

The time of establishment of the security right is not decisive, but the moment the right is made effective against third parties

1. Creation of security rights 

• E.g.  by ‘granting’

  • Art. IX.-2:101 ff

2. Making it effective against third parties 

• E.g. by registration or possession by secured creditor

  • Art. IX.-3:101 ff

3. Priority determined by registration (or ‘effectiveness’) 

• Art. IX.-4:101 ff 

Production etc. 

• Possibility of extension to newly produced or combined goods by party agreement

- Art. IX.- 2:307

•  In case of commingling

- Security right in the rights of the former owners following from Art. VIII.-5:202 (Art. IX.-2:309(1)) 

• Priority 

- Art. IX.-4:103

Retention of title

- Security device for seller 

> Directive 2011/7/EU 

• Art. 9

Germany: § 449

NL: Art. 3:92(1) DCC

France: Article 2367, al. 1 Code Civil

Retention of title - DCFR

Art. IX. – 1:104 

Retention of ownership is treated as a security right!

• Not treated as full ownership, but as a security right

There must be: 

1. Creation → Art. IX.-2:201

2. Effectiveness by registration → Art. IX.-3:107

3. Superpriority → Art. IX.-4:102

Production etc. - DCFR

Art. VIII.- 5:101(3)

Book IX has priority over Book VIII 

• Regular rules Book VIII are applicable, but the buyer is considered the owner →Art. IX.-2:308(1):

  • Rules on production/combination/commingling apply, but reference to the owner in book 8 must be understood as reference to the buyer 

• Possibility of extension to newly produced (or combined) goods by party agreement → Art. IX.- 2:308(2) & (3):

  • Retention of title may apply to the newly produced goods

• In case of commingling

  • Security right in the rights of the former owners following from Art. VIII.- 5:202 (Art. IX.-2:309(1))