Property law Week 6 (omat)

Acquisitive prescription

In some circumstances a person, who has possessed a thing for a sufficiently long period of time, actually becomes the owner of that thing → The outside appearances and the legal reality coincide

• Different from transfer of ownership

• The law steps in regardless of the parties’ will → A party will own a thing because he has possession of it throughout a specific period of time

Example of acquisitive prescription

A transfers a thing to B, and B later transfers the thing to C

• However, the transfer between A and B has been invalid → C is usually protected!

• Legislation passes ownership to the person who possesses the thing for a specified period of time → In this case the person is C

  • Distinction between the actual owner and the apparent owner

  • Beneficial for legal certainty → You are able to rely on outside appearance

  • Even if something went wrong in the previous transfer, the fact that you possess the item/land long enough means that you have acquired ownership, and there is no need to assess the transfer’s validity

• Acquisitive prescription can also apply in cases that concern stolen goods → Even if you buy something stolen, you can become the owner

  • This is also applies to land transfers → E.g., a mistake made by the notary can be repaired by acquisitive prescription

When does acquisitive prescription take place?

Requirements: DCFR

Art VIII-4:101

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

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

(b) for a period of thirty years [regardless of good faith!]

acquisitive prescription for a thief

Art VIII-4:101(3)
If you are a thief, you cannot become the owner through acquisitive prescription even after 30 years

Acquisitive prescription

1. Possession as an owner

2. For a specified period of time → Period must be continuous, i.e., have no interruptions (with some irrelevant exceptions)

3. Depending on whether they are in good faith

Possession as an owner

Possession: VIII-1:205/206 (cf week 3)

• Difficult with land

  • E.g., if you walk over land you do not possess it

  • If a cafe has some (temporary) chairs on a part of land, does it possess that land?

• To have possession over land, there must be something ‘going on’ for us to establish control over land

  • E.g. a house → You have keys to your house, there is a fence, and everyone else is excluded from using this land

Good faith

Art VIII-4:101(2)

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

• There may be circumstances making your ownership doubtful, you have to really believe that you are the owner

Good faith is always presumed

Good faith and the land register

E.g., in the NL all land (by definition) is owned by someone

• Data is displayed in registers → Difficult to prove ‘good faith’ with any mistakes

• If the notary made a mistake and you did not notice it, you are not the owner but you could still be in good faith, i.e., reasonably believe you are the owner

‘Specified period of time’ & ‘Depending on good faith’

• Possessor is in good faith: 10 years

• In any case (regardless of whether the possessor is in good faith): 30 years

  • But, no acquisition by prescription by the thief → Art VIII-4:101(3)

Art 3:99(1) DCC

Main rule: good faith and uninterrupted possession for 10 years

Art 3:105(1) DCC

Acquisition of property even when not in good faith, after the time when prescription of the right of action to terminate possession is complete

Art 3:306 DCC

Right of action is 20 years

• When you are not in good faith for, e.g., 15 years (more than 10, but less than 20 years), the initial owner can invoke his right of action and again get ownership of assets

• If the original owner does not invoke his right of action within 20 years, you acquire ownership even if you are not in good faith

Approaching a question about acquisitive prescription in Dutch Law

1. Is there possession? Did the person behave as the owner of the land from a 3rd party perspective?

2. Which period applies? → 10 years (good faith) or 20 years (not in good faith)

3. Did sufficient time pass?

Protection of property of the original owner

Art 1 of the 1st Protocol to the ECHR

• ECHR 30 August 2007, JA Pye (Oxford) Ltd and Another v United Kingdom

Adverse possession

Common law equivalent of acquisitive prescription

JA Pye (Oxford) Ltd and Another v United Kingdom

House of Lords decided that possession of land for so long meant that Grahams became the owner of the land

• Pye became unable to revindicate the land worth of millions of pounds

Considered in conformity with the law → This is the way of controlling the land, and there was a legal basis (Limitation Act)

Arguments for rationalising/explaining this act:

• The act was prescribed by law (Art 1 of the 1st protocol to the ECHR)

• The act had a legitimate aim

• The time period was long enough for the act to be considered proportionate → One party loses, and another party acquires ownership

• Adverse possession is a common institution throughout state parties to the ECHR → Accepted by the ECtHR, cf Art 1 of the 1st Protocol

Ownership and limited rights

• Limited proprietary rights also concern the relationship between a person and a thing

• Have erga omnes effect → Can also be invoked against the owner

  • If the owner refuses to comply (e.g., with the right of usufruct), the limited right holder can enforce his rights

• Property law principles apply (e.g., priority, nemo plus)

The relationship between ownership and limited rights

Issue: How is it possible that limited rights can be invoked against the owner, who has the most absolute right?

• The ownership right comprises different rights, including limited rights → The owner can decide to ‘give’ a part of his ownership to another person

  • E.g., the right of usufruct (the right to use an object & benefit from it), gives another party the right to use the car/house/whatever thing subject to the right of usufruct

• A limited right can be enforced against the owner, as the owner has established this right and he no longer holds this part of his ownership → Parted with it voluntarily

Art VIII-1:204

Art VIII-1:204: “Limited proprietary rights in the sense of this Book are [...]”

• The DCFR offers few rules on limited proprietary rights

  • Exception: Security rights and trust-related rights

  • Presupposes national limited rights

Art 3:98 DCC

“Except as otherwise provided by law, all the provisions of this section regarding the transfer of property shall apply mutatis mutandis to the establishment, transfer, and relinquishing of a limited right to such property”

§1032 BGB

“For the creation of usufruct in a movable thing, it is necessary that the owner delivers the thing to the acquirer and both agree that the usufruct is to pass to the acquirer [...]”

• Same requirements as are stated for the transfer

What are security rights?

Property rights that secure a contractual right

Subject to general principles of property law

• E.g., prior tempore rule (priority principle) → An earlier security right has priority over subsequent security rights

• E.g., Both A and B have the right of pledge over C’s car → Whose right prevails? If A’s right is older, it is stronger than B’s right

• E.g., two parties have a security right in an asset, which is worth €20,000. Each party has the right to €10,000. If the parties want to sell the asset and get their money, and A’s right was older, B can only access his part after A has been fully paid

Pledge vs mortgage

Pledge is for movables, mortgage is for immovables

Non-possessory pledge

The holder of the pledge does not have the encumbered asset himself, it is therefore typically registered somewhere

Art IX-2:101 DCFR

Creation of a security right

• E.g. by granting

Art IX-3:101 DCFR

Effective against third parties

• E.g., registration/possession by secured creditor

Art IX-4:101 DCFR

Priority determined by registration (or ‘effectiveness’)

• Even if a right is ‘overwritten’ by a later right, the original right has priority if it has been registered before the later right

Retention of title (RoT)

Security device for the seller

EU Directive 2011/7/EU → Harmonized property law within Europe

• Note: Not included in the reader with national legislation

Art 9, Retention of Title: “[...] the seller retains title to goods until they are fully paid for if a retention of title clause has been expressly agreed between the buyer and the seller before the delivery of the goods”

• The seller remains the owner until the payment of the purchase price

• Directive → Every MS system has to enable for such a clauses to be created, and for them to be effective

§449 BGB

Retention of Title → Germany
“If the seller of a movable thing has retained title until payment of the purchase price, then in case of doubt it is to be assumed that ownership is transferred subject to the condition precedent that the purchase price is paid in full (retention of title)”

Art 3:92 DCC

Retention of Title → Dutch law

“Where a contract is intended to reserve to one party the ownership of a thing over which the other party is given control, until an obligation owed by the latter has been performed, the former is presumed to obligate himself to transfer the thing to the latter under a condition precedent of performance of that obligation”

Art 2367, al 1 CC

Retention of Title → French law

“The ownership of a thing can be retained as a guarantee as a result of a clause of reservation of ownership that suspends the transferring effect of a contract until payment in full of the obligation that is its counterpart”

• The only reason why the seller would want to retain ownership is to ensure that he will be paid → If he is not paid, he gets his things back

• The seller has already concluded the contract of sale, and the ownership acts more or less as a security right (or as the article calls it, a ‘guarantee’)

DCFR → Articles related to the retention of title

Art IX-1:104: Retention of ownership is treated as a security right

Art IX-2:201: Creation of retention of ownership devices

Art IX-3:102: Methods of achieving effectiveness

• E.g., registration

Art IX-3:107: Registration of acquisition finance devices

• Effective only if registered

• A grace period applies for 35 days after delivery → The registration will have retroactive effect!

  • If registration takes place after 35 days, it takes effect only on the day of registration and does not have superpriority

Art IX-4:102: Superpriority

Art IX-6:101(1): Instances of termination of proprietary security

• E.g., para (c), which cover a situation where the asset ceases to exist

Retention of ownership and its relationship with production/combination/commingling

Art VIII-5:101(3): Book IX takes priority over Book VIII

Art IX-2:308(1): Regular rules in Book VIII are apply, but the buyer is considered the owner

Art IX-2:308(2) & (3): Possibility to extend the retention of ownership to newly produced/combined goods by party agreement;

• Different from Art VIII-5:201 → The buyer must be treated as the owner (so not covered by the general provisions on production), meaning:

  • Art VIII-5:201: The person whose materials were used gets a limited property right at the time of production, meaning that the materials were owned by another person

  • Art IX-2:308: The production does not entail using materials owned by someone else, so the owner of the goods is understood as the buyer

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

Consensual system land registration

1. A legal basis

2. The power to transfer / right of disposal

3. Declaratory registration: not required for transfer, but required for third-party effects

Tradition system land registration

1. A legal basis

2. The power to transfer / right of disposal

3. Constitutive registrations

Positive registration system

Right, object, and title holder are registered

• Registration prevails over property law

Negative registration system

Isolated transactions are registered

• Property law prevails over registration