The principles of the Act on Separate Ownership of Buildings (layered ownership)

The government is preparing a new legal framework for investments above and below transport infrastructure – here is what is already known about the proposal.

A draft bill on the separate ownership of building structures (UD465) has been included on the Council of Ministers’ legislative agenda. The Ministry has announced that the text of the legislation will be published in the fourth quarter of this year – for the time being, only the broad outlines and the Ministry’s statement are known. The bill is primarily intended to regulate developments situated above or below transport infrastructure – such as railway lines, roads and tunnels. The draft introduces a new concept in property law – separate ownership of a building structure (OWOB). A structure situated on, above or below ground level will be able to constitute an independent object of ownership, with its own land register and the possibility of being encumbered by a mortgage. Ownership of the land will remain with the current owner. The model for this is the Act on the Ownership of Premises (u.w.l.):

• the right shall arise on the basis of an agreement between the investor and the owner or perpetual usufructuary of the land, a unilateral decision by the landowner, or – in the case of public-purpose investments – an administrative decision (equivalent to Article 7 et seq. of the Land Ownership Act),
• the district administrator shall certify the property’s independent status by means of a certificate (in accordance with Article 2(3) of the Act on Local Government),
• a new feature will be a commitment in the form of an administrative decision, issued prior to the conclusion of the contract by the authority subsequently responsible for issuing the certificate.

The perpetual usufructuary will require the property owner’s consent to establish a separate ownership of a building (OWOB). A condition for the creation of separate ownership will be the handover of the building for use, confirmed by an occupation permit and a certificate of independence. Access will be ensured by a new type of easement, recorded in the land and mortgage register. Issues requiring clarification:

• The independence of the structure and the function of the commitment: it is this premise that will determine the scope of the regulations, and there is as yet no definition – the commitment is presumably intended to provide certainty regarding independence as early as the design stage.
• Nature of the entry in the land register: under the Act on the Land Register, it is constitutive; here, it is to be declaratory, and ownership is to arise upon the building being handed over for use.
• Financing the construction: a mortgage will only be available once the development is complete – the key factor will be the terms on which banks are willing to finance the construction beforehand.
• Issues remain unresolved regarding existing properties based on leases and easements, the legal status following demolition, and the rules governing valuation and taxation.

For investors and financing institutions, this is a signal to keep an eye on the progress of the bill – it may allow infrastructure assets to be traded and free up land above or below such assets for development.