Real estate litigation: 10 key cases of 2018
In 2018, the Belgian Court of Cassation issued several significant judgements in the context of real estate litigation. Please find below an overview of some key real estate cases from the last year.
- Judgement 16 February 2018 - Commercial lease
- Judgement 8 March 2018 - Ownership, article 1 of Protocol n°1 to the ECHR
- Judgement 8 March 2018 - Termination of a commercial lease agreement
- Judgement 9 March 2018 - Sales price
- Judgement 15 March 2015 - Long-term lease right on public domain
- Judgement 22 March 2018 - Receipt of a soil certificate as condition precedent in a sales agreement
- Judgement 26 March 2018 - Claim related to hidden defects
- Judgement 12 April 2018 - Impossible condition
- Judgement 6 September 2018 - Building an planting right
- Judgement 2 November 2018 - Penalties for non-compliance by a subcontractor
The judgment of the Court of Cassation dated 16 February 2018 concerns the application of article 14 § 1 of the Belgian Commercial Lease Act dated 30 April 1951 (the Commercial Lease Act).
Pursuant to article 13 and 14 §1, a retail lessee is entitled to request three renewals of his commercial lease for a duration of 9 years each. To obtain a renewal, the tenant must comply with specific formalities, including requesting the renewal by registered letter or by bailiff’s writ maximum 18 months and minimum 15 months before the end of the lease. The renewal request must indicate, under penalty of being void, the terms and conditions under which the lessee is willing to enter into a new lease and must contain the following statement (free translation): “if the lessor does not notify either the reason why he refuses the renewal, or the other conditions or offers done by a third party, in the same way [i.e. by registered letter or by bailiff’s writ] and within three months to the lessee, the lessor will be deemed to agree with the renewal under the terms and conditions proposed by the lessee”.
The facts of the case at hand can be summarised as follows: the lessee sent a renewal request to his lessor by registered letter, therein stating "... that in the absence of a notification sent by you [i.e. the lessor] in the same way and within three months, the lessor will be deemed to agree with the renewal” (free translation).
In the contested judgment of 13 September 2016, the Court of First Instance ruled that the said renewal request was valid, thereby stating that the fact that the renewal request provides "... that in the absence of a notification sent by you [i.e. the lessor] in the same way and within three months..., the lessor will be deemed to agree with the renewal” is sufficient to comply with the formalism of article 14 §1 and to guarantee the lessor's interests.
In its judgement dated 16 February 2018, the Court of Cassation ruled that article 14 is imperative and aims to protect the interests of the lessor. Therefore, the fact that the renewal request provides that “the lessor can reply in the same way" is not sufficient: the lessee should have written "by bailiff's writ or by registered letter". Consequently, the Court of Cassation ruled that the Tribunal of First Instance could not validly rule that the renewal request complies with the formalism imposed by article 14 § 1 of the Commercial Lease Act.
Article 1, paragraph 1 of Protocol n°1 to the ECHR provides that “every natural or legal person is entitled to the peaceful enjoyment of his properties. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law”.
In its judgement dated 8 March 2018, the Court of Cassation ruled that it follows from settled case-law of the ECtHR that someone’s right of peaceful enjoyment of his or her properties within the meaning of article 1 of Protocol n° 1 to the ECHR does not only protect someone’s existing properties, but also his or her property rights, including the claims that someone can lodge to protect his or her legitimate expectation that he or she will acquire the actual peaceful enjoyment of the property right on a certain property. However, a conditional claim that no longer exists as a result of the non-fulfilment of a condition cannot be considered as 'property' within the meaning of the said article 1.
In the case at hand, a private sales agreement with regard to an immovable property was concluded under the condition precedent that the relevant authorities would not exercise their legal pre-emption right in accordance with the Flemish Code of Living (Vlaamse Wooncode). The purchaser thereby accepted that he would only acquire the ownership of the property upon the execution of the notarial deed. Prior to the execution of the notarial deed, the relevant authorities informed the notary that they wished to exercise their pre-emption right. Consequently, the notarial deed was not executed and the sale was not concluded.
In its judgement dated 8 March 2018, the Court of Cassation ruled that, based on these elements, the Court of Appeal could validly rule that the purchaser has no right of ownership protected by article 1 of Protocol n°1 to the ECHR.
The judgment of the Court of Cassation dated 8 March 2018 settles a question relating to the implementation of article 3, paragraph 3 of the Belgian Commercial Lease Act dated 30 April 1951 (the Commercial Lease Act). Pursuant to article 3 paragraph 3, tenants are entitled to terminate their retail lease at the end of each 3-year period, by giving notice by registered letter or by bailiff’s writ, no later than 6 months prior to the end of the 3-year period. No indemnification or justification is required.
The facts of the case at hand can be summarized as follows: the parties entered into a 9-year commercial lease on 25 September 2012, which took effect on 1 November 2012.
On 29 April 2015, the lessee sent a registered letter informing the lessor of his intention to terminate the lease at the end of the first three-year period. The post officer presented this registered letter to the lessor’s registered office on 30 April 2012, but in fact the lessor was not at the office and had knowledge of it only on 5 May 2015, i.e. less than 6 months before the expiry of the first three-year period (as provided for in article 3 paragraph 3, see above).
Has the notice been validly given, knowing that the registered letter was sent more than 6 months before the end of the first three-year period? Or should it be considered as too late since the lessor was only aware of it on 5 May 2015 (i.e. less than 6 months before the end of the first three-year period)? On what date is the notification deemed to take place?
In the legal doctrine, there exist two theories. On the one hand, there is the 'theory of sending', which implies that the date on which the tenant sent the register letter must be taken into account. On the other hand, there is the 'theory of receipt', which implies that the date on which the landlord actually received the registered letter must be taken into account.
In its judgement dated 8 March 2018, the Court of Cassation ruled that it is necessary to take into account the moment on which the lessor has or could reasonably have had knowledge of the notification.
Therefore, the Tribunal of First Instance could not reasonably decide that the notification was not sent on time by stating that (i) the lessor was only aware of the notification on 5 May 2015 and (ii) the fact that the registered letter was presented by the post officer on 30 April 2012, was not relevant.
By doing so, the Court of Cassation considered that the Tribunal of First Instance only took into account the effective knowledge and not the moment on which the lessor could reasonably have had knowledge of the notification.
Pursuant to article 1583 of the Civil Code, a sales agreement exists as soon as the parties agree upon the subject matter and the sales price. Under Belgian law, the sales price is a financial compensation for the transfer of ownership resulting from the sale.
In the case at hand, the purchaser of an immovable property agreed to purchase the property for a price of one euro, thereby committing himself not to present himself as candidate purchaser of another property in which the sellers were interested.
In its judgement dated 9 March 2018, the Court of Cassation ruled that a sales price consisting of (i) one euro and (ii) the commitment not to present yourself as candidate purchaser of another property is not valid since (i) the sum of one euro is only symbolic and (ii) the said commitment cannot be determined on the basis of objective data in the sales agreement. Consequently, in the absence of a sales price, the agreement in the case at hand does not qualify as a sales agreement and must be considered as an agreement 'sui generis'.
In its judgement dated 15 March 2018, the Court of Cassation ruled that a municipality can grant a long-term lease right on a property that is part of the public domain and is intended for the use of everyone if its right to regulate the said use at every moment is not impaired.
In its judgement dated 22 March 2018, the Court of Cassation answered to the question whether a condition precedent related to the receipt of a soil certificate is allowed in an agreement of sale of immovable property. Both in the legal doctrine and case law, there was much discussion about this question for a long time.
In fact, article 101 §1 of the Flemish soil decree dated 27 October 2006 (the Soil Decree) provides that every seller of an immovable property should request a recent soil certificate and inform the candidate purchaser of its content prior to the conclusion of the sales agreement. Pursuant to article 101 §2, the private sales agreement must set out the content of the soil certificate. According to article 116 §1 of the Soil Decree, the purchaser of an immovable property may request the annulment of the sale in case of breach of article 101 §1.
In its judgement dated 22 March 2018, the Court of Cassation ruled that a condition precedent in an agreement of sale of immovable property related to the receipt of a soil certificate confirming that there is no soil pollution that results in a sanitation obligation for the owner of the immovable property, is not valid. In such case, the purchaser commits himself to purchase a polluted property prior to taking note of a soil certificate indicating that the property is polluted, which is not in line with the objectives of the Soil Decree, i.e. protecting a potential buyer to acquire a polluted property without being duly informed. At the other hand, a condition precedent related to the receipt of a blank soil certificate or a soil certificate confirming that there is no soil pollution is valid, according to the Court.
Under Belgian law, all claims related to hidden defects against a contractor must be lodged within a reasonable period of time.
In the case at hand, a notary and his wife purchased an office space in a newly constructed building in which the floor tiles were not properly installed. Therefore, the notary and his wife complained about the floor tiles vis-à-vis the contractor. Due to these complaints, repair works were carried out. Since the repair works were also not properly carried out by the contractor, the notary and his wife decided to initiate legal proceedings. During the legal proceedings, a discussion about the starting point of the ‘reasonable period of time’ during which the notary and his wife had to lodge their claim based on hidden defects, arose.
In the contested judgement of 23 December 2016, the Court of Appeal ruled that the ‘reasonable period of time’ started when the repair works were carried out, this without verifying whether the notary and his wife had or could have had knowledge of the fact that these repair works were not properly carried out.
In its judgement dated 26 March 2018, the Court of Cassation annulled this decision and ruled that the period of time during which a claim for hidden defects must be lodged against a contractor cannot start prior than the moment on which the principal has or could have had knowledge of these hidden defects.
Pursuant to article 1168 of the Belgian Civil Code, an obligation is conditional if the obligation is subject to a future and uncertain event. Pursuant to article 1172 of the Belgian Civil Code, every condition which consists of something that is impossible or contrary to good moral practice or not allowed by law, is null and void and makes the agreement which is subject to that condition, null and void.
In the case at hand, the sale of an immovable property was concluded under the condition precedent of granting a mortgage loan to the candidate purchasers. The sales agreement provided that the condition precedent would be deemed to be fulfilled if the candidate purchasers would not show within three weeks as of the date of the sales agreement that three banks refused to grant a mortgage loan. However, due to the holiday period, the candidate purchasers had de facto only 12 business days to provide the banks with the necessary documents .
In the contested judgement, the Court of Appeal of Antwerp ruled that the three weeks period was obviously way too short and 'not realistically feasible'. Therefore, the Court of Antwerp ruled that the condition precedent in the sales agreement had to be considered as an impossible condition that is null and void.
In its judgement dated 12 April 2018, the Court of Cassation ruled that an impossible condition means that, based on objective elements, the condition is impossible to meet. This impossibility must be certain. The fact that the period of time during which the condition must be fulfilled, is hard to achieve, does not imply that the condition is impossible. The impossibility must be certain.
In its judgement dated 6 September 2018, the Court of Cassation ruled that it does not follow from articles 552, section 1 and 553 of the Belgian Civil Code and articles 1 and 4 of the Belgian Act of 10 January 1824 on building and planting rights that every renunciation of the benefit of accession constitutes a building and planting right.
In its judgement dated 2 November 2018, the Court of Cassation ruled that the calculation of the penalties for non-performance by a sub-contractor is not linked to the calculation of the penalties for non-performance agreed upon in the main construction agreement between the main contractor and the principal.
This is logical since article 1165 of the Belgian Civil Code provides that agreements will take effect only between the contracting parties; it does not in any way affect third parties, unless the law provides otherwise. This is the so-called principle of relativity of contract.
Lien BellinckSenior associate Attorney at Law
Lien Bellinck is a senior associate in our office in Brussels and a member of the Loyens & Loeff Real Estate Practice Group in Belgium. She focuses on all aspects of real estate law.T: +32 2 773 23 36 M: +32 4 99 34 19 88 E: email@example.com