Real Estate Update - JULY 2021 - Loyens & Loeff
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JULY 2021
Real Estate
Update
The information provided in this publication does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available are for general informational purposes only. Information in the publication may not constitute the most up-to-date legal or other information. Readers should contact their attorney to obtain advice with respect to any particular legal matter. No reader should act or refrain from acting on the basis of information on this publication without first seeking legal advice from counsel in the relevant jurisdiction. Only your individual attorney can provide assurances that the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation.
In this edition Reform of property law – Volume ownership: a major change In the spotlight – Updated FAQ on the 6% VAT-rate for demolition and reconstruction – Annual property tax in the COVID-19 era – Overview interesting case law of the past 6 months Last month in short On our website
Reform of property law
Real Estate Update 5
Introduction
The law of 4 February 2020 containing Book 3 “Goods” of the new Civil Code has been
approved and shall enter into force on 1 September 2021 (with exceptions). It undoubtedly
introduces the most far-reaching reform of Belgian property law since the Code Napoleon
of 1804. The new Book 3 repeals, inter alia, the acts of 10 January 1824 on long-term lease
right and right to build.
With the new Book 3, the legislator wishes to better structure, modernize and integrate
(the rules of) property law into a single code. In addition, the legislator wants to create a
functional, useful and flexible set of rules with a new - sometimes delicate - balance between
contractual freedom and legal certainty.
This reform will surely be on top of your agenda. On our side, sharing knowledge is a top
priority and, on this topic, we are organizing the following sharing moments:
– A monthly update on a specific topic via this newsletter
– A series of breakfast webinars given in French and in Dutch
– A half-day seminar to go deeper into the new regulations on usufruct right (droit
d’usufruit/vruchtgebruikrecht), right to build (droit de superficie/opstalrecht) and long-
term lease right (droit d’emphytéose/erfpachtrecht), to analyse the tax aspects of these
new regulations and to comment on bankability of property rights structure. This seminar
shall be given in English.
Any questions or suggestions? Do not hesitate to contact us!
Ariane Brohez
Lien Bellinck
6
Volume ownership: a major change
Title 3 of the new Civil Code introduces the possibility of a horizontal division creating a
perpetual volume ownership. This is a major change in Belgian law, although the concept
already exists in other countries. However, this possibility is subject to strict conditions and its
practical application remains a source of questions.
Current legal framework What is the proposed solution?
The owner of the land will create a right to build for the
The horizontal division of a building is already possible benefit of a third party, allowing the latter to acquire
today, although the current legal framework is not optimal. ownership of a volume on, above or below the land. This is
Indeed, the use of co-ownership in such a scenario is the classic definition of the right to build, which allows
sometimes “artificial”, as the parliamentary work points its holder to obtain ownership of such a volume, built or
out. The creation of a right to build is possible but only not. This right to build can be perpetual, and thus give its
allows for a temporary split of ownership. Moreover, the holder perpetual ownership of this volume, in order to allow
use of easements (plumb line, anchorage) does not offer the division into volumes of a complex and heterogeneous
a solution to all factual situations. And finally, as for the real estate complex comprising several volumes likely to
recent case law of the Supreme Court, which seems be used autonomously and in various ways, which do not
to consider that a waiver of accession should not be have any common part between them.
assimilated to the granting of a right to build: we believe
that the decision is difficult to transpose to all cases, given Under what conditions?
the particular situation referred to in the case. The conditions are strict and the right to build in question
only remains perpetual as long as these conditions
Conclusion: the current legal framework does not offer are met.
sufficient possibilities and security to create a perpetual
volume ownership. - The perpetual right to build can only be granted
by the owner of the land. This is the application of
Reform the principle “nemo plus iuris...”: only the holder
of a perpetual right can grant a perpetual right of
The horizontal division of a building, creating a perpetual use. The consequence of this is that the holder of a
volume ownership, will henceforth be possible using an long-term lease on a building cannot grant a perpetual
exceptional perpetual right to build. However, a red line is right to build on the volume above this building
drawn: this type of horizontal division may not infringe the (for example, in order to build a new volume), but that
mandatory provisions on co-ownership. this right to build can only be temporary (whereby the
building lease right may have as its maximum duration,
the duration of the leasehold right). On the other hand,
we do not see what would prevent the owner of the
land, after having granted this perpetual right to build
(for example for the volume under the land), from
subsequently granting a long-term lease on the land.
- This horizontal division can only be conceived if,
on the same property, at least two independent
volumes coexist comprising structures intended
for different uses and capable of independent
management. It is necessary that the separate
volumes correspond to different uses, for example
the division of a tower into two retail floors and
five residential floors. We do not believe that the
destination given from the point of view of town
planning is relevant here: indeed, town planning law
is a regional matter and to proceed in this way would
necessarily introduce differences between the three
Regions. About these structures, it seems to us that
the parliamentary works contradict the legal provisions
when they mention that the volume must “include”
structures. We believe that this should be understood
as meaning that the planned constructions should be
realised within the volumes, i.e. “be built”. Indeed, the
essence of the right to build is to obtain ownership of a
built or unbuilt volume. Limiting the perpetual building
right to already built volumes has no basis in the law
and would run counter to the legislator’s intention,
namely the optimal use of space, including in the
context of property developments.
- These volumes, and the (future) works they contain,
may not have any common parts between them.
This is the red line drawn by the new regime: the
parties cannot undermine the imperative nature of the
rules relating to co-ownership. However, this does
not prevent “collective equipment” being used by the
different volumes, such as a lift linking a car park in
the basement (separate volume) of a shopping center
above ground (separate volume). We come back to
this hereunder.
8
The permanence of the conditions. These conditions However, one may wonder about such a provision: is it
must be fulfilled at the time the perpetual right to build sufficient or far too broad? It seems to us that it is indeed
is created, but the right to build remains perpetual only relevant to have recourse to an easement with regard to
as long as these conditions are fulfilled. This is likely to these collective equipment, but it is also relevant not to
be the case about the condition relating to different uses. limit oneself to this legal easement, but rather to describe
For example, a tower divided into two distinct volumes, and regulate the rights and obligations of the parties
retail and residential. Let us imagine the disappearance of (for example with regard to maintenance and repairs)
the “retail” use, the tower becoming after several years a concerning these collective equipment.
tower solely dedicated to residential use. The owner, via
the right to build, of the “residential” volume will see its Volume ownership and co-ownership
ownership become temporary, until the end of the building
right. This raises the question of the duration of the right to A red line is drawn between volume ownership and
build. The parliamentary works tell us that the right to build co-ownership, as the mandatory legal provisions
will have a term of 99 years from the time the different uses concerning the latter cannot be circumvented by means
disappear. However, there is no legal provision for this; on of the new volume ownership. However, the two figures
the contrary, the perpetual right to build is an exception can be combined: the residential part of the tower can
to the maximum term of 99 years. Is it to be concluded be owned as a condominium, with each flat being sold
that the existing right to build ends on the moment the piecemeal to individuals. But what will be the object of the
different uses disappear and that, immediately afterwards, sale? The private flat and a share in the common parts is
a new right to build arises? The tax consequences for the the most obvious answer, but one may wonder what this
owner of the “residential” volume would be significant. “share in the common parts” will include.
Indeed, in case the perpetual right to build would expire
and a new right to build would be created, the ownership First, there is the collective equipment. Let us assume that
of the residential structure would be transferred to the its ownership is attached to the “retail” volume and that
land owner (the right of accession revives at the end of the “residential” volume benefits from an easement for its
the building right) and, immediately afterwards, a new use. These utilities will therefore not be considered as a
building right on the built volume comprising the residential common part.
structure would be granted. Since the building right on
a built volume implies the transfer of ownership of the Then there is the perpetual right to build. In principle, this
constructions within the volume, such transfer will trigger perpetual right to build is supposed to replace the land,
transfer taxes. A legislative amendment on this point would and the purchaser of a flat is allocated a share in this right
be welcome. to build. This raises the question of the tax treatment of
this sale. If VAT does not apply, transfer taxes will be due
The collective equipment. Unless this reform was to at the rate of 2% on the price allocated to this share of
be rendered completely useless, it was inconceivable to the right to build. One may wonder about the justification
provide for the introduction of volume ownership without for this difference in treatment: the purchaser of a flat in a
introducing a specific regime concerning utilities. In fact, tower dedicated solely to residential use will bear transfer
merely stating that volumes cannot have any common taxes at the rate of 10 or 12.50%, whereas the purchaser
parts between them would render the regime useless of a similar flat in a tower of which only a part is dedicated
(just think of the walls, the various pipes and ducts, etc.). to residential use will bear transfer taxes on part of the
The existence of such collective equipment is indeed price at the rate of 2%, unless it is said that the entire
authorised, but the legislator has also provided for a new value is allocated to the full ownership of the flat. And what
legal easement in the following terms: “the holder of a real in case of a new building that should be sold under the
right of use of an immovable property benefits from all the VAT regime? A strict reading of the legal provisions should
easements necessary for the exercise of his right on the lead to the conclusion that there is no question of “land”
land encumbered by the said real right”. adjoining a new building.
Nor should it be a question of the transfer of a real right to a new building since the subject of the right to build is a volume. Should it therefore also be concluded that the part of the price allocated to the share in the right to build is subject to transfer tax at 2% instead of VAT at 21%? What could be the justification for this difference in treatment, again unless it is assumed that the entire price is to be allocated to the full ownership of the flat. The introduction of volume ownership, or perpetual horizontal division, is a major reform. However, practice, case law and doctrine will probably still have to refine the contours of this reform, as one of the obstacles, and not the least, remains the estate documentation and the land register, and the question of how these perpetual rights to build will be identified and transcribed. Ariane Brohez Lien Bellinck
In the spotlight
Real Estate Update 11
Updated FAQ on the 6% VAT-rate
for demolition and reconstruction
The tax authorities recently published a new FAQ with some clarifications regarding the
temporary favourable VAT-regime for demolition and reconstruction. This FAQ complements a
previously published circular letter on this subject (circular letter n° 2020/C/18) and includes the
complementary FAQ involving specific cases with property developers. Both documents reflect
the tax authorities’ current view on this temporary arrangement. The most important clarifications
are briefly discussed below.
The purchase of a unit in an assisted Reconstruction on adjacent plots
living facility unit
If a building is to be constructed on different cadastral
The tax authorities clarify that, if all conditions are met, parcels of which only one was previously built on, more
the sale of a unit in an assisted living facility by a property than half of the new building must be located on the
developer can also fall in scope of the temporary VAT previously built-on parcel. If this is not the case, the
regime. Also here, the buyer will have to occupy the reduced VAT rate of 6% cannot be applied. In addition,
building himself for his own use. In practice, this will lead a cadastral merger of the two parcels before demolition is
to a circular lease between the buyer (in his capacity as an insufficient to argue that the demolition and reconstruction
“elderly person”) and the management body. have taken place on the same parcel.
What should be considered as When do different buildings qualify as
“demolition”? “one building”?
It is emphasised once again that a building must be It is important to know whether several residential blocks
completely demolished in order to fall in scope of the realised within a real estate project can be considered as
6% VAT regime. It is not sufficient to partially demolish one building. In this respect, the tax authorities uphold
a multi-layered building to then (further) build on it. the basic principle that each residential block must
However, it is not required that all buildings on an be regarded as separate. A mere physical connection
existing plot are demolished as long as the demolished between the residential blocks is insufficient to consider
buildings are significant, also in relation to the newly them as a single building. A basic deed which shows that
constructed dwelling. the land and the access roads to the site are common is
on itself also insufficient.However, the tax authorities do clarify in this respect that there is a single building if there is a common underground cellar and/or garage with a continuous and permanent passage between the underground spaces, as well as the presence of common facilities that relate to all the residential blocks (e.g. stairs or lifts that are accessible to all residents, common entrances, common utilities and technical rooms). If these conditions are not met, each residential block should be considered as a separate building. Demolition and reconstruction by the same person This new FAQ includes the specific FAQ deemed to clarify the regime when property developers are involved. In this respect, in case the landowner initially grants a right in rem (e.g. building right or long-term lease right) to the property developer, the latter can be considered as the person carrying out the demolition and the reconstruction by virtue of its right in rem. Furthermore, the tax authorities consider the condition as deemed to be met when, prior to the granting of the right in rem, or in the context of the right in rem granted on the land in its future state after demolition, the property developer carries out the demolition on behalf of the landowner. In other words, even if the demolition and reconstruction are not carried out by the same person (i.e. the demolition is carried out by the property developer on behalf of the landowner) the tax authorities consider that the regime can be applied to the extent that the property developer performs the demolition itself or through its subcontractors.
Real Estate Update 13
Shared construction management Transfer of undivided shares of a
is allowed residence that is purchased/occupied
under the beneficial regime within the
The previously published circular letter n° 2020/C/18 regularisation period: revision required!
already provided an administrative tolerance in case the
demolition was carried out by the landowner and the If a dwelling was bought or built with the application of
reconstruction was carried out by the building owner. the reduced VAT rate, the owner has to use the building
The tax authorities now also accept shared construction as his/her own and only residence for 5 years. If not
management. In this case, the landowner grants a partial (for instance when selling the property), he/she loses the
building lease right to a building developer and thereby right to the reduced rate and regularisation is required.
reserves a part of the land and the new building or flat The owner must then pay the difference between 6% and
connected to it. In this case, the developer will, on the one 21% to the Treasury. This is the case, for example, if the
hand, act as the owner of the residential units intended owner sells half of his property to his spouse or gives part
for sale to third parties and, on the other hand, act as of the property to his children.
the contractor for the demolition and reconstruction of
the residential units reserved for the landowner. The tax If the owner sells with VAT, the VAT paid on the
authorities accept that in such a case, the reduced VAT demolition/reconstruction can be recovered. But if it is a
rate of 6% can apply both to the sale of the housing units sale with registration duties, this is not possible.
to third parties as well as to the construction works on
the reserved parts. Both parties are considered to be Samira Moujahid
demolishing a building and constructing a new dwelling.
Completion of a building after purchase
or occupation: can the reduced VAT
rate apply?
The answer depends on the subsection of the
arrangement that is applied. If a builder has carried out
the demolition and reconstruction himself and wants
to carry out additional work after the dwelling has been
put into use, the reduced VAT rate can still apply to
the additional work (f.i. tiling the kitchen), provided that
this work is carried out between 1 January 2021 and
31 December 2022 and at the latest on 31 December of
the year in which the dwelling was first put into use.
The situation is different if the reduced rate is applied to
the sale of a new home. In such a case, the buyer cannot
carry out the subsequent finishing work at the reduced
rate, as the buyer does not qualify as the “builder” of the
dwelling. The normal VAT rate of 21% will be applicable
unless it is the seller/constructor who is responsible for the
further finishing of the building.14
Annual property tax in the
COVID-19 era
Traditionally, assessment notices for annual property tax (onroerende voorheffing / précompte
immobilier) are sent out during the holiday months of July and August. The annual property tax
is a tax on the notional net annual rental value of real estate (building, land, some machines) to
which you have a property right. Is the tax due even if you did not use the property due to the
corona pandemic?
The tax As mentioned above, property tax is a regional tax.
Brussels does not have a tax reduction for unproductivity.
The property tax is due by the full owner, the holder of a The other two Regions do.
long-term lease, the usufructuary or the holder of a right
to build of the immovable property, even if the immovable In general, the reduction for unproductivity is subject to
property is not rented out. If the property is rented out and 7 conditions.
the rental contract provides for the recharge the tax to the a. The building or machinery was not used at all. Less use
tenant, the landlord is still the taxpayer. of a building, or more difficult access to the building
is insufficient.
The tax is calculated on a notional income, namely the b. The building was not furnished. For company buildings,
flat-rate estimate of the net annual rental value of the the tax authorities accept that goods that were in the
property (irrespective of the actual rental income). building remain there, provided that they are not used.
c. The building did not produce any income. This means
The tax is a former federal tax that has been transferred that if a landlord continues to receive rent, the building
to the three Regions. The Regions therefore benefit from is not unproductive even though the tenant was not
the fiscal income generated by this tax, but they are also using it.
competent to change e.g. the tax rate, the exemptions d. The unproductivity lasts for a minimum period in the
and reductions. calendar year: 90 days in the Flemish Region and 180
days in the Walloon Region. These days do not have to
Exemptions and reductions be consecutive.
e. Unproductivity may not last longer than 12 consecutive
Among other things, property tax is not due on school months. There are numerous exceptions to this.
buildings, religious buildings, hospitals, etc. Numerous The 12-month period can be spread over two
reductions are also possible, for example for new calendar years.
machines or in case of demolition and reconstruction in f. The unproductivity is involuntary. It may not be the
certain city districts. result of a deliberate choice on the part of the owner,
usufructuary, etc.
An important reduction is the reduction for the so-called g. The taxpayer has done everything possible to end the
“unproductivity”. If you (or the user) were unable to use the unproductivity as soon as possible.
building, the taxpayer can benefit from a reduction subject
to strict conditions to be complied with.Real Estate Update 15 Unproductivity in the COVID-19 era Objection Companies that were forced to close during the pandemic As long as you have not received the assessment notice, could invoke unproductivity to claim a reduction. you cannot do anything. The reduction can only be The conditions regarding not using the property have requested by means of an objection notice. You must probably been met. The question is rather whether the respect the time limits for submitting an objection. In the minimum period of unproductivity can be achieved. In the Flemish Region, you only have 3 months (but in all Flemish Region, there are certainly many businesses that cases, you have until 31 March of the year following the have had to close for 90 days (restaurants and cafés spring assessment year - in this case, 31 March 2022). In the to mind). In the Walloon region this seems somewhat less Walloon Region, you have 6 months to lodge an objection. certain considering the minimum period of unproductivity of 180 days. For landlords, a reduction could be claimed as Ariane Brohez well if the tenant was forced to close. However, landlords cannot claim the reduction for unproductivity if they still received the rent. It is still unknown whether the regional tax administrations will accept a waiver of rent as an ‘involuntary’ unproductivity.
16
Overview interesting case law of
the past 6 months
During the first 6 months of 2021, the Belgian courts issued several significant judgements
in the context of real estate litigation. Please find below an overview of some key real
estate cases.
(VAT) The Court of Cassation applied this case law in its decision
of 21 May 2021. In the case at hand, the Court took
Court of Cassation - 21 May 2021 – VAT deduction a strict position by ruling that the Court of Appeal had
for brokerage fees and publicity costs (in the context taken all the circumstances into account and sufficiently
of the Vos Aannemingen (CJEU - case C-405/19)) justified its decision when stating that there was no direct
and immediate link between the economic activity of the
The Court of Cassation ruled on the case Vos construction company and the part of the expenses that
Aannemingen, in which the VAT deduction for publicity benefits the landowner. In this respect, it is important to
and brokerage costs incurred by a construction company note that the Court of Appeal previously determined that
could be limited to the building alone, thus excluding these costs were partly related to the sale of the land and
VAT-deduction for costs related to the land. that the construction company could allocate these costs
to the landowner. The judgement of the Court of Appeal,
On 1 October 2020, the European Court of Justice already in which the construction company is only allowed to a
ruled that the mere fact that the costs incurred are partly partial VAT deduction, was therefore confirmed.
for the benefit of the land owner is as such not sufficient to
automatically restrict the VAT deduction in the hands of the Notwithstanding this position of the Court of Cassation,
construction company. the right to VAT deduction in similar cases can, in our
view, not be limited as a matter of principle. There are
To allow the VAT deduction, there should be a direct and conceivable cases in which there is no direct link between
immediate link between the expenses and the economic the costs for brokerage and publicity and the sale of the
activity of the taxable person and the advantage for land (e.g. in case there is a purchase obligation leading to
the third party (in this case the landowner) should be a situation where the land company does not have to incur
secondary to the needs of the VAT taxable activity of the such costs). Hence, a case-by-case assessment is in our
construction company. The ECJ also clarified that the view required.
possibility for the construction company to allocate a
part of these costs to the land owner can be an element,
along with all of the other circumstances in which the
transactions occurred, that the referring court can take
into account to determine the scope of the right to
VAT deduction.Real Estate Update 17
(VAT) have to repay immediately all that VAT, plus any applicable
interest, on the ground that the planned project that
Court of Justice of the European Union, n° C-248/20, gave rise to the right of deduction did not result in any
18 May 2021 - Deduction of the input tax paid during taxed activity.
the construction phase of a building – Abandonment
of the initially planned activity – Adjustment of (Property Tax)
the deduction of the input VAT paid instead of
immediate reimbursement Constitutional Court, decision 51/2021 dated 25
March 2021 - Taxable basis for annual property tax
In the case at hand, a Swedish company A was
constructing an office building deemed to be rented out The taxable basis for the regional property tax is the
and opts to subject the renting to VAT. During construction, so-called cadastral income. This cadastral income is a
a potential tenant withdraws, making the project lump-sum estimation of the net annual rental value of the
unprofitable so that A stops the project. According to real estate concerned. The method of calculation of the
Swedish legislation at the time, A lost its status as a cadastral income has not changed since 1980 and is
VAT payer for that project and the VAT already deducted based on standards from 1975. For budgetary reasons,
(about 100,000 EUR) had to be refunded immediately the amount of the cadastral income is indexed.
with interest.
When a building is erected, a cadastral income is given
In this context, the Court ruled that the acquisition of shortly after the building is put into use. The owner then
goods or services by a taxable person acting as such has 6 months to lodge an objection. Once the objection
gives rise to the deduction mechanism. On the contrary, period is over, the cadastral income is final.
the use of goods or services, or the intention to use the
goods or services merely determines the extent of the After that, a revision of the cadastral income is only
initial deduction to which the taxable person is entitled possible in exceptional circumstances that cause
and the extent of any adjustments in the course of the an increase or decrease of at least 15% in the
following periods, but does not affect whether the right of cadastral income.
deduction arises.
A taxpayer who requested such an exceptional review
However, the principle according to which the right of had his request rejected. No appeal was possible against
deduction is maintained even where an activity is brought this decision. The taxpayer challenged this before the
to an end before it gives rise to any taxable transactions, Constitutional Court, but the latter dismissed the case.
must be combined with the rules regarding the adjustment The Court also states that the transfer of the property does
of VAT deductions. The adjustment mechanism aims to not open up a new period of appeal.
establish a close and direct relationship between the right
to deduct the input VAT paid and the use of the goods (CIV)
or services concerned for taxable outgoing transactions.
Therefore, if the taxable person no longer plans to use Court of Appeal of Brussels, 8 January 2021
these goods and services to perform outgoing transactions - Sale of real estate - Impact of an urban
subject to VAT or uses them to perform VAT-exempt planning infringement
transactions, the close and direct relationship is basically
broken and the adjustment mechanism will be applicable. The purchaser signed a private sale agreement for a
building that was (in fact) divided into seven housing units.
The Court concluded that a national legislation cannot In the private sale agreement, the building was described
require that a taxable person who benefitted from the as a residential and investment house (une maison
optional VAT scheme during the construction of a building d’habitation et de rapport). The seller refused to shield
that was intended to be let out, and for which the input the purchaser from possible fines for the absence of a
VAT charged on the incoming transactions was deducted, planning permission for the division.18
Although the private sale agreement had already been The tenant argued that the disadvantage suffered as a
signed, the purchaser contacted the town planning result of the judicial termination of the tenancy agreement
authorities who informed the purchaser that the building consisted of (i) losing the advantage of operating its
was registered as a single-family house (maison business in the rented premises and of carrying out
unifamiliale) and not as a residential and investment house. important works and (ii) being prevented from transferring
Five months later the purchaser refused to sign the notarial this business and therefore losing a profit of 750,000 EUR.
deed of sale; in reaction the seller claimed a compensation The tenant further argued that he had suffered these
payment of 10% of the purchase price as provided by disadvantages without there being any actual advantage
the contract. for the landlord, except for the landlord being able to
rent the rented premises to the prospective buyer of the
The Court of Appeal of Brussels decided that the aforementioned business without having to go by the
purchaser cannot, despite having been expressly invited by tenant first.
their notary not to sign the private sale agreement before
having taken steps with the town planning authorities, use The Court confirmed the tenants’ position: before he can
a letter from the municipality confirming the existence of decide that significant and repeated rent arrears constitute
this infringement, of which they were aware, as a ground a serious breach of the lease agreement that justifies the
for refusing to sign the notarial deed. judicial termination of the lease at the tenant’s expense, the
judge must first examine the balance between the benefits
According to the Court neither the object nor the cause of to be gained by the landlord and the harm to be suffered
the sale is unlawful since, on the one hand, the planning by the tenant.
infringement is not established (the municipality only stated
that there was a risk of irregularity) and, on the other hand, (CIV)
the seller could legitimately wish to sell the building as is,
after having informed the purchaser of the planning risk Court of Cassation - 15 January 2021 – professional
linked to the division of the building into seven units, and to seller versus specialized seller
let the latter assume this risk.
The Antwerp Court of Appeal had ruled that the seller
The absence of planning permission for the division of the of a recreation park, in its capacity of project developer,
building into seven housing units did not constitute an error had to be considered as a professional seller who cannot
or fraud, or a hidden defect, since this element was known exonerate his liability from hidden defects. The case was
to the purchaser before the sale. brought before the Court of Cassation. The Court states
in its decision of 15 January 2021, that the obligation
(CIV) of result (resultaatsverbintenis / obligation de résultat)
does not rest upon each professional seller, but on
Court of Cassation - 4 March 2021 – Commercial manufacturers or specialized sellers. The Court rules that
tenancy agreement and abuse of rights such an obligation of result means that the manufacturer
(rechtsmisbruik / abus de droit) or specialized seller should sell products without defects
and should take all necessary measures to (i) detect the
In this case, the tenant argued that the judgment rendered possible defects and (ii) indemnify the buyer in the event of
against him violated the prohibition on abuse of rights defect, unless he can proof that the defect was impossible
(rechtsmisbruik / abus de droit) on the ground of article to detect. To determine whether a party is a specialized
1134, third paragraph of the old Civil Code, because the seller, the Court of Cassation states that, as determining
judicial termination of the lease agreement requested by criteria, the judge should verify the degree of specialization
the landlord was granted, on the basis of significant and and technical competences. By not doing so, the decision
repeated rent arrears, without examining and balancing was not justified.
the advantage sought by the landlord by asking for judicial
termination and the disadvantage suffered by the tenant.Real Estate Update 19 (CIV) Court of Cassation - 12 February 2021 – Limitation of the decennial liability is null and void, before or after the acceptance of the work. In this decision, the Court of Cassation confirmed that a clause limiting the liability to the part of the architect and/or contractor (the in solidum clause) in the event of concurrent faults on the part of the architect and the contractors, must be regarded as a clause excluding liability. As the decennial liability is from public order, it is not possible to exclude the liability and, as a result, the in solidum clause is considered as null and void. Besides, the Court of Cassation also considers that such in solidum clause is also null and void if it relates to damage suffered in the period before the acceptance of the executed work. This seems to be contrary to general accepted principle in regulation, case law and doctrine, pursuant to which the decennial liability starts as form the acceptance of the work. Legal authors believe that this statement must be read in the context of the dispute, in which the architect agreement was mutually terminated, and the provisional acceptance of the work never took place. In such case, the date of the termination of the architect or contractor agreement could define the start of the decennial liability term, provided that a threat to the stability of the executed work is visible at that moment.
Last month in short
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Tax reduction for waiver of rent Investing in a residential care center
via usufruct
Parliament has approved a bill extending the tax reduction
(for individuals) and the tax credit (for corporations) for The ruling commission recently approved a structure
waiver of rent (see our April edition of the Real Estate whereby private investors finance the construction of a
Update). As such, nothing changes in terms of conditions residential care center through a usufruct construction.
and modalities. The law only changes the months for A landowner grants a right to build to a developer in
which the waiver must be granted: instead of March, April order to build a residential care center. The construction
or May (or several of these months) the waiver must now is financed by private individuals: they buy a flat in the
relate to the months of June, July or August, or several residential care center together with part of the land and
of these months. However, one condition is added: in the other common parts (including car parks).
month for which remission is granted, the tenant must be
compulsorily closed for at least one day. These investors undertake to immediately grant a usufruct
right of their flat to a non-profit association that runs the
In practice, therefore, this measure will hardly ever residential care center. The usufruct will last for 28 years
be applied. and cannot be early terminated.The ruling commission confirms that the private individuals owe VAT on the purchase of the flats. Because the flats are used as residential care centers, the rate is only 12%. The non-profit association also must pay 12% VAT on the establishment of the usufruct. This allows the private investor to recover (part of) the VAT paid. The VAT is calculated on the total nominal and non-indexed sum of the usufruct payments. As regards income tax, the ruling commission further confirms that the income from the usufruct is not taxable real estate income and that price increases (as indexation of the usufruct payments) are not movable income. Because the private investor transfers the usufruct immediately after the acquisition of the real estate, there is potentially a taxable capital gain. But this capital gain will in practice be equal to zero so that no capital gain tax should be due either. VAT and student rooms At the end of 2020, the ruling commission approved an ruling request whereby the renting out of student rooms would be subject to VAT. This allowed the lessor to deduct the VAT paid on the construction of the complex. (ruling no. 2020.1867, 06.10.2020) The government reacted to this in May 2021 via an amendment to a pending tax bill. According to that amendment, the renting out of student rooms, even with additional services, would be explicitly exempt from VAT. But the Council of State ruled that the amendment did not have the same “urgency” as the bill itself, so the amendment was withdrawn. It turned out to be just a postponement: on 9 July, the Council of Ministers approved a preliminary draft law containing various provisions on value added tax. In the press release about this, the government announced, in addition to some technical corrections to the existing legislation, a change in “the taxation of the provision of furnished accommodation”. Since Parliament will soon be starting its holiday, we expect a new bill by the autumn.
On our website
Reform of property law Read more about the reform of property law (Book 3 Civil Code) with useful infographics, reports on the different webinars and even the possibility of a full replay of our popular webinars. Infographics Reform of property law Usufruct Long-term Lease Building rights Easements Webinars Long-term lease vs Heavy repairs (retail) lease Mortgage in case of split Building rights in real Property in volume ownership estate developments
25
About Loyens & Loeff Authors of this edition
We are an international law and tax firm with cross-border Ariane Brohez: ariane.brohez@loyensloeff.com
expertise in a wide range of sectors. Our specialists in Lien Bellinck: lien.bellinck@loyensloeff.com
Belgium, Luxembourg, The Netherlands and Switzerland Samira Moujahid: samira.moujahid@loyensloeff.com
are recognised for their in-depth knowledge and unique
approach, integrating tax and legal advice.
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