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What is "usufructuary lease"?

Czech Republic: As of 1 January 2014, two distinct legal relationships will define the manner in which the owner of a thing may make it available for use by others: lease (nájem) and "usufructuary lease" (pacht). Which of the two is to be applied depends on whether the beneficiary will enjoy, aside from the right of use, also the "fruits" of the property (i.e., for all intents and purposes, the profit that can be derived from it). The respective legal regimes for lease and usufructuary lease differ in certain aspects.

As of 1 January 2014, when the New Civil Code comes into force, one will have to differentiate between "lease" (nájem) and "usufructuary lease" (pacht), the difference being that under a lease, all that is (temporarily) transferred is the right of use pertaining to a given property, whereas under a usufructuary lease, the right to derive profit or "fruits" from it is also enjoyed by the "tenant". It is therefore the will of the parties that is decisive for determining which type of obligation is present. Typically, where a piece of farming land is being let to someone else (in the expectation that that party will use it to grow their own crop of wheat there), or a fully furnished restaurant (to be operated by the tenant), one would speak of a usufructuary lease. By contrast, making available parking space in a garage (so that the tenant may park their car there) would qualify as an ordinary lease. In this vein, if a self-employed vendor rents a stall in the market square for preparing and selling grilled sausages, the concomitant agreement would be called a lease agreement if made on or before 31 December 2013, but would qualify as usufructuary lease agreement if made thereafter.

Usufructuary lease agreements are made between the lessor (and owner of the property -the "propachtovatel") and the usufructuary ("pachtýř" - the person who is granted both the underlying right in rem to use the property, and the right to derive profit - "fruits" - from it). The defining characteristics of usufructuary arrangements are these: an individually defined thing (or set of things) is being made available for use and enjoyment; the said use and enjoyment are temporary; and the thing is made available for consideration.

The usufructuary lease is governed by Sec. 2332 through 2357 of the New Civil Code. While it is very similar to the "ordinary" lease (to such an extent that the statutory rules for lease agreements are also the default rules for usufructuary lease agreements, cf. Sec. 2341 of the New Civil Code), a number of special (divergent) rules are none the less to be observed.

For instance, the termination of usufructuary leases is subject to a somewhat different arrangement: under the New Civil Code, an unlimited usufructuary lease may be terminated observing a six-month notice period, such that the lease ends at the end of the usufruct year (pachtovní rok) - a time period which by default matches the calendar year (except for agricultural usufructuary leases, where it lasts from 1 October through 30 September of the following year), though the parties may agree on their own definition of the usufruct year.

Special rules also apply in those cases where the property that is being let under the usufructuary lease comes with inventory (note that this term need not necessarily designate the furnishings of rental premises, but also extends e.g. to livestock). The usufructuary must see after (and replenish) the inventory with the due care of a prudent businessperson. For the event that the inventory should be destroyed (or deteriorate to a point where it can no longer be used), the New Civil Code provides that the lessor is obliged to renew the inventory (unless the damage is attributable to the usufructuary).

In closing, we should note that the New Civil Code recognizes, apart from the "common usufructuary lease", also an agricultural usufructuary lease (which denotes the leasehold of farming land or forest land for cultivation), and the usufructuary lease of an enterprise.

Ondřej Tejnský, Attorney-at-law