Less Common Real Estate Contracts

Quick Overview

• An exchange agreement is used to exchange one property for another, possibly with an additional cash payment.
• A loan agreement allows someone to use a property temporarily and free of charge.
• A leasehold is particularly suitable for land from which the lessee derives crops or other income.
• An easement agreement can, for example, secure the right of way or passage across another person’s land.
• An apartment sublease agreement governs the relationship between the tenant and the subtenant; a sublease is not the same as a lease.

Not sure which type of contract fits your specific situation? Our attorneys will help you choose the appropriate legal solution and draft the contract to protect your interests, even if it is eventually registered in the real estate cadastre.

Real Estate Exchange

We encounter exchange agreements for land or other real estate when the contracting parties mutually commit to transferring ownership of the properties specified in the agreement to one another. In addition to land, we also sometimes encounter the exchange of apartments.

A practical example involving apartments might be when an older couple living in a large three-bedroom apartment agrees to swap with other neighbors who are expecting a child and currently live in a one-bedroom apartment. The proposed exchange would most likely also involve a payment. Theoretically, it is possible to arrange an exchange involving more than two apartments, but in such cases, we tend to refer to it as a “chain exchange.”

In the case of a land swap, it could involve, for example, a situation where we urgently need to acquire a specific piece of land (e.g., one adjacent to ours, for which we have further plans) and its current owner, for instance, wants to consolidate their land holdings and finds ours suitable for that purpose.

As mentioned, when exchanging two apartments or plots of land of unequal size, the idea of paying the difference in value naturally comes to mind. However, this does not have to be the rule. The value of an apartment is not determined solely by its size; the extent of renovations and the apartment’s wear and tear can also play a role. A subjective attachment to the property in question can also be a significant factor. For example, in the aforementioned case of land consolidation, a situation may arise where one of the owners urgently needs a specific plot of land for their own purposes, and that plot thus holds special subjective value for them. Therefore, they may be willing to exchange it even for a plot that is much larger and objectively more valuable.

What should a contract for the exchange of land or an apartment include?

An exchange agreement is, in a way, similar to a purchase agreement. However, the consideration for the transaction is not money, but another item. In our case, it is real estate. There is no seller or buyer here, because both parties simultaneously provide and receive a specific item. As indicated above, consideration may also be involved here, specifically in situations where the value of the two items is not equal.

Of course ,a barter agreement should properly identify both the contracting parties and the items being exchanged. The parties must then express their intent to transfer ownership of these items. Both parties acquire ownership at the time of registration in the real estate cadastre. It is also advisable to wait until this date before the actual mutual transfer and use of the property.

If you are impatient and wish to agree on an earlier handover, it is also advisable to specify the resulting obligations in the contract (settlement of payments related to the apartment, or the possibility of using the land, including the fruits and benefits derived from it — such as mowing the grass for livestock.)

A written form is required for a real estate exchange. As with other real estate contracts, it is not recommended to use templates found online, which often fail to address all details or may even contain errors. Errors can even occur in the real estate cadastre. A lawyer or attorney who is experienced in such transactions and thinks “a step ahead” is invaluable in these cases.

From our legal practice: A common mistake in real estate contracts is an overly general description of the property or an insufficient plan for what is to happen between the signing of the contract and the registration of the change in the land registry. For less common contracts, it is therefore important not to simply adopt a generic template without reviewing it, but to tailor the contract to the specific property and the parties’ circumstances.

Agreement on the Use of Land or an Apartment

Of course, we don’t have to sell or exchange real estate that we aren’t using right away. If we want to allow others to use it, we can choose from several types of real estate use agreements.

First, we should consider whether we will charge a fee for the use of the property or not. For agreements involving payment, a lease agreement is typically chosen. If we want to make the property available for use free of charge, we can opt for a loan agreement.

A special type of real estate use agreement is the leasehold agreement. Unlike a standard lease, this allows the lessee not only to use the property but also to enjoy it and reap its benefits. This type of contract is typically used for the use of agricultural and forest land, where crops can be harvested.

Agreement on the Establishment of an Easement

Another option for regulating relationships regarding real property is an agreement establishing an easement. It is typically used, for example, when the owner of an adjacent property wishes to obtain a right of way, a right to lay utility lines, or another long-term right to use another’s real property.

The Civil Code distinguishes, in particular, between easements—where the property owner must tolerate something or refrain from certain actions—and real burdens, which may also oblige the owner to perform certain active duties. With real property, it is therefore important to precisely define not only the encumbered parcel but also the content and scope of the right, its duration, and any consideration.

If a real right is established on real property registered in the real estate cadastre, registration in the cadastre must also be taken into account. An imprecise definition of the scope of a real burden can later lead to disputes between owners.

For example, do you need to legally secure access across a neighboring property? It is advisable to draft the agreement establishing the easement as precisely as possible— we will help you determine the scope of the right, prepare the agreement, and draft the application for registration in the real estate cadastre.

Real Estate Loan Agreement

With a real estate loan agreement for an apartment or plot of land, you transfer the property to the borrower free of charge and on a temporary basis. Although the law does not require it to be in writing, as with anything related to real estate, we recommend that you put it in writing. To choose the right form, simply use common sense. It’s certainly not common—or very practical—to draw up a contract with, say, your own sister if you’re letting her stay in your apartment for the weekend while you go to your vacation home. However, if you’re traveling abroad and leaving your apartment to a friend for half a year, it’s definitely better to put a few things in writing together.

The temporary nature of the contract can be defined, for example, by a specific date or a certain event that will occur but whose exact timing is unknown (until my return from England). The contract should also specify the purpose of the loan.

The borrower’s fundamental right is the use of the property. However, they should use it as agreed and, for example, not sublet it to another person without your consent. Furthermore, the borrower should cover the costs associated with using the property and return the apartment or land upon the expiration of the agreed-upon term (or upon fulfillment of the agreed-upon purpose).

The lender should instruct the borrower on how to use the property and then make it available for the borrower’s use. They may not demand its return earlier than agreed. Of course, it is possible to avoid this disadvantageous position by negotiating various exceptions (e.g., if the planned trip abroad ends early for reasons specified in the contract).

Apartment Sublease Agreement

It is important to distinguish between a lease agreement and an apartment sublease agreement. In a lease, the agreement is typically entered into between the property owner and the tenant, whereas in a sublease, the tenant himself sublets the apartment or a portion of it to another person.

Whether the tenant needs the landlord’s consent depends, among other things, on whether the tenant permanently resides in the apartment and whether the tenant is subletting the entire apartment or only a part of it. If the tenant does not permanently reside in the apartment, the tenant may sublet the apartment or a part of it only with the landlord’s consent. Furthermore, the sublease will end no later than the expiration of the main lease.

It is therefore advisable to clearly specify in the agreement the subject of the sublease, its duration, the amount of the sublease rent and utility payments, the rules for using the apartment, and the method of terminating the sublease.

Land Division Agreement

The decision to divide a plot of land into smaller parts is usually motivated by the owner’s intention to use the newly created plots, for example, as building lots. If we have similar plans for our own land, we should first verify whether its designated use is consistent, because only then can it be subdivided.

It’s also worth finding out what other plans the municipality has for the area where the land is located—specifically, whether further development is anticipated there. Of course, this is merely an indication, not a guarantee of future success with your own construction project.

Application for Permission to Subdivide Land

You begin the land subdivision process by submitting an application for a land subdivision permit to the relevant building authority. The application must be accompanied, among other things, by a general site plan on the scale of the cadastral map, showing the proposed subdivision and access to the newly created parcels. If there are multiple affected owners, all of them must submit the application, or one of them must provide proof of the others’ consent.

Permit for Land Subdivision

In the permit, the building authority sets forth the conditions for the subdivision of land and defines the new property boundaries, including access from a public road. If no special conditions need to be specified, the issuance of the permit may be the building authority’s first action in the proceedings.

Based on the decision or notification, you can have a geometric plan prepared. This requires a survey by a licensed surveyor and preparation by a qualified professional. Final approval of the geometric plan then depends on the cadastral office, which will simultaneously assign parcel numbers to the newly created parcels.

Once you have obtained approval from the building authority and the cadastral office has approved the geometric plan, you may apply to have the newly created parcels marked in the real estate cadastre.

Summary

Less common real estate contracts address situations for which a standard purchase or lease agreement is insufficient. For example, real estate can be exchanged, lent free of charge, or leased. A contract establishing an easement allows for the long-term regulation of, for example, the right of way across another’s land, while a sublease agreement governs the relationship between the tenant and the subtenant. A separate area is the subdivision of land, which is governed by the Building Act and may require a permit from the building authority and a subsequent change in the real estate cadastre. For all these legal transactions, it is advisable to precisely define the real estate, the rights and obligations of the parties, and the manner in which the relationship will be terminated.