WHAT IS THE “SURFACE RIGHT” (GROUND LEASE RIGHT) ACCORDING TO THE GREEK LAW?
For us to better explain that relatively newly established right, we shall break it into its components:
- Surface is the in-rem-right of an individual or a legal entity to construct a building on the territory of an estate which is, at the time of establishment of the right, belonging to the State, and to exercise in this building or in a building already constructed in such estate the powers, which confer the right of ownership.
- The owner is the owner of the land of the public estate, who remains the owner of the estate who receives an exchange for granting the surface rights. The owner also benefits by the value increase that the surface holder is offering to the estate by building assets on it.
- The surface holder is the person or entity who has the right to the surface. This means that the holder acts as quasi- owner for a specific time period, exercising all the rights of the owner on the estate.
- The duration of the surface right cannot be less than 5 years and more than 99 years. The surface right can either expire or be extinguished. In the first case the agreement between the owner and the holder includes a specific time period. In the second case the right could be extinguished either with the abolishment of the contract after the agreement of both parties, the withdrawal of the holder, the total destruction of the estate, the dissolution of the entity or the death of the individual holding the surface, the transfer of ownership to the holder, the fulfillment of any condition subsequent in the agreement between holder and owner. The parties can contract to extend the duration, but an obligation to extend in advance is not binding.
HOW CAN A GROUND LEASE RIGHT BE GRANTED IN GREECE?
The establishment of the ground lease right between the owner and the surface holder shall be constituted by an official notarial contract. Moreover, the notarial contract must be transcribed in the books of the competent Mortgage office; either registered in the competent Land registry depending on the area the estate is located. Any extension agreement regarding the surface right is made with a notarial document submitted also to transcription/ registration.
HORIZONTAL AND VERTICAL ESTABLISHMENT BY THE SURFACE HOLDER:
The surface holder is allowed to construct assets on the estate. Thus, the Greek law allows the holder to establish vertical and horizontal properties or to amend the existing ones, with the purpose of better exploitation of the asset. By the end of the surface right all the constructed assets remain on the estate and to the ownership of the owner.
TRANSFER OF SURFACE RIGHTS, SECURITIZATION and TAXATION IN GREECE:
The surface right is transferable in life or cause of death. It can be also the subject of a contribution to a company. According to the law the transfer of the surface right is done in the same way as the transfer of property ownership. Moreover, it can be also used as a collateral for bank finance.
The establishment of a mortgage, the registration of a pre-note (lien), as well as the establishment of real and personal servitudes, which encumber the right of surface, is permitted. In the event of infringement of the right of the surface owner, the provisions for the protection of ownership shall be applied accordingly.
The establishment of the right is done either in exchange for a certain price that is paid in full at the time of establishment or is credited in whole or in part, or in exchange for the payment of land fee (periodic consideration) or with a combination of the two.
The right of the surface is equated for tax purposes with that of usufruct, while the cost of acquiring the right is partially and equally deducted from the gross income of the years that the right lasts.
PURPOSE OF THE LAW OF THE GROUND LEASE IN GREECE:
This innovative legal institution of the surface right is a flexible mechanism for the easier and more appealing utilization of public estates. The “surface right” provides the capability of investment opportunities and development prospects without the ownership transfer of public land. Simultaneously, it is clearly a more economical solution in the case of acquiring the real estate rights on encroached State lands in relation to the acquisition of full ownership.
Our Law firm is being part of distinguishable forthcoming projects including foreign investments in public estates in the city of Thessaloniki and in Chalkidiki. Such high- level projects are utilizing all the benefits that the surface right legal framework is providing, in order to take leverage on the opportunities the Greek State is now offering.
