Property

From Max-EuP 2012

by Ralf Michaels

1. Term and purpose

The term property is ambiguous. Sometimes property designates a right in an object; sometimes it designates the object itself: a person has property in an object, and the object is her property. Understood as a right, property is the most comprehensive right that one can have over an object. It encompasses the right to use and enjoy, the right to exclude and the power to dispose. According to a definition given by Pothier and representative at least of civil law, property is one’s right to dispose at one’s pleasure of a thing without injuring another’s right or breaking the law. This definition implies two important aspects. Firstly, property concerns the owner’s legal relations both to the object as well as to third parties. Some regard the relation to the object as central and that to third parties as a reflex; others, conversely, recognize legal relations only between persons and thus reject the idea of a relationship between owner and object as conceptually wrong. In reality, both can be combined: property is the full attribution of an object to its owner (a right in rem) in relation to all other persons (an absolute right). Secondly, property is defined and confined by the law and is subject to social obligations. There is thus neither an a priori nor a unified European-wide concept of property. Indeed, national constitutional law as well as human rights and fundamental rights (ChFR and ECHR) impose limits on the legislature.

Property can be distinguished from other legal positions in three ways. Firstly, property as a right is distinct from possession as actual control. However, the distinction is not a neat one because possession is also legally protected. Secondly, property as a comprehensive right is distinct from limited rights in rem, or interests in property, especially security in immovables (real property security (Eurohypothec)) and in movables (security rights in movable assets), but those are treated like property rights in many relevant respects. Finally, property as an absolute right and as a right in rem is distinct from the relative and personal legal relationships created by the law of obligations. This division is especially relevant in insolvency, where property rights are generally privileged over contractual rights. The division is more prominent in the civil law than in the common law, although even in the civil law it is not always sharply drawn. For example, the legal relations between buyer and seller are effectively very similar, regardless of whether the property has already been transferred or not. Where a contract can be specifically enforced, the right of control over the object effectively passes with the contract (and creates, under common law, a trust); risk also passes already with the contract (risk, transfer of). Furthermore, all legal systems recognize mixed structures between the law of obligations and property law. The most prominent of these, the trust of English law, has been absorbed at least partly into the continental European legal systems of Liechtenstein and Luxembourg and, as fiducie, to some extent into French law.

The purpose of property was seen to promote personal freedom. Today, more emphasis is usually put on the incentives property rights create for economically beneficial conduct. Firstly, the owner in a private property regime can profit from the use of the object but must also bear the costs of that use so that overuse of goods as in communal property (free rider problem, tragedy of the commons) is avoided. Secondly, a clear definition of property rights is deemed to be necessary for the security of transactions and the optimal allocation of goods. In consequence, state-guaranteed property rights are now often viewed as necessary for economic development. From a historical and comparative perspective, these justifications are not unproblematic. Common property regimes have functioned over centuries in European history and are currently experiencing a partial renaissance. Economists have shown that deliberately unclear definitions of property rights (‘muddy property’) can have advantages in forcing parties to negotiate and thereby disclose their private valuation for the particular good. Finally, the example of China shows that economic growth is possible without a strong protection of property rights.

Two concepts of property can be distinguished historically and comparatively. Dominium in Roman law, which influenced the German legal tradition through pandectist legal thought, was an abstract and universal concept of property, an absolute (though not unlimited) attribution of a thing to a person. This concept still characterizes the notion of property in the continental European legal system today (for movable and unmovable things equally). German law even goes so far as to abstract the acquisition of property from the invalidity of the underlying contract. In contrast, property under the old Germanic law was a concretely conceived right of control, subject to multiple modifications per object and person and therefore relative in character. This concept influenced to some extent French law, but above all English law, which still features quasi-feudal elements. Thus, all land in England traditionally belonged to the Crown; rights in land were limited to tenure and were thus relational, quasi-contractual, until 1925. The most comprehensive right in real property is the estate in fee simple absolute in possession, or freehold estate. Although conceptually still derived from the Crown, this right is effectively very similar to the freedom of use and enjoyment of continental European property. This conceptual difference explains continuing differences between European legal systems and provides a significant obstacle to legal unification or even harmonization.

2. Objects of property

In German and Dutch law, property (Eigentum, eigendom) is limited to physical objects: land and chattel. In contrast, French law also recognizes property in claims (proprieté des creances); the English concept is also broader. Additionally, Dutch law (like French law) also recognizes the comprehensive term of goed, bien, which includes both. In terms of economic analysis, a property right describes every subjective right. Similarly, the constitutional concept of property is not limited to physical objects, but rather contains any legally protected position. Intellectual property, despite the terminological similarity, is governed by special rules.

Property is traditionally divided between movable and immovable objects (in civil law systems) or personal and real property (in common law systems), which are subject to partially different rules. The division is justifiable by the fact that land is static and easier to register and has traditionally had a larger economic significance than most movable objects. The division is not drawn exactly the same way in the legal systems of the EU Member States. In so far as it is appears in Union law, the distinction is determined by autonomous criteria (thus, for tax law ECJ Case C-315/00 – Maierhofer [2004] ECR I-563). In private international law, the applicable law for both kinds of objects is usually determined on the basis of their location, with exceptions for objects in transit (property law (international)).

Traditionally, property in land encompasses buildings on the land. By contrast, in the former socialist countries the land and the buildings upon it could have different owners. Western legal systems achieve comparable results through (hereditary) building rights; the right to build upon foreign ground is either an indefinite real property right or a long-term rental right (emphyteusis). Special rules also exist for apartments: in most legal systems individual ownership of the apartment is connected with communal property in the apartment building.

3. Tendencies of legal development

The three most important developments are of relatively recent date and affect all European legal systems. First, since about the 19th century the function of property has fundamentally changed. Instead of physical control over an object, the economic exchange value of the property has moved to the forefront. This is partly due to increased transferability (transfer of title (movable goods)) and partly because property provides a suitable means of credit. Public registers serve this function, and in some legal systems also for other valuable objects (security interests in transport vehicles).

The second important development concerns the relation between private property and constitutional law. Although property has long been a central feature in European constitutions, as long as constitutional law and private law were viewed as separate, constitutional and private law protection of property were at most parallel regimes. The enhanced impact of constitutional law on private law in the 20th and 21st centuries has led to frictions. Firstly, the constitutional law concept of property is to a large extent linked to the relationship between the state and citizens and especially focused on limits on state intervention. This sometimes stands diametrically opposed to the horizontal relationship between proprietor and non-proprietor with which private law is concerned. Secondly, the constitutional law notion of property is different (usually broader) than that of private law, so that the special position of private law property vis-à-vis other legal positions, especially contractual ones, is not obvious from a constitutional law perspective. Finally, assets other than land and chattels have grown in their economic importance and are now recognized as objects of rights similar to property rights and have led to a ‘dephysicalization’ of property. The oldest of these rights are intellectual property rights. In the meantime, matters such as personal information, genes, body parts, trade secrets, internet addresses and greenhouse gas emission certificates (Dirs 2003/ 87, 2004/101) are being discussed and treated as objects of property. A comprehensive modern property law cannot be confined to land and chattels.

4. Pertinent specific issues

Several principles characterize property law especially in the civil law tradition, though the difference from the common law is not as great as it may seem in this regard. In the civil law, property rights usually exist in specific objects (specificity principle), but it is sufficient when these can be determined at the decisive moment. As a consequence, the civil law effectively enables securities quite similar to the floating charge of the common law.

In the civil law, property is in principle unlimited in time; part-time rights of use are not conceived as time-limited property rights. However, transfer of property can be placed under resolutive conditions. The restitution claim of the owner is also subject to prescription. English law in contrast knows the estate for life, which is limited to the lifespan of the owner.

Moreover, a principle of publicity (or transparency) for property rights is frequently postulated: property rights and particularly the right of ownership should be publicized by way of entry in a registry or possession. Especially for movable objects, however, possession and ownership are often separate, particularly as a result of conditional sales, delivery chains and chattel mortgage. As a consequence, possession no longer generally justifies the presumption of ownership; it has developed away from a presumption and into an independent foundation of acquisition from the non-owner.

The registration of property is given different weight in different legal systems. In German law, the Grundbuch creates rights and is imbued with public trust; in other legal systems the effects are weaker. The meaning of such registers is correspondingly different for the transfer of property as well as for the acquisition of ownership from a non-owner. Such registers are also important prerequisites for the effectiveness of security rights; in legal systems without mandatory registration, legal certainty is limited. Registers also exist in some legal systems for other valuable things, such as ships and cars. At the European level, the national registers are connected in a network, the European Uniform Land Information System (EULIS) that allows for direct access to national registers. At this point no common European register exists.

Additional principles arise out of the effect of property on third parties. First, a non-proprietor cannot transfer rights regarding property (nemo dat quod non habet). This principle is limited, however, by rules regulating acquisition of ownership from a non-owner, which still differ widely amongst EU Member States. Secondly, a priority principle exists between different positions: the earlier acquisition has priority over the later. Thirdly, the effects of property rights on third parties make a numerus clausus necessary, at least from a civil law perspective. Whereas parties are able freely to agree on the legal relationships inter partes effects on third parties are fundamentally limited to existing legal types. Although all civil law systems have a numerus clausus, the actual types of rights that are available differ. Some version of the numerus clausus also exists in English law, where it is, however, softened by equity and especially trust law.

Finally, property law cannot be viewed in isolation from other areas of the law, especially the law of obligations. Both contractual agreements and the rules of tort law, especially those concerning the effect of bad faith or fraudulent intention, have an impact on property interests. This shows how property law and the law of obligations work together and must be viewed together.

5. European law

In addition to private law rules, constitutional rules—both of domestic and of European origin—apply. Previously, the protection of property amounted merely to a general principle of European Union law, drawn from the common rules in national constitutions, but this general principle does not usually go further than national constitutions and has little force to invalidate Union acts. Now, however, the Lisbon Treaty has integrated the EU Charter of Fundamental Rights, which grants explicit protection of property in its Art 17(1), with binding force.

In addition, explicit protection of property arises out of Art 1 of the Additional Protocol to the European Convention on Human Rights, which also served as a model for the above-mentioned EU legislation. The controlling English and French versions use the comprehensive terms possession and biens; the protection thus extends to all property positions. The European Court of Human Rights (ECtHR) calls for the balancing of public and private interests against each other in the evaluation of state property rules. That might compromise the formal legal security that is important in private law. So far, the ECtHR has shown restraint in private law (eg ECtHR No 44302/02 – Pye v United Kingdom).

Article 345 TFEU/295 EC clarifies that the system of property in the Member States remains untouched—unlike that of intellectual property. The provision was drafted above all with respect to national policies on privatization and traditionally has had little relevance for private law. As the ECJ has said, absolute exclusion of property would result ultimately in the paralysis of the powers of the Community. This means that where a basis for Community involvement exists, eg for purposes of competition, consumer protection or environmental protection, the Community can impinge on property law to some extent.

Of particular relevance to property is the free movement of capital, which includes, according to the nomenclature in Annex I to the Third Capital Directive (Dir 88/361), investments in real estate (including purchases of buildings and land) on national territory by non-residents and investments in real estate abroad by residents. This means that land ownership cannot, in general, be refused to foreigners, even if those foreigners want to own land as second homes (ECJ Case C-302/97 – Konle v Austria [1999] I ECR 3099). Other restrictions must also be justified. Transitional periods exist for accession countries.

6. Unification

Property law is hardly less important for the functioning of the European internal market than contract law and is perhaps more important than tort and family law. Nonetheless, in view of Art 345 TFEU/295 EC, the European legislature has shown restraint up to this point. European rules on property law are isolated; property law is usually left to individual Member States. The Timeshare Directive (Dir 2008/122), per its Art 1(2)(b), leaves the rules of the Member States regarding the registration and transfer of property untouched. Article 4 of the Late Payment Directive (Dir 2000/35) and Art 7 of the Insolvency Regulation (Reg 1356/2000) deal with the effects of retention of title but refer back to national law for the establishment of such right. The same is true for Art 12 of the Return of Cultural Goods Directive (Dir 93/7) with regard to the effect that the enforced return of stolen cultural goods has on property. More complex is the Financial Collateral Arrangements Directive (Dir 2002/47), which envisions the transfer of secured property without transfer of possession. This leads to frictions with property systems like the Dutch, which do not recognize such structures.

A comprehensive European property law, within which property would be comprehensively regulated, is not currently envisaged. Unlike in contract, tort and family law, where principles of European law have been formulated, no attempt has yet been made to draft a comprehensive set of Principles of European Property Law (though the proposal has been made). In the long run, Europe will have to consider property law as an essential part of a European private law; the isolated regulation of the European law of obligations is ultimately bound to remain unsatisfactory.

Literature

Frederik Vinding Kruse, The Right of Property, vol I (1939), vol II (1953), vol III not translated into English; GE van Maanen and AJ van der Walt (eds), Property Law on the Threshold of the 21st Century (1996); Ugo Mattei, Basic Principles of Property Law (2000); Daniela Caruso, ‘Private Law and Public Stakes in European Integration: The Case of Property’ (2004) 10 ELJ 751; Christoph Schmid and Christian Hertel (eds), ‘Real Property Law and Procedure in the European Union’ (2005) <www.eui.eu/LAW/ResearchTeaching/EuropeanPrivateLaw/Project RealPropertyLaw.html>; Peter Sparkes, European Land Law (2007); Bram Akkermans, The Principle of Numerus Clausus in European Property Law (2008); A Gambaro, ‘Western Property Law’ in Mauro Bussani and Franz Werro (eds), European Private Law: A Handbook, vol I (2009) 47; Bram Akkermans and Eveline Ramaekers, ‘Article 345 TFEU (ex Article 295 EC), Its Meanings and Interpretations’ (2010) 16 ELJ 292; Sjef JHM van Erp, ‘European Property Law: A Methodology for the Future’ in Reiner Schulze and Hans Schulte-Nölke (eds), European Private Law—Current Status and Perspectives (2011) 227.

Retrieved from Property – Max-EuP 2012 on 27 January 2022.

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