Contract for Acquisition of Property against Life Care Obligations

The contract for acquisition of property against life care obligations belongs to the so-called “unnamed contracts”. This means that there is no specific normative framework to arrange it. During the last years, this legal institute has gained vast popularity, determined by the public and economic relations in the state.

In short, the subject of this type of contract is the following: a property owner transfers their property to another person (acquirer). In return, the acquirer provides life care to the property owner until the latter is alive. Note that not only immovable property can be a subject of this contract. There is no obstacle to transfer movable property against life care obligations. The last case is far less practically applicable. That is why this article shall consider immovable property as the subject of this type of contract.

Which are the main characteristic of the contract for acquisition of property against life care obligations?

1/ This is a contract that can be concluded only between natural persons, i. e. legal entities cannot be a party to such contracts.

2/ The contract subject can be both immovable and movable property.

3/ When there are two transferors, the acquirer is obliged to provide life care to both of them. If the acquirer provides to one of them, this poses a partial execution of their obligations, which in this case means complete non-execution and poses a reason for annulling the contract.

4/ The acquirer’s obligations are indivisible. That is to say, if the acquirer provides only maintenance, but does not take care of their creditor, we once again return to the hypothesis in point 3 above – this poses a non-execution. Providing maintenance means providing in kind for the normal existence of the creditor. This also includes paying the bills for electricity, heating, water and etc.

Maybe this is the moment to mention that such detailed description of the parties’ obligations is in their interest. That is why the particularized and detailed enumeration of the obligations is of upmost importance. This shall be considered below in the current article.

Regarding the maintenance, in some cases money can also be provided. These are the cases where temporary reasons require so, when it is objectively impossible for the creditor to receive maintenance in kind, when the latter is in delay and etc.

In any case, a pecuniary payment is possible only regarding the maintenance, but not the care. The latter is connected with the acquirer’s obligation to take care of their creditors. Detailed enumeration is again possible here and the physical condition of the creditor is also of great importance /are they healthy, can they move by themselves, can they prepare food for themselves, etc./. Since the deadline of the contract is the death of the creditor, it is highly possible that more and more care may be needed for the latter as the years pass on.

The proper execution of the obligation to provide care implies that the acquirer has to take care of the creditor in a way that the latter can live a normal life, while keeping in mind their physical condition. The case law on such contracts for acquiring property against life care obligations impose that the life care has to be provided in the negotiated capacity and type, continuously and in full size. Otherwise, a delay occurs, partial execution and the contract can be annulled.

5/ The moment of the property transfer is also very important. The transfer immediately turns the acquirer into an owner. That is why the acquirer can manage the property as its owner – sell it, donate it, lease it, mortgage it and etc. This can be done without it being necessary that the person, who has to be taken care of, is dead. The initial owner can reserve their right to use the property until they are alive. Practice presumes up to an extent that the life care is due in the same property, which is the subject of the contract, unless the parties have agreed upon another location. The cases where the acquirer agrees that they will not transfer the property before the death of the initial owner are not isolated. Since the person who is obliged to provide life care becomes the owner of the property from the moment of the contract conclusion, such a clause as the mentioned one cannot restrict the acquirer’s rights as an owner. That is why, under the threat of being evicted from their property in which they live, the debtor can reserve their right to use the property. The latter shall be in force regarding possible subsequent acquirers until the death of the debtor.

According to art. 18 of the Obligations and Contracts Act, contracts which transfer or establish other real rights on properties have to be done in a deed. This form serves as a fact of existence.

6/ The contract for acquisition of property against life care obligations is not concluded in view of the acquirer’s identity. This means that the care can be provided by relatives, as well as a specifically hired for this purpose person.

At the same time there is no obstacle for this contract to be intuito personae when the personal qualities and skills of the acquirer are of importance to the creditor and were the reason for the conclusion of the contract. According to Interpretative Decision No. 30/81 the contract is not so tightly connected to the identity of the acquirer that the death of the latter could lead to the termination of the contract. This means that if the acquirer is married, the property shall fall under the idle matrimonial property regime. If the spouse-acquirer dies before the creditor and the contract was not concluded intuito personae, the life care obligations should be carried out by the spouse who is still alive. Overall, the death of the debtor (acquirer) does not pose a ground for terminating the Contract for acquiring property against life care obligations. The creditor can request that the acquirer’s successors execute the obligations. However, the death of the creditor leads to the termination of the contract. The acquirer is not obliged to provide life care to the creditor’s successors because this right cannot be inherited. The creditor’s successors, however, can lodge a claim for annulling the contract.

7/ The annulment of the contract for acquisition of property against life care obligations has a reverse effect. According to the provision of Art. 87, Para. 3 of the Obligations and Contracts Act, the annulment takes place in court. When annulling the contract, Art. 55, Para. 1 of the Obligations and Contracts Act is applied. This provision reads that anyone who receives something without reason or in view of an unrealized or discarded reason, has to return it. This way, if the contract is annulled in court, the parties have to return what they have received from one another.

There is a delicate moment here – the acquirer has to prove what he has provided and to determine its value. In any case, if the debtor transfers the property, the rights acquired by third persons before the entry of the claim, are not affected.

What are the possible practical problems with the Contract for acquisition of property against life care obligations?

The main emphasis should be put on the execution of this type of contracts and their subsequent annulment. I mentioned in the beginning of the current article just how important it is that the parties negotiated their obligations clearly and unquestionably. To a certain extent, this contract is executed long enough for changes to occur regarding the attitudes and approaches of the parties. The precise determination of the obligations actually guarantees the protection of the interests of the party who has duly performed.

Elderly people, who trust persons without the latter being their relatives, should keep in mind the possible development in the following hypothesis:

“X” – a 70-year old widow with two children, transfers her apartment, in which she lives, to the 50-year old “Y” against life care from the latter. “X” does not reserve the right to use the property. ”Y” in her capacity as owner of the property transfers it to the person “Z”. Not long after, “Y” stops providing the necessary life care to “X”. “X” on her part, annuls her contract with “Y” with a court decision, which is in force. A return of the property is due according to the provisions of the Obligations and Contracts Act. What is absolutely possible and happens in practice? “Y” has transferred the property to “Z” before the entry of the claim for the annulment of the contract. This way the annulled contract is of significance regarding the rations between “X” and “Y”, but not regarding the rights of “Z” and the rights of probable subsequent acquirers of the property. Regarding these persons, the annulment has no effect. Simply put, “Y” shall now owe the value of the property back, but not the property itself. If it turns out this way, “Y” does not have property under her name and “X” cannot satisfy her claim as a claimant in an enforcement procedure.

The possible cases are numerous and I could not possible consider each and every one of them. When drafting a contract for acquisition of property against life care obligations, it is very important to seek consultations with a competent lawyer. The right approach in the beginning will save you many headaches afterwards.