Real Encumbrance Institute in Civil Law of the Republic of Latvia
PhD Student Rolands Neilands
Rīga Stradiņš University, Latvia
The aim of this paper is to research the real encumbrance (burden) institute in Civil Act of the Republic of Latvia to state whether this institute is archaic and should be removed from the Civil Law or whether it has strong position in nowadays commercial circulation. Methods of qualitative research were employed in the paper – comparative method, analytic method, inductive method, and deductive method.
In Latvian law real encumbrance is a permanent duty attached to immovable property to repeatedly provide specified performance of money, in kind or by corvée. Nowadays there is no place for corvée and it does not exist since 19th century.
The paper shows that there are some cases when the real encumbrance institute is used in nowadays. It also describes whether it is appropriate to use this historical institute for commercial relations in 21st century, as well as reveals the suggestion of the author.
Real encumbrance, burden, kind, corvée
In accordance with Article 1260 of the Civil Act of the Republic of Latvia, a real burden means a continuous obligation imposed on a real estate to recurringly provide certain performance in cash, in kind, or corvée labour. Part of this legal provision does not work in a contemporary environment – corvée labour historically was an obligation of farmers to work certain number of days at the manor (as part of the serfdom), while performance in kind is a reimbursement, where goods are provided in lieu of money, which is a rare occurrence in the modern economic circulation. The most common form of the real burden in a contemporary legal relationship is a recurrent payment of money.
1. Tithe and Corn Rent
Real burdens have developed in the medieval law. In the late 6th century in the Frankish state the Christian Church claimed a tithe as a church tax on the basis of fragments in the Old Testament where it was imposed on Hebrews. In the second half of the 8th century the state supported this claim of the Church in order to compensate the latter for secularization of the lands of the Church. Charlemagne introduced the tithing tax in the entire Frankish state, including Italy, in the year 779. Parish ministers collected this tax, and the resources obtained, according to the law, were managed by bishops and allocated for the purposes of the Church pursuant to the Canon Law.
Theoretically, the tithe was to be paid in the Frankish state as a 10%-tax of the harvest of land and growth of livestock. In reality, the rate was usually lower and depended on the region. Church officials – bishops or even parish ministers, who collected the tithe of some particular region, commonly used to dispossess it from various secular entities. Especially such dispossession of tithe, delivering (holding) in fealty increased in the 12th century. Thus, the tithe held in fealty (Latin – in feodata decima), received by Church vassals, came to life.
In the current territory of Latvia the tithe was introduced concurrently with the Catholic faith. Concurrently with formal introduction of Christianity, tithe was also claimed from a newly baptized person. Everybody who underwent baptizing had an obligation imposed to pay the tithe to the Catholic Church. In early 13th century, inhabitants of the territory of Latvia – farmers – had the tithe imposed in full, as a 10% tax on the gross crop, on the livestock growth, on a bee-garden, and on income from fishing. Consequently, unlike in other Medieval Europe, where the rate of the tithe was reduced in the Frankish state, here they tried to enforce the tithe in full as the 10%-tax. Nevertheless, later in some places the Church conceded and remitted the tithe by introducing a rather low corn rent.
The tithe held in fealty was not a setting of divine right anymore, because it did not serve either God or God’s servants, but secular entities – vassals – instead. Furthermore, the corn tax, upon holding in fealty, transformed into the real burden governed by the civil law. However, as time went by these real burdens increased. Rates of the corn tax increased; the tithe morphed from a 10% tax into a 25% gross tax or one forth of the revenues, or was applied to produce that was not tithed earlier. Furthermore, some produce (such as corn) was taxed according to the tithing principle, whereas other (such as harvest of the garden) – according to the corn rent principle. As a result, one farmstead paid a tax according to both the principle of tithing and the principle of corn rent.
Usually the tithe had to be given from all harvest, which had grown within the boundaries of the land encumbered by this real burden; therefore, it was not important where and what plants or livestock were cultivated (for example, bees in the woods, flax in the fallow land), because obligations of the landed estate do not change by modifying the crop rotation or agricultural machinery. There was a reason for the Mantag to resolve in 1473 that the tithe needs to be given not only from the corn crop, but also from the hop, honey, chicken, geese, bacon, meat, hay, firewood, planks, etc. Disputable was the issue whether this levy needs to be charged on clearings and freshly raised (virgin) soil as well. In Livonia they stuck to the principle, at least in the 17th century, that the clearing is not subject to tithing for the first three years; therefore, they were called free years.
During the Swedish rule, on 30 June 1688 the tithe was lifted for all farmers of state land in Vidzeme, and instead a land rent in cash, in kind and corvée labour based on the plough value was introduced.
2. Corvée Labour
Besides the tithe or crop rent, the new landlords subjected residents of Livonia to other burdens as well, which in the 13th century were mainly of military nature. According to the treaty of 1239, baptized Couronians had to take part in military campaigns against heathens not only in defence but also in offensives to spread the Christian faith. Based on treaties Semigallians, Estonians, and other tribes had the same obligation. Besides, for the purpose to protect the land non-German people had a duty of military service, constructing castles and churches, roads and bridges. Pursuant to the treaty of 1267 with Couronians, every Couronian had to work for the Order for 4 days per year in his region – 2 in summer, and 2 in winter. In accordance with the treaty of 1272, the Semigallians had a duty to serve 2 days in summer and two – in winter, including one horse handler per each plough; other able-bodied persons had to work on foot – cut grass, carry and chop firewood. The military duty diminished, because, after the order castles were built and invasion of Livonia was completed in the late 13th century, wars involving non-German people either ceased altogether or calmed down at least. The agricultural corvée labour, on the other hand, increased with every century, which can be explained by the rule of landlords (feudal lords) transforming into estate agriculture (Gutsherrschaft), and small natural economy of vassals was replaced by large-scale estate farming (manorial economy) for the market and export.
Even though in the subsequent centuries data about corvée (unpaid, unfree labour) of Livonian farmers are very scarce; nevertheless, it can be maintained with a great degree of probability that the corvée had a tendency to continuously increase depending on the needs of the estate; therefore, their size was not equal anymore and varied from one county to another county. However, the habit to discern between corvée labour for the castle and for agriculture quite frequently remained; the latter exceeding the first many times. For example, in 1469 farmers of Lubāna and Bērzaune had to go to work for the estate to build a castle. In 1486 vassal Tiesenhausen claimed 9 days of corvée from his people per year: six – to cut grass and harvest hay, 3 – to cut rye. Rules of the Order for the farmers of Semigallia stipulate in 1492: “In summer work for the estate needs to be done according to the number of men, in winter – according to the number of farmsteads.” For this purpose, the civil parish usually recorded all able-bodied men. Farmers had to do not only agricultural work at the estate but also take cartloads to Riga, take part in the wars and send craftsmen for the needs of the castle.
It should be noted that there were farmers exempted from corvée labour as well. Freeholders were people of the civil parish who, based on a special contract, were exempt of the regular duties of the farmers – corvée labour at the estate, tithe, or crop rent – for a longer or shorter period of time. The freedom was attributed not only to the person but also to the land. Scope of the freedom and legal grounds thereof were varied; therefore, the name freeholder was carried by people of unequal social and economic status. However, since the freeholder was still a member of a civil parish or a village anyway, the freehold did not forfeit its status of farmer’s land, and, unlike the estate land, legally belonged to the region of the civil parish.
In the 19th century, after the serfdom was revoked, corvée labour had to be done by farmers of clergy houses. In Courland, there were at least 353 such farmers per 90 clergy houses, while in Vidzeme – 713 on the continent, and 146 on Saaremaa Island, 1212 farmers altogether. Although the corvée labour was prohibited in 1865, and farmers of the clergy houses had to pay a rent instead, corvée attributable to the whole parish was retained. Parish corvée, for the most part, had to be performed when a minister did not have farmers of his own, although even ministers, who had their own farmers, occasionally, got corvée labour from the parish.
3. Object of Real Burden
In the regions of the state farmers possessed of their land based on a title according to rights in rem, which was proven by a land registry institution that existing in the 15th century already. These records contained encumbrances of paternal area in a form or real burden and debts, as well as change of owners in cases of succession. According to these records, the landlords reclaimed the escaped debtors, while later the feudal lords (serf-owners) reclaimed their serfs. Neither members of the farmer’s household nor freeholders of the parish were registered in the land registers, because they did not have control over farmer’s ploughs – the host of the farmstead was liable for them before the master. According to the nature of public servitude farmer’s land was categorized in freehold land and civil parish land (governed by local administration), or free ploughs and corvée ploughs. The freehold land was encumbered with labour duty and levies or tithe. Such a freedom was given in exchange for layman services, keeping a hose for landlord’s officers, or pay a certain freedom fee on regular parish days.
The basic principle of the tax law in Vidzeme, beginning of the 13th century already was that the estate land was free, whereas the farmers’ land was encumbered with real burdens. This immunity of the estate land has historic grounds: the landlord had to do the military service, whereas the farmer had to pay taxes instead and provide the landlord with corvée labour. In the 17th century this principle was revoked by the Swedish government; therefore, starting from that time tax exemption of the estate land existed rather hypothetically, and not in reality. First, it occurred in the sphere of real burdens governed by the civil law. The Swedish land law already (1608) stipulates that patrimonial estates of landlords (feudal lords) are not free from burdens of building churches, which was confirmed by Karl XI in respect of Vidzeme by the decree of 20 December 1694. By the rules of the domain board of 21 March 1696, the minister’s tithe had to be given not only from the farmer’s land, but also from the estate (manor) land, which was a direct encumbrance of the latter in favour of the Church. As regards, the real burdens governed by the public law during the Swedish rule, they encumbered only the farmers’ land, namely: 14 Taler and 52 Groschen from each plough. As of the decree of Catherine II of 1783, when the Russian capitation (head tax) act (1722) was attributed to Vidzeme either, the Russian government persistently proceeded with complete overhauling of the previous tax regime in Vidzeme: by the decree of 11 October 1784 the manors had to provide accommodation for the army and horses; by the decree of 28 November 1796 the recruit act comes into effect in Vidzeme. Since the feudal lords considered farmers their own property and key source of income from the land, these direct state taxes and burdens seemed almost like expropriation of their assets. Furthermore, the Russian rule retained the communal burdens established by the Swedish government: road corvée and postal shed, and added chest levy in favour of the knighthood treasury. In 1860 it was established that no only parishes but also manors need to take part in construction of public buildings (such as horse mail); moreover, the estate land (manor) is obliged to provide the necessary building materials, save for straw, and cover all expenses in cash, whereas the holders of civil parish land, commensurately to the size of their land plots, had to provide the necessary labour, transport the materials and provide the straw.
Pursuant to the decree of the Vidzeme province board of 11 December 1870, building corvée had to be shared among the civil parishes and manors upon building and repairing parish schools, parsonages, and churches. Furthermore, the manor and the civil parish took part in provision of a Lutheran minister and a sexton with corn tithe and some days of corvée labour to cultivate agricultural lands of the ministers. If the church burdens were considered levies subject to civil law in the first half of the 19th century still, by the decision of the Senate dated 27 February 1885, these burdens were subsequently referred to as actual taxes. Conversely, the obligations of the manor and the civil parish before the parish doctor, doctor’s office, and the hospital remained of pure private law character still.
After proclamation of the Republic of Latvia, an agrarian reform was introduced, during which the laws and regulations prescribed rescinding of the real burden. Pursuant to Article 18 of the Agrarian Reform Act adopted at the Constitutional Meeting of Latvia on 16 September 1920, real burdens in favour of the estate authorities, churches, and clergy/acolytes, as well as private persons were rescinded, as well as in respect of the lands enrolled in the land fund, as well as lands which are not included in the national land fund pursuant to Articles 2 and 3 of this act. On the other hand, Article 12 of the Act on Corroboration of Real Estate due to the Agrarian Reform Act stipulated that the real burdens shall be deleted from the land registers based on a request from an owner of the burdened real estate. Notwithstanding the foregoing the real burdens were not eliminated, and in the Civil Act adopted in 1937 they were taken over from the Collection of Local Civil Acts of the Baltics.
The chapter on real burdens contained in the Collection of Local Civil Acts of the Baltics a land rent or quit-rent was also mentioned. In terms of its source, it was a contract governed by the obligation law, which was transformed into a property law institute. The right to land rent, or quit-rent was a legal relationship where the owner of the real estate delivered this property in use by another person in exchange of an annual rent payment (obrok). The tenant of the land used the real estate just like the owner. This right was not limited by any validity period, and therefore was passed to the successors. The land tenant was eligible to transfer his rent right as well. The owner did not have the right to interfere with such activities of the land tenant in any way; however, he had the right of first refusal.
In accordance with Article 1329 of the Collection of Local Civil Acts, the land tenant subject to quit-rent (obrok) was not authorized to encumber the real estate with any easements, mortgages, or other burdens without consent of the owner. However, the buildings built by him on such land can be encumbered by him by both easements and mortgages at his own discretion.
Upon drafting and adopting the Civil Act in 1937, the quit-rent was not adopted in the Civil Act. Consequently, there is no quit-rent nowadays.
4. Contemporary Real Burdens
Pursuant to Article 1270(2) of the Civil Act, if the real burden is established under a contract or under a will, then it becomes valid towards third parties only after it is entered with the land register over the servient real estate. Following this legal provision it can be inferred that the real burdens are a property law instrument rarely used in area of the civil law, in contractual and successor relationship – according to the statistical data of the National Uniform Computerized Land Register, during the period between 1998 and mid-2016, 322 corroboration requests have been submitted to the Land Register for corroboration of the real burdens in Latvia. During the period between 1993 and 1997, no such corroboration request has been submitted. The highest number of the corroboration requests – 256 – have been submitted to the Riga Regional Land Registry Department.
While working on the article, the author has personally reviewed the information of the Riga Regional Land Registry Department about the corroboration requests and documents enclosed thereto for the period until 19 April 2016, i.e. about 256 requests for corroboration of real burdens. Out of all these corroboration requests, 158 corroboration requests have been satisfied in full, 59 corroboration requests have been partially observed, whereas the rest (39) have been left without review (withdrawn) or left without consideration. Out of the satisfied corroboration requests, 137 corroboration requests (86%) are corroboration requests from one developer of a settlement of private houses located in the Riga Region, whereas 16 corroboration requests (10%) are corroboration requests of another developer of a settlement of private houses located in the Riga Region. Only five fully satisfied corroboration requests (3%) are not corroboration requests of developers of private housing settlements. All partially satisfied corroboration requests (59), in their turn, are corroboration requests from the first developer of the settlement of private houses. Consequently, all fully satisfied corroboration requests submitted by developers of private housing settlements constitute 212 corroboration requests or 97% of the total number of fully satisfied and partially observed corroboration requests (217).
Corroboration requests of both developers of private housing settlements are substantiated on similar factors. The developers sell individual land plots or land plots with private house on them, and concurrently with entering into a purchase agreement also close an agreement on establishment of a real burden. A fee is stipulated in these agreements for maintenance of the common areas – common-use streets, existent infrastructure, recreational area, sidewalks, draining ditches and greeneries. On developer defines this fee as a management fee in the agreement, while the other – a service fee.
Arising out of the foregoing, the real burdens are used to charge a management fee for common roads and infrastructure of the settlements in two private housing settlements in the Riga Region. The management fee established in a form of real burdens is convenient for the developers of settlements, because upon change of owners of the land plot, the real burden registered with the Land Register is binding on the new owner. However, from the perspective of the civil law system an archaic legal institute used in such a way may not be considered anything else than a shrewd ploy of individual lawyers how to take advantage of deficiencies of the legal framework for the benefit of their clients or employers. A suitable, legally correct solution would be entering into a management agreement, and not entering into the agreement on real burden.
Irrespective of the fact that the real burdens are an extremely rarely used instrument of the property law (comparing the 322 corroboration requests submitted to the Land Registry Departments since 1993 to 662,001 mortgage corroboration requests submitted in the same time span , i.e. 2056 times more), the real burdens have priority over mortgages, if recovery is aimed at the real estate. Pursuant to Article 628(1) of the Civil Procedure Act from the proceeds received from the sold real estate encumbered with a pledge, after enforcement costs related to sale of the real estate are covered, the real burdens registered with the Land Register, which have become due and payable, are to be satisfied as a third priority, whereas the claims secured by the pledge of the real estate shall be satisfied according to their hierarchy as the fourth priority.
5. Solution for the Archaic Nature of the Real Burdens
The real burdens are a complicated and inherently inconsistent medieval institute, which has developed by combining both public and private corvée duties before landlords. The real burdens have been created during the feudal era, and have managed to survive in the civil law of Latvia until now, notwithstanding the fact that their original objective is absolutely incompatible with the contemporary society. Since nowadays the real burdens are used very rarely (moreover, in 97% of cases in order to secure income of the management fees for maintenance of common roads and infrastructure), the institute of real burden should be deleted from the civil law of Latvia.
Consequently, it would be necessary to delete Articles 1260 – 1277 from the Civil Act of Latvia, and sub-paragraph 3 of paragraph one of Article 628 of the Civil Procedure Act. After deletion of these legal provisions, status of mortgages would improve, before the priority of real burdens over mortgages would be eliminated.
Real burdens have no place in the contemporary civil law system of Latvia. Real burdens are an archaic leftover of the feudal law, which has managed to survive until this day. If till 19th century various taxes and levies could be charged based on the real burdens, nowadays their existence lacks any objective substantiation. There is a separate legal system for taxation in place – tax law that contains an elaborate and detailed procedure for calculation, payment and collection of taxes. Conversely, the comparatively rare cases when the real burdens are used, they secure collection of the management fee from residents of two private housing settlement for maintenance of the common roads, territories, and infrastructure. Instead, management agreements should be closed for this purpose, and not the agreements on real burdens.
Taking into account the foregoing, it is necessary to eliminate the real burden institute from the civil law system of Latvia.