Source: http://id-lawoffice.com/services/transfer-of-the-ownership-right-over-a-property-in-exchange-for-maintenance-and-care/
Timestamp: 2019-04-22 06:52:20+00:00

Document:
Due to the fact that the transfer of ownership over a real estate property in exchange for the maintenance and care is not regulated by the law and represents a legal deal that creates an obligation with uncertain duration, as well as numerous theoretical problems, we recommend you to contact us in order us to advise and represent you during implementation of such a deal.
You will find additional information about the procedure relating to the transfer of ownership over a real estate property in exchange for the maintenance and care in the article Below.
The contract about transfer of the ownership right over a real estate in exchange for the maintenance and care represents a written contract in the form of a title deed according to which one person /transferor/ immediately transfers the ownership of his or her own property in exchange for an obligation of the person who receives the property /acquirer/ to provide lifelong maintenance and care. Except the transfer of the ownership right such contract may also arrange property rights over the property in exchange for an obligation the acquirer to ensure the maintenance and care. Exactly because of the fact that the transferor receives the maintenance and care, the contract is on a remuneration basis. If the transferors are two persons the maintenance and care must be provided to both of them. Any person can be the acquirer, even a person with no family relationship with the transferor. The obligation of the acquirer is indivisible – i.e. he must provide and maintenance and care. A legal entity cannot be a party to such agreement.
Most often the transferors in such contracts are old persons who transfer their property in exchange for the right to receive lifelong maintenance and care they require. At the same time such contract arranges future distribution of assets.
This type of contracts contains an uncertain factor, namely: the obligation the acquirer to provide the maintenance and care for an indefinite period of time, until the death of the transferor, i.e. the duration of the obligation is not defined. Beside that the amount of the maintenance due and the requirements for the exact care are also not specified.
The agreement represents an intermediate option between the sale and donation, as because of the fact that the contract is gratuitous /the transferor receives profit/ such kind of agreement allows the acquirer to avoid the negative consequences of donation, but namely – the risk the deal to be disputed by the heirs of the transferor because of the violation of the mandatory inherited shares.
Usually in case of conclusion of such type of contracts the transferor reserves the right to use the property for life. Thus the acquirer receives the right to use property after the death of the transferor.
The rules of a deal for the transfer of the ownership right over a real estate in exchange for the maintenance and care are the same as the rules of a sale-purchase deal, but namely – the transferor must be fully capable, he must be the owner of the real estate, the documents that are required and other are the same.
The acquirer has the right and may transfer the ownership right over the property to a third party via sale, exchange, donation, he may mortgage the real estate and to perform other actions without receiving of the consent of the transferor. A problem may arise in case the acquirer will stop to fulfil his obligation to provide the maintenance and care after such deal. In such situation in case the transferor will manage to terminate the contract he will have the right to receive the monetary value of the real estate, but not the property itself. Receiving of the monetary value usually requires long and costly enforcement proceedings.
Very often the contract does not maximally specify the care and maintenance due – where those should be provided, how they should be provided – personally by the transferor or by third parties, what they must include (provision of food, light, heat), etc. The volume and type of the cares depend on the needs of the transferor and the capabilities of the persons who provide care. It may be agreed the maintenance to be provided in cash or in kind /or both/. Such agreements help the parties to avoid future misunderstandings.
If the transferor will die soon after execution of the deal, his heirs may require the court to declare the contract null and void /to require termination of the contract/ because of the lack of the ground for it – art. 26, para. 2 of the Obligations and Contracts Act /because of the soon death of the transferor the acquirer actually did not provide the maintenance and care, i.e. he did not fulfil his obligations under the gratuitous contract/. There is a continuous court practice of the Supreme Court of Cassation confirming this statement.
If the real estate is acquired by several persons, then according to the art. 129, para. 2 of the Obligations and Contracts Act those persons are jointly liable, as the practice of the Supreme Court of Cassation is that in case one of the acquires provides the full required amount of the maintenance and care, then termination of the contract is unacceptable /even regarding another person who does not fulfil his obligations/. The practice of the courts and the statement of the Supreme Court of Cassation is that the interest of the creditor is protected and satisfied, even in case the obligation for providing of the maintenance and care was fulfilled by only one of the debtors. The bona fide debtor can claim the financial compensation for the provided maintenance and care from other debtors – even in the court.
When the obligations about providing of the maintenance and care has been taken towards more than one person and unless the contract specifies obligations due to each person by type and amount, the acquirer is obliged to fulfil his obligations about providing of the maintenance and care at the same time and inseparable for all the creditors and the latter should receive them together. Eventual non-fulfilment of the obligations towards one of the creditors means partial fulfilment which means inaccurate fulfilment of the contract. In this case each creditor has the right to claim receiving of the full amount of the obligation and to require termination of the entire contract. An obligation for providing of the maintenance and care due to two persons is common and indivisible and that is why non-fulfilment towards one of the creditors is the ground for termination of the entire contract. This interpretation is confirmed by the constant and recent practice of the Supreme Court.
Another hypothetical situation in regards with such kind of contracts may appear when the contract is concluded in favour of a third party which is neither a creditor /the transferor/ nor party to the contract, despite the fact that the contract is in this third person’s favour. In such case the issue with nonfulfillment of the contract regarding one of two creditors when one of them is a third party in favour of which the contract for maintenance and care was concluded is resolved differently. According to the art. 22 of the Obligations and Contracts Act the third person can claim that he wants or refuses to use the agreement in his favour but he cannot influence the contract. The right to terminate the contract due to nonfulfillment belongs to the transferor /party to the contract/ who is an active legitimate creditor according to the art. 87 of the Obligations and Contract Act but not to the third person in whose favour the contract was concluded. The third person who is a user to the contract may require only fulfilment. The third party also has the right to require compensation for the damages caused to him because of guilty nonfulfillment by the debtor /the promising party/. However, there are cases of merging of the qualities of ‘the beneficiary’ /the third party/ and of ‘the creditor’ in the court practice. Usually those are the cases of succession when the beneficiary under the contract is the successor of the transferor /for example, inheritance between spouses/. The right under the art. 87 of the Obligations and Contracts Act is included in the scope of the inheritance and in such case in case there are other prerequisites for the termination the heir-beneficiary will become actively entitled to require termination of the contract in the court.
We must pay attention to the termination of a contract about providing of the maintenance and care and to the consequences of such termination. The interpretative decision of the Supreme Court states that termination of such type of contracts is retroactive. It means that termination of the contract will be performed according to the art. 87, para. 3 of the Obligations and Contracts Act and during the termination according to the art. 88, para. 1 the parties must restore the situation as it was before signing of the contract and each party must return what was received under the contract to another party. According to the rules of the retroactive effect there is a possibility the transferor to receive back the transferred real estate. In this regards the court cannot make a statement about returning of the exchanges benefits in regards with termination of the contract due to the nonfulfillment without the claim from the parties about making of such statement. Upon termination of a bilateral contract the benefit given by the parties can be returned if a subjective right was exercises by its bearer – i.e. each party should require from the court returning of the benefit given by the party regarding and during implementation of party’s obligations under the contract for maintenance and care.
Another characteristic feature of the contract for the maintenance and care can be observed in case of its termination. The termination of the contract occurs with the death of the transferor and/or of the beneficiary /receiver of the property/. The death of the receiver /recipient/ under the contract for the maintenance and care also raises several important questions and in this regards it should be noted that the actions regarding providing of the maintenance and care are replaceable and can be performed by any other person. That is why it is acceptable that after his death the receiver of the property can be replaced by his successors. It means that the successors have the right or possibility to continue fulfilment but they are not obliged to.
Another important feature is related to the cases when the transferor has concluded the agreement having in mind some specific personal characteristics of the receiver and to the cases when it was explicitly stated that the debtor cannot be replaced by other persons. In this case the death of the receiver means termination of the contract.
Unlike the donation /and like the sale and purchase deal/ a real estate property acquired during the marriage by one of the spouses in exchange for an obligation about providing of the maintenance and care becomes the property of both spouses.
Due to the specifics of the matter and the individuality of each specific case the choice of the correct legal form /type of the deal/ is a difficult and responsible task for an average person. That is why we, the solicitors from ID Law office, can provide you with the necessary advice when deciding on the type of the deal and to assist during its implementation.

References: art. 26
 art. 129
 art. 22
 art. 87
 art. 87
 art. 87
 art. 88