28.05.2024 · Short read

Priority ranking change between rights in rem in Dutch property law

In Dutch law, the prior tempore, potior iure rule makes rights that are registered earlier in time have priority over rights registered later. In the Dutch Civil Code, a change in priority ranking (rangwisseling) is possible if at least one of the rights is a mortgage right. According to Article 3:262 of the Dutch Civil Code, a change in priority ranking can occur among mortgages on the same property (section 1), as well as between mortgages and other rights in rem (section 2). This change is formalized through the registration of a notarial deed in the Dutch land registry. The deed must explicitly state that the party holding the initially established right consents to its subordination.


The Dutch Supreme Court ruled on 9 April 2021 that it is consistent with the system of the law and aligns with the cases regulated in the law that a change in priority ranking is also possible concerning the right of pledge and that Article 3:262 of the Dutch Civil Code is suitable for analogous application to rights of pledge (HR 21 April 2021, ECLI:NL:HR:2021:524). In line of this ruling, it is also argued in the literature that priority ranking change of other rights in rem (such as leasehold rights and rights of superficies) should be possible.


Besides the argument of further analogous application of Article 3:262 of the Dutch Civil Code, it is often argued that there is a practical need for priority ranking change between two rights in rem. This practical need is evident in sustainability projects (such as PV projects) where there is a need to establish a right of superficies on leased land to prevent the leaseholder neglecting the rights of the superficiary. In practice, various methods have already been developed to achieve the same effect, allowing rights of superficies to coexist alongside leasehold rights.


One of the alternatives is an obligatory agreement between the PV operator and the leaseholder, allowing the PV operator to establish and maintain a PV project on the leasehold land. However, since this lacks a proprietary effect, it serves as a suitable alternative only in cases where there is the certainty that the leaseholder will not default (e.g. by going bankrupt), such as where the leaseholder is a governmental organization. Therefore, this is only a moderately successful alternative. To achieve a proprietary effect, other routes are possible, depending on the specific circumstances of the case.


The effect of priority ranking change can be achieved by partially waiving the leasehold right (gedeeltelijke afstand doen van het erfpachtrecht). This can be achieved by the execution and registration of a notarial deed in which the content of the leasehold right is amended in such a way that the leasehold right no longer pertains to a specific part of the land (namely, where the PV project is planned). In the same notarial deed, a right of superficies for that particular part can be established in favor of the PV operator. Partially waivement requires cooperation from both the leaseholder and the landowner. Although this is not a priority ranking change as prescribed in Article 3:262 of the Dutch Civil Code, the principle is similar: the leasehold right established earlier steps back to accommodate a later-established right of superficies. Instead of partially waiving the leasehold right, the same effect can be achieved by temporarily suspending (opschorten) the leasehold right to the extent necessary for the existence of the right of superficies.


Another alternative is to establish a right of easement (erfdienstbaarheid), treating the leasehold right as the servient land (dienend erf) and the PV installation as dominant land (heersend erf). This right of easement entails the obligation for the leaseholder to tolerate the presence of the PV installation and the the PV installation is operated at the location (with all accompanying rights for the PV operator, such as, for example, access to the installation for maintenance). Of course, cooperation of all three parties and a notarial deed is required to establish this.


With these examples, we have shown some alternatives for priority ranking change between a right of superficies and a leasehold right. Besides PV projects, these options can also be useful in the structuring of other sustainable projects. The proposed alternatives can achieve the same effect as priority ranking change as prescribed in Article 3:262 of the Dutch Civil Code, ensuring that the leaseholder cannot neglect the right of superficies. Nevertheless, we welcome the suggestion that priority ranking change between rights of superficies and leasehold rights may be possible. However, until clarity is provided regarding the validity of priority ranking change for other rights in rem, other possibilities exist that can be tailored to fit the client’s need. Not only the legal outcome offers the same level of certaintity, the administrative burden of these alternatives would also not differ much from a “real” priority change in rank.


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