Commentary to the articles of Paragraph 1 of the General Provisions of Chapter 27 Rent and lifelong maintenance with dependents of the Civil Code of the Republic of Kazakhstan

The obligation of rent is widely known to the law of countries with market economies. However, before the republic's transition to a market economy, such an obligation was not provided for in the legislation of Kazakhstan, as there were no necessary economic conditions for it in the USSR. However, as a rudimentary obligation of rent, the norms of which were developed in Chapter 28 of the Civil Code, we can consider the chapter on the alienation of a house with the condition of lifelong maintenance in the Civil Code of the Kazakh SSR.  

The separation of rent in the system of norms of the Civil Code is due to the specifics of this obligation as a regulator of a special sphere of property relations.  

The commented chapter consists of 4 paragraphs. Paragraph I contains general provisions on rent, paragraph 2 is devoted to permanent rent, paragraph 3 is devoted to lifetime rent and paragraph 4 is devoted to lifelong maintenance with a dependent.  

Chapter 28 thus regulates two main types of rent: permanent and lifelong. In turn, in the lifetime annuity, lifelong maintenance with a dependent is allocated as a special type. Although chapter 28 is titled "Rent and lifelong maintenance with a dependent," and thus the obligations of rent and lifelong maintenance with a dependent seem to be considered as independent types of obligations, lifelong maintenance with a dependent is a type of annuity obligation, or more precisely, a type of lifetime annuity obligation. This conclusion follows directly from paragraph 2 of art. 517 of the Civil Code, which states that a lifetime annuity can be established on the basis of lifelong maintenance with a dependent.

Paragraph 1 of Chapter 28 contains general provisions relating to all types of rent. This paragraph begins with the definition of an annuity agreement (paragraph 1 of Article 517), but does not contain a definition of an annuity obligation, which is typical for other chapters of the Special Part of the Civil Code devoted to certain types of obligations. In these chapters, as in the commented chapter, the definition of the relevant contract is usually given, but not the obligation, and therefore the concepts of obligation have to be derived from the corresponding legal definition of the contract.  

Meanwhile, the contract and the obligation under the Civil Code are not unambiguous concepts. By virtue of clause I of Article 378 of the Civil Code, only an agreement on the establishment, modification or termination of civil rights, including binding ones, is recognized as a contract. In other words, the contract is considered by the Civil Code as a legal fact, a type of transaction, but not as a legal relationship, which is an obligation. A contract is one of the grounds for obligations, and Article 268 of the Civil Code gives an independent definition of an obligation that differs from the definition of a contract. At the same time, the emphasis in defining the obligation is on the obligations of the parties, and not on the rights, as is done in the legal definition of the contract, although in every obligation the obligations of one party correspond to the rights of the other.  

Based on the general definition of an obligation in Article 268 of the Civil Code and the legal definition of an annuity agreement given in paragraph 1 of Article 517 of the Civil Code, it is possible to characterize an annuity obligation as such an obligation under which one of its parties, called the recipient of the annuity, transfers certain property to the other party, called the payer of the rent, and the payer of the rent undertakes to In exchange for the received property, it is necessary to pay rent to the recipient of the rent in the form of a certain amount of money or (and) provide funds for its maintenance in another form.  

It is not difficult to notice the similarity of the above definition of obligation with the legal definition of an annuity agreement given in paragraph 1 of Article 517, which is rather formulated according to the formula of obligation given in Article 268 of the Civil Code, rather than according to the formula of the concept of contract given in paragraph 1 of Article 378 of the Civil Code. It is possible that the legal definition of an annuity agreement through the obligations of the parties is due to the fact that in the science of civil law, a contract is often understood not only as a legal fact, one of the grounds for obligations, but also as a contractual legal relationship, one of the types of which is an obligation.  

The only basis for the obligation of rent, which clearly follows from Article 517 of the Civil Code, is a contract.  

Given the length of the term of the annuity obligation and its economic importance to the parties, the law imposes increased requirements on the form of its conclusion. According to Article 518 of the Civil Code, an annuity contract is subject to notarization, and if the recipient of the annuity transfers real estate to the payer for rent payment, then the contract is subject to state registration in addition to notarization.  

The consequences of non-compliance with the mandatory requirement of the law on the form of an annuity agreement are provided for in Articles 154 and 155 of the Civil Code. Failure to comply with the requirements of the law on notarization of an annuity contract entails its invalidity, since a contract requiring notarization by law is considered completed only after such certification. The invalidity of an annuity agreement also entails non-compliance with the requirement for its state registration. Thus, if there is real estate in the property transferred by the recipient of the rent to the payer, then the rent agreement is considered to be completed on the basis of a complex factual composition - notarization of the agreement and its state registration. The absence of at least one of these legal facts entails the invalidity of the rental agreement.  

Invalidation of an annuity contract due to non-compliance with its form entails the consequence provided for in Clause 3 of Article 157 of the Civil Code: each of the parties to the contract is obliged to return to the other party everything received under the contract, and if it is impossible to return in kind, reimburse the cost in money.  

The procedure for notarization of the contract is determined by the law "On Notaries" dated July 14, 1997, and the procedure for state registration is determined by the Decree of the President of the Republic of Kazakhstan, which has the force of the law "On State Registration of Rights to Immovable Property and Transactions with it" dated December 25, 1995.  

The rules of the Civil Code regarding the parties to the annuity obligation have a number of special features. At the same time, the commented chapter does not contain any special rules regarding rent payers. Consequently, they can be both individuals and legal entities, if their legal capacity does not prevent this or there are no special rules for the exercise of their legal capacity. For example, an institution does not have the right, without the consent of the owner, to dispose of the property assigned to it, allocated to it according to estimates. A state-owned enterprise is in a similar position with respect to the property assigned to it (Article 206 of the Civil Code). Consequently, institutions and state-owned enterprises can act as renters only with the consent of the owner of the property assigned to him. Such consent is required for the conclusion of an annuity agreement and for state-owned enterprises that have property under the right of economic management. This is due to the fact that the conclusion of rent contracts goes beyond the scope and objectives of the activities of a state-owned enterprise provided for in art. 18 Decree of the President of the Republic of Kazakhstan, which has the force of law, "On the State Enterprise". In this case, transactions, including contracts, can be carried out by the enterprise, by virtue of paragraph 2 of Article 8 of this Decree, only with the permission of an authorized state body.  

As for the recipients of rent, depending on the type of rent, they can be citizens and non-profit organizations (with permanent rent) or only citizens (with a lifetime annuity, including lifelong maintenance with a dependent). This conclusion follows directly from paragraph 1 of Article 523, paragraph 1 of Article 530 and paragraph 1 of Article 532 of the Civil Code. A non-profit legal entity may be a recipient of a permanent annuity only if this is consistent with the objectives of its activities provided for in the constituent documents.  

Thus, the law restricts the range of legal entities receiving permanent rents, firstly, not including commercial entities, and secondly, non-profit legal entities if the conclusion of an annuity agreement contradicts the objectives of their activities.  

The provisions of the law on the range of legal entities receiving rent are mandatory. Therefore, a permanent annuity agreement in which the recipient of the annuity is a commercial legal entity or even a non-profit organization, if this does not meet the objectives of its activities, is recognized, in accordance with art. 158 of the Civil Code, invalid from the moment of its commission as not complying with the requirements of the law.  

As for citizens who receive an annuity, the law does not establish any special restrictions on their participation in rent agreements as recipients. In particular, they can be both able-bodied and disabled persons, both with and without other sources of income.  

The main obligation of the annuity recipient under the contract is to transfer the property defined by the contract to the annuity payer. As a rule, this property must be transferred to the ownership of the rent payer. This follows directly from the texts of paragraph 1 of art. 517 and paragraph 1 of art. 519 of the Civil Code.  

Any property may be transferred to the ownership of the rent payer under a contract, except for those withdrawn from circulation and limited in circulation (clauses 2 and 3 of art. 116 of the Civil Code). This means that both immovable property, such as buildings, structures, enterprises as objects of rights, and movable property, including money and securities, can be transferred for payment of rent. This applies to both individual items and their complexes, a combination of movable and immovable property. On the contrary, property that can only be owned by the State, such as water and forests, cannot be transferred for payment of rent.  

Special attention should be paid to the possibility of transferring land participants for rent payment. Undoubtedly, privately owned land plots can be transferred for payment of rent, provided that they are located on lands that may be privately owned by the payer of the rent. This is due to the fact that some types of land plots, for example, plots provided for personal farming can only be owned by citizens, but not by legal entities that pay rent (paragraph 1 of Article 33 of the Decree "On Land"). The issue of the possibility of transferring land use rights for rent is more complicated. The fact is that paragraph 1 of Article 517 of the Civil Code clearly provides for the transfer of property to the renter for rent, and not on any other right.  

Therefore, when a land plot is transferred to ownership to an annuity payer, such a transfer fully complies with the norm of paragraph 1 of Article 517 of the Civil Code. The situation is different with the possibility of transferring land use rights to the renter for payment of rent. This right may be excluded from civil circulation or negotiable. Thus, transactions regarding the right of land use on public lands, lands provided for defense needs, specially protected natural territories and land plots are not allowed (paragraph 3 of art. 39 of the Decree of the President of the Republic of Kazakhstan, which has the force of the law "On Land" dated December 22, 1995). State land users are not entitled to alienate and pledge land plots (clause 2, Article 44 of the Decree "On Land"). The right of land use of non-governmental land users is included in the civil turnover. These land users may transfer their rights on the basis of civil law transactions by other persons for a fee or free of charge, to the entire site or part of it (paragraphs 1 and 2 of art. 39 of the Decree "On Land).  

The right of permanent land use by non-governmental land users is a negotiable proprietary right that is close in legal regime to the right of ownership of land. From this it can be concluded that the right of permanent land use by non-governmental land users can be transferred to the rent payer. This conclusion is also supported by the norm of paragraph 1 of Article 520 of the Civil Code, which speaks about the encumbrance of the right to a land plot by rent and, consequently, takes into account the possibility of transferring land use rights in civil circulation to rent.  

Article 519 of the Civil Code provides for the possibility of alienating property for the payment of rent, both for payment and free of charge. This issue is resolved by the parties to the contract upon its conclusion and the corresponding condition is fixed in the contract.  

The law does not provide for obstacles to the transfer of part of the property for a fee, and part for free. The terms and procedure for the transfer of property for the payment of rent are not regulated in detail by the Civil Code. However, it contains a reference rule (paragraph 2 of Article 519 of the Civil Code), according to which, when transferring property for a fee, the rules on the contract of sale (Chapter 25 of the Civil Code) apply to the relations of the parties for its transfer and payment, and when transferring property for free, the rules on the gift agreement (Chapter 27 of the Civil Code), unless otherwise It is not established by the rules of the commented chapter and does not contradict the essence of the agreement. At the same time, the law does not provide for the conclusion of two or even three contracts (rent and purchase and sale and (or) donation), but only the application of the norms of the Civil Code on purchase and sale and donation to a single annuity agreement regarding the transfer of property for rent payment. Therefore, an annuity contract is a single independent contract that generates an independent rent obligation, rather than a set of several contracts that generate several independent obligations. Therefore, when applying the norms of the chapters of the Civil Code on purchase and sale and donation to the transfer of property for rent, one should always take into account, firstly, the compliance of these norms with the norms of Chapter 28, and if they differ, apply the norms of Chapter 28 of the Civil Code on the rent agreement, and, secondly, consider whether the rules of Chapters 25 contradict and 27 CC on the essence of the rent agreement. After all, the acquisition of property by an annuity payer from its recipient for a fee or free of charge is not mediated by purchase and sale or donation agreements, but is carried out under an annuity agreement, which creates the obligation for the payer to pay rent as a counter-payment of rent payments to the recipient of the rent. Therefore, for example, the rules on the form of an annuity agreement apply to the transfer of property under an annuity agreement, and not on the form of purchase and sale or gift agreements.  

As stated in paragraph 1 of Article 519 of the Civil Code, the property for the payment of rent is transferred to the ownership of the payer of rent. The right of permanent land use of a non-governmental land user may also be transferred to him. This means that the right to dispose of the property transferred to the rent payer, including the right to alienate it. However, the alienation by the payer of the rent of the property transferred to him by the recipient of the rent may adversely affect the interests of the recipient. Therefore, the commented chapter provides for a number of legal means to protect the interests of the annuity recipient. These funds vary depending on whether real estate or movable property is transferred for payment of rent.  

With respect to immovable property, in particular, such a guarantee is the rule of art. 520 of the Civil Code on encumbrance by rent of immovable property transferred to the payer of rent under a contract.  

The legal definition of encumbrance of immovable property is given in subparagraph 4 of Article 1 of the Decree of the President of the Republic of Kazakhstan, which has the force of Law, "On State registration of rights to immovable property." By encumbrances, this Decree means restrictions on the rights to immovable property, including the existence of certain rights of third parties to it, and the seizure of property.  

The encumbrance provided for in paragraph 1 of Article 520 of the Civil Code is that upon alienation of immovable property received by the payer of the rent for its payment, the obligations of the payer of the rent are transferred to the acquirer of the property and he thus becomes the payer of the rent. Consequently, the encumbrance in this case consists in the existence of certain rights of the recipient of the annuity to the property transferred for the payment of the annuity.  

The Civil Code says nothing about the consequences of the legal alienation by the rent payer of a part of the immovable property received from the recipient of the rent. It should be recognized that in this case, the obligations of the rent payer are transferred to the rent acquirer in part, in proportion to the value or damage of the property transferred for the payment of rent.  

Speaking about encumbrance of immovable property by rent, it should be borne in mind that by virtue of paragraph 1 of Article 521 of the Civil Code, when transferring rights to a land plot or other immovable property for rent, the recipient of the rent acquires the right to pledge this property. By virtue of Clause 2 of Article 315 of the Civil Code, the pledgor, who in this case acts as the payer of the rent, has the right to alienate the pledged object only with the consent of the pledgee (payer of the rent), unless otherwise provided by legislative acts, contracts or follows from the nature of the pledge.  

Subparagraph 1 of Article 520 of the Civil Code says nothing about the need for consent to the alienation by the payer of the rent of the property received under the rent from its recipient. However, by virtue of Clause 1 of Article 521 of the Civil Code, the recipient of an annuity is the mortgagee of the property transferred to the payer of the rent, and therefore his consent to the alienation by the payer of the rent of immovable property received under the rent is mandatory. Without such consent, the alienation of property itself does not comply with the law. The obligation to pay the rent does not pass to the acquirer of the property, the payer of the rent remains obligated to pay the rent to its recipient. It should also be noted that by virtue of Article 413 of the Civil Code, the seller is obliged to transfer property to the buyer free from any rights of third parties, except in the case when the buyer has agreed to accept property encumbered by the rights of third parties. Therefore, if the buyer did not know and should not have known about the encumbrance of the property he bought, he has the right to demand from the seller a reduction in the purchase price or termination of the contract. If the buyer does not request termination of the contract and the contract is not terminated in accordance with the procedure established by law, the obligations to pay the rent remain with him, even if he did not consent to accept the property burdened with the rights to receive the rent.  

By virtue of Clause 2 of Article 520 of the Civil Code, an annuity payer who has transferred rent-burdened immovable property to the ownership of a third party bears subsidiary liability for the payment of rent in relation to the liability of the acquirer of the property, unless a legislative act or contract provides for joint and several liability under the obligation. Articles 288, 357 and 287 of the Civil Code speak about the concepts and conditions of subsidiary and joint liability.  

The rent payment relationship is usually long-term, and the property for the payment of rent is transferred by the recipient of the rent to its payer even before the start of the payment of rent payments. Therefore, the Civil Code provides for measures to ensure the payment of rent. The forms of security depend on whether immovable or movable property is transferred for payment of rent. When transferring immovable property for payment of rent, the mandatory norm establishes that, in order to secure the obligation, the recipient of the rent acquires the right of pledge (mortgage) on the transferred property even without including the relevant condition in the contract. But art . 521 of the Civil Code contains a provision on ensuring the interests of the annuity recipient and when transferring movable property for rent payment. Paragraph 2 of Article 521 of the Civil Code establishes that when transferring movable property for rent payment, an annuity agreement must provide for the fulfillment of obligations in accordance with Article 292 of the Civil Code or the risk of liability for non-fulfillment or improper fulfillment of the contract must be insured in favor of the recipient of the annuity.  

It should be noted that the condition on ensuring the interests of the annuity recipient when transferring movable property for rent is clause 2 of Article 521 of the Civil Code refers to the essential terms of the contract. According to clause 1 of Article 393 of the Civil Code, a contract is considered concluded when the parties have reached an agreement on all its essential points. Consequently, in the absence of a condition to ensure the performance of the contract, it cannot be considered concluded and generate the rights and obligations of the parties.  

Speaking about the ways to secure the obligation of rent, paragraph 2 of Article 521 of the Civil Code refers to Article 292 of the Civil Code. Paragraph 1 of Article 292 of the Civil Code states that the fulfillment of an obligation may be secured by a penalty, pledge, retention of the debtor's property, surety, guarantee, deposit, and other means provided for by law or contract. The concept of these types of obligation security is given in Chapter 18 of the Civil Code. The choice of types of security for obligations under an annuity agreement is determined by the agreement of the parties to this agreement, taking into account its specifics.  

It should be noted that in Chapter 28 of the Civil Code itself, Article 522 provides for a penalty for late payment of rent in the amount provided for in Article 353 of the Civil Code, unless a different amount of penalty is established by the contract. The amount of the penalty under Article 353 of the Civil Code is calculated based on the official refinancing rate of the National Bank of the Republic of Kazakhstan on the day of fulfillment of the monetary obligation or its corresponding part.  

Another alternative form of payment security is insurance in favor of the annuity recipient of the risk of liability for non-fulfillment or improper fulfillment of obligations to pay rent. This type of insurance refers to voluntary property insurance, in which the policyholder, i.e. the person concluding an insurance contract with the insurer, i.e. the person providing insurance, is the payer of the annuity, and the beneficiary, i.e. the person receiving the insurance indemnity, is the recipient of the annuity.  

Insurance is regulated by Chapter 40 of the Civil Code and the Decree of the President of the Republic of Kazakhstan, which has the force of Law, "On Insurance" dated October 3, 1995. In accordance with paragraph 1 of Article 10 of the said Decree, a commercial organization established to carry out insurance activities and licensed to carry out the relevant type of insurance may act as insurers.  

Since the annuity recipient is interested in the greatest guarantees of his interests, it should be recognized that the annuity contract may provide for a specific insurer and the basic insurance conditions that should be included in the insurance contract, taking into account insurance legislation.

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The commentary was prepared within the framework of the scientific and practical research program of the Scientific Research Center of Private Law of the Kazakh State Law University.  

Head of the working group on the preparation of the draft Civil Code of the Republic of Kazakhstan, Corresponding Member of the Academy of Sciences of the Republic of Kazakhstan, Professor Suleimenov M.K.

Deputy head Professor Basin Yu.G.