Commentary to the articles of Paragraph 2 Permanent rent of Chapter 27 Rent and lifelong maintenance with dependents of the Civil Code of the Republic of Kazakhstan

It is devoted to permanent rent (section 2 of the commented chapter). Four groups of norms can be distinguished in this paragraph: on the recipient of permanent rent (art. 523), the form, amount and timing of payment of permanent rent, its redemption (art. 526-528) and the risk of accidental death or accidental damage to property transferred for the payment of permanent rent. Naturally, the general provisions contained in section 1 of the commented chapter also apply to the obligation of permanent rent.  

By virtue of Clause 2 of Article 523 of the Civil Code, the rights of an annuity recipient under a permanent annuity agreement may be transferred to citizens and non-profit organizations if participation in the annuity agreement as its recipient meets the goals of their activities. The procedure and conditions for assignment of a claim are defined in Articles 345-347 of the Civil Code. The order of succession in the reorganization of legal entities is established by art. 46 of the Civil Code, and the order and conditions of inheritance are provided for in Section 6 of the Civil Code "Inheritance Law". The possibility of transfer of the rights of the annuity recipient by way of succession is provided only for permanent annuity, but not for life annuity or lifelong maintenance with a dependent. In the latter two cases, succession after the recipient of the annuity would contradict the essence of the obligation aimed at the lifelong maintenance of the recipient of the annuity.  

As a general rule, clause 1, Article 524 of the Civil Code, permanent rent is paid in money. In accordance with Article 127 of the Civil Code, it must be calculated and paid in the currency of Kazakhstan - tenge. Payment of rent in the currency of foreign countries is possible only in cases permitted by the legislation on currency regulation. An annuity agreement may provide for payment not in money, but by providing the payer of the annuity to its recipient of any things, works or services corresponding in value to the monetary amount of the annuity, the amount of which, according to the payment periods, must be determined by the agreement (para. 2 art. 524 of the Civil Code). A combination of different types of rent payments is also possible by agreement of the parties.  

According to Article 525 of the Civil Code, permanent rent is paid at the end of each calendar quarter. The rule of art. 525 of the Civil Code is dispositive, and the contract may establish other terms of rent. The procedure for calculating deadlines is defined by Chapter 6 of the Civil Code. These rules are important for determining the specific date of payments, and therefore for calculating the amount of liability for late payment of rent provided for in art. 522 of the Civil Code. However, the contract may also specify specific payment dates, for example, until the tenth day of the first month after the quarter for which the payment is made.  

Taking into account the long-term nature of payments under a permanent rent agreement and the possibility of changing the real value of money, paragraph 3 of Article 524 of the Civil Code establishes that the amount of rent paid varies in proportion to the change in the calculated indicator established by legislative acts.  

The size of the calculated indicators for each year is determined by the laws "On the State Budget", adopted annually, and are usually differentiated quarterly.  

The period of payment of permanent rent can be very long. After all, a permanent rent is called permanent because the deadline for its payment is not fixed, but only periodic payment periods are provided. Over time, during the period of payment of the rent, the economic situation of the parties and the possibility of fulfilling the contract by the payer of the rent may change significantly. Therefore, in order to protect the interests of the parties to the rent obligation, the Civil Code provides for the possibility of its termination on the initiative of each of the parties to the obligation. This termination of the obligation may occur by way of annuity redemption (art. 526-528 GK). Annuity redemption is understood as the basis for terminating an obligation by paying an annuity payer a certain amount of money to its recipient. Redemption is a specific basis for termination of an obligation, which is characteristic of the obligation of rent under the legislation of Kazakhstan. 367 of the Civil Code, which lists the grounds for termination of obligations, does not explicitly provide for redemption among such grounds. However, paragraph 3 of Article 367 of the Civil Code establishes a rule according to which legislation and a contract may provide for other grounds for termination of obligations other than those listed in paragraph 1 of this article. Such a basis, in particular, is the purchase of rent provided for by the norms of the commented chapter. Redemption as the basis for termination of obligations is closest to the compensation provided for in art. 369 of the Civil Code. However, compensation under Article 369 of the Civil Code is provided for by agreement of the parties, and the purchase of permanent rent is provided for by mandatory provisions of the law. According to clause 3 of Article 526 of the Civil Code, the condition of the contract on the waiver of the payer of permanent rent from the right to purchase it is invalid.  

A permanent annuity may be redeemed by its payer either at the request of the payer himself (paragraph 1 of Article 527 of the Civil Code) or at the request of the recipient of the annuity (Article 526 of the Civil Code).  

The law does not provide for a period after which, from the moment of conclusion of the contract, the payer, on his own initiative, can redeem the rent. However, the contract may provide in the interests of the annuity recipient that the right to purchase a permanent annuity cannot be exercised during the lifetime of the annuity recipient or for another period not exceeding thirty years from the date of conclusion of the contract.  

Permanent annuity may be repurchased at the request of the annuity recipient in cases provided for by mandatory or dispositive provisions of the law (sub-paragraphs 1-4 of Article 527 of the Civil Code), for example, in case of violation by the rent payer of his obligations to ensure payment of rent, as well as in other cases provided for by the contract (sub-paragraph 4 of Article 527 of the Civil Code).  

Article 528 of the Civil Code regulates the purchase price of an annuity. As a general rule, clause 1 of Article 528 of the Civil Code, the purchase price of a permanent annuity, both when it is repurchased on the initiative of the payer and at the request of the recipient, is determined by the rent agreement. If the condition on the price at which the rent is redeemed is not defined by the contract, it is determined by art. 528 of the Civil Code in different ways, depending on whether the property was transferred to the payer of the rent by its recipient for the payment of rent for a fee or free of charge. If the property was transferred for a fee, then the purchase price is equal to the annual amount of rent payments (Clause 2, Article 528 of the Civil Code). When transferring property for rent payment free of charge, the purchase price is calculated from the annual amount of rent payments and the price of the transferred property.  

The risk of accidental death or accidental damage to property transferred for payment of rent is regulated by art. 529 of the Civil Code.  

As a general rule, paragraph 1 of Article 190 of the Civil Code, the risk of accidental death or accidental damage of alienated items passes to the acquirer simultaneously with the emergence of his ownership rights, unless otherwise established by legislative acts or contracts.  

Article 529 of the Civil Code, by establishing special rules on the risk of accidental death or accidental damage to property transferred to rent, differentiates the rules on such risk depending on whether the property was transferred for free or for a fee. If this property is transferred free of charge, then the risk of its accidental death or damage is borne by the payer of the rent, and despite the death or damage to the property, the obligations of the payer of the rent to its recipient are fully preserved. This does not prevent the annuity from being repurchased on the terms defined by law or contract. In case of accidental loss or damage to property transferred for payment of rent for a fee, the rent payer has the right to demand termination of the obligation in case of loss of all property, and in case of loss of part of the property or damage to it, changes in the terms of payment of rent (Clause 2, Article 529 of the Civil Code).

Lifetime annuity and lifelong maintenance with dependents

Articles 530-539 of the Civil Code are devoted to life annuity and lifelong maintenance with dependents. Life support with a dependent is a type of life annuity. Therefore, the norms of paragraphs 3 (Life annuity) and 4 (Life support with dependents) are close to each other. Moreover, according to clause 2 of Article 535 of the Civil Code, the rules on lifetime annuity apply to a contract of lifelong maintenance with a dependent, unless otherwise provided for in paragraph 4 on lifelong maintenance with a dependent. Naturally, the norms of the first paragraph of Chapter 28 "General provisions" also apply to the two rental relations mentioned above.  

The difference between a lifetime annuity and a lifetime maintenance with a dependent is that a lifetime annuity is a sum of money that is periodically paid to the recipient of the annuity during his lifetime (paragraph 1 of Article 531 of the Civil Code), and with a lifetime maintenance with a dependent, the obligation of the payer of the annuity may include providing housing, food, clothing, care and necessary help. In case of lifelong maintenance with a dependent, an additional payment of certain sums of money is not excluded. At the same time, the monetary value of such content as a whole should be defined in the contract, i.e. the cost of the total amount of maintenance in relation to certain periods of time of payment of rent (paragraph 1 of art. 531 and paragraph 2 of art. 536 of the Civil Code).  

A lifetime annuity and a lifetime maintenance with a dependent can be established both for the period of life of the citizen who transferred the property for rent payment, who in this case acts as the recipient of the annuity, and for the period of life of another citizen indicated by him. In the latter case, three persons are involved in the rent relationship: the person transferring the property for the payment of the rent, the payer of the rent, and a third person as the recipient of the rent (paragraph 1 of Article 530 of the Civil Code).  

It is allowed to establish a lifetime annuity in favor of not one, but several citizens, including the person who transferred the property for the payment of rent, and the citizens indicated by him for the period of each of them 's life.  

In the event that a contract is concluded between a citizen transferring property for the payment of rent and an annuity payer with the condition of payment of rent to a third party or persons for the duration of the latter's life, such a contract within the meaning of art. 530 CC becomes a contract in favor of a third party.  

The relations of the parties under the contract in favor of a third party are defined by art. 391 of the Civil Code. Within the meaning of the norms of this article of the Civil Code, a third party in a life annuity agreement and a life maintenance agreement with a dependent is a citizen (or citizens) for whose benefit and for the period of their life an annuity or maintenance with a dependent is established. From the moment they express their intention to exercise their right to the payer of the rent, this citizen or citizens acquire an independent right to claim against the payer of the rent in the amounts stipulated by the rent agreement. At the same time, the rent payer and the person who transferred the property for rent on the basis of a contract with each other are not entitled to terminate or amend the contract without the consent of a third party. If there are several third parties, then each of them, after expressing their intention to exercise their right, acquires an independent claim to a part of the rent stipulated by the contract.  

In the event that a third party is indicated as a lifetime annuity recipient along with the person who transferred the property for rent payment, there is a lifetime annuity agreement (lifelong maintenance with a dependent), complicated by the right of the third party. In this case, the annuity recipient, as a party to the contract and a third party who has expressed an intention to exercise his right, acquire independent claims to parts of the rent payments stipulated by the contract.  

An annuity agreement in favor of a third party must be concluded in accordance with the requirements of the Civil Code for its form, stipulated by art. 518 of the Civil Code. However, these requirements regarding the form relate only to the contract itself, but not to the form of expression of the intention of a third party to exercise its right. Such an intention can be expressed in any form, in particular, by accepting an annuity payment.  

The shares of several rent recipients are assumed to be equal. But the annuity agreement may determine the size of the shares of each person receiving the rent. At the same time, in the event of the death of one of the several annuity recipients, his share passes to other recipients, unless otherwise provided by the contract (clause 2, art. 530 of the Civil Code).  

The amounts and forms of life annuity and life support with dependents are determined by the contract in accordance with Articles 531, 536 and 537 of the Civil Code. The amounts of money paid under an annuity agreement and the nature and types of in-kind provision under a lifetime maintenance agreement with a dependent are determined by the agreement based on the payment period, namely for a month, unless otherwise provided by the agreements (paragraph 2 of art. 531 of the Civil Code). At the same time, the amount of the lifetime annuity and the cost of in-kind provision per month cannot be less than the calculated indicator. As the value of the calculated indicator increases, the amount of rent payments should increase proportionally.  

The life annuity, unless otherwise stipulated by the contract, must be paid at the end of each calendar month. As for the provision of lifetime maintenance with a dependent under a contract, their terms are determined by the contract and the nature of the provision. Naturally, for example, the care of the annuity recipient and the provision of necessary assistance should be carried out on an ongoing basis, and not at the end of the month. Therefore, in the event of a dispute over the amount of maintenance with a dependent, the court must proceed from the principles of good faith and reasonableness (paragraph 3 of Article 536 of the Civil Code). In this case, the contract may provide for the replacement of the provision of maintenance with a dependent in kind by the payment of periodic payments in money (art. 537 of the Civil Code).  

In order to protect the interests of rent recipients, Article 538 of the Civil Code provides for restrictions on the alienation and use of property transferred to ensure lifelong maintenance with a dependent. This article develops the norms of Article 520 of the Civil Code on encumbrance of immovable property by rent, which refers to contracts of life annuity and lifelong maintenance with a dependent. Although Article 538 is included in the paragraph on life support with a dependent in Chapter 28, it should be recognized, given the proximity of this agreement to the life annuity agreement, that the norms of Article 520 of the Civil Code are applicable to the latter agreement.  

Paragraphs 3 and 4 of Chapter 28, with respect to contracts of life annuity and lifelong maintenance with a dependent, contain special rules on the procedure for terminating these obligations at the initiative of the annuity recipient in the event of a significant breach of the contract by the annuity payer (Articles 535 and 539 of the Civil Code).  

The concept of a material breach of contract is given in subparagraph 2 of paragraph 2 of Article 401 of the Civil Code, which defines the general grounds for amendment and termination of contracts. By significant, this article means violations that cause such damage to the other party that it is largely deprived of what it was entitled to expect when concluding the contract. In a life annuity agreement, this may primarily relate to violations of the terms and amounts of payments stipulated in the agreement, and in relation to the obligation of lifelong maintenance dependent on the value and quality of the property provided by the rent payer, as well as conditional assistance and care.  

In the event of a material breach of the contract by the payer of the rent, the recipient of the rent has the right, at his discretion, to demand either the repayment of the rent or the termination of the contract. At the same time, the procedure for annuity redemption is determined by art. 528 of the Civil Code. Its peculiarity, provided for in paragraph 2 of Article 533 of the Civil Code, is that if an apartment building or other property is transferred for the payment of rent or maintenance with a dependent, the recipient of the rent has the right to demand the return of this property with its value offset against the purchase price of the rent, if, of course, this property has been retained by the payer of the rent. And this may apply primarily to real estate.  

The procedure and consequences of termination of contracts of life annuity and lifelong maintenance with a dependent are not defined in detail by Chapter 28 of the Civil Code. The general procedure provided for in Chapter 24 of the Civil Code applies here. As for the special rules relating to contracts of life annuity and lifelong maintenance with dependents, they are contained respectively in paragraph 2 of art. 533 and paragraph 2 of art.539 of the Civil Code.  

Article 534 of the Civil Code speaks about the risk of accidental death or accidental damage to property transferred to the payer for the payment of a lifetime annuity. But this article also applies to a lifetime maintenance contract with a dependent. The risk of accidental loss or accidental damage to property transferred for payment of rent is borne by its owner, the payer of rent, regardless of whether the property was transferred free of charge or for a fee. Therefore, accidental death or damage to the specified property does not release the payer from the obligation to pay rent on the terms stipulated in the contract.  

The norm of Article 534 of the Civil Code differs from the corresponding norm concerning permanent rent (Article 529 of the Civil Code).

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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.