Next of Kin

One of the most significant issues pertinent to acquiring a real estate property is Next of Kin issue. To explain the issue precisely we have to go back to April 2005, when the Prime Minister of Egypt had issued a decree, defining foreigners' right on real estate properties within the territory of Sharm el Sheikh as usufruct right.

 

Usufruct, in the briefest definition, is the right to enjoy another landlord's property for a certain period of time, utilizing its benefits as well i.e. rental income. The term usufruct is originally a Roman term that means "Usage of Fruits."

 

Egyptian law has regulated terms of inheritance in case of ancestor's death. Inheritance, however, covers the case of freehold, while usufruct expires upon death of the beneficiary "usufructuary."

 

The aforementioned decree had defined the maximum time limit for usufruct as 99 years, which normally exceeds the time period a purchaser is thought to live after having purchased a property, and subsequently it is thought that the usufruct right shall transfer automatically to the said purchaser's next of kin, but the truth is that the usufruct, according to law, expires upon the usufructuary's death, even if the 99 years were not consumed, provided that the usufructuary was the sole beneficiary in the usufruct contract.

 

This fact made people who are aware of it think of an alternative solution to keep the property for their children and grand children until the 99 years expire, and the idea of articulating a will came to the surface.

 

Wills, however, are not the right solution in this case, since the will system in Egypt is different than the will system in England or other western countries. Egyptian civil law had certain conditions for the will, stating that the beneficiary of a will must not be a natural heir, and consequently children fall out of the beneficiary category in the Egyptian will system. Moreover, a beneficiary in a will cannot be granted more than 1 / 3 of the ancestor's assets.

 

This situation has an easy solution in fact; purchaser's next of kin, whether they were natural heirs or not, shall be mentioned as next of kin within the context of the very usufruct contract. The clause can be articulated as follows:

 

In the event of death of the second party, both parties have agreed that the remaining period of the usufruct right shall be transferred automatically, instantly, and without any additional legal procedures to the following next of kin:

1-

A) Name:
B) Nationality:
C) Passport Number / Social Number:
D) Address:

 

Purchasers who are still in the process of obtaining their contract are strongly encouraged to include this clause in their contracts. The point here is that the next of kin in this case will obtain its right according to the landlord / developer's approval, represented in their signature on the contract, which implies granting the remainder of the usufruct period to the next of kin defined by the original purchaser.

 

In case a person has already purchased a property that does not include this term, it is highly recommended to obtain an addendum to the purchase contract, identifying the next of kin and bearing signatures of the developer and the purchaser. Next of kin can be one person or more, as there is no limit for the next of kin.

 

In the event the next of kin was mentioned as two persons for instance, the right will be distributed on them in equal portions, while in case the purchaser had another wish, portions can be defined accurately in the agreement, since the said agreement is based on private law, and people have the right to agree on whatever they find more convenient.

 

It is also worth mentioning that in most, if not all, of the usufruct contracts, there is an article regulating resale, and fixing a certain sum of funds, or a certain percent of the purchase price, to be settled for the developer in order to issue a new 99 years usufruct contract to the new purchaser. This article can be utilized in favor of the purchaser and its next of kin as well and can be useful in a unique way; the usufructuary, at any point during the 99 years, can settle this amount to the developer, and transfer new 99 years to its next of kin via a new contract issued by the developer in favor of next of kin directly, and in that case the next of kin would be the direct usufructuary, and shall make sure that its next of kin is mentioned in the context of its very contract.

 

Next of kin can also be mentioned in the contract as a joint purchaser, but in that case the next of kin shall be 21 years of age at least, since the Egyptian civil law does not recognize legal actions by people younger than 21 years of age, especially regarding acts that involve purchasing or selling.

 

In the event a purchaser has died, and the usufruct right has transferred automatically to its children who are legally prohibited to act. A senior family member shall represent the kids legally until they reach 21 years of age, and the court must accept this family member as a guardian, and the court's approval will be needed in prior to initiating a resale on the property. Otherwise the court would appoint an official guardian to preserve the kids' rights until they reach 21 years of age.

 

Zeiad Yehia
Solicitor


 

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