April 23, 2010 / Ruben Roes
Since the Supreme Court’s decision that a cable network can be considered immovable property, the Dutch registrars have had to take measures to enable this property to be registered. This article describes the ways in which registration has been made possible and the facets that played a role in this process.
People had long pondered the issue of whether a cable network, such as for telecommunication, electricity or gas distribution, should be classified as immovable or movable property. The answer to this question was primarily of fiscal importance. If a cable network was considered immovable property, a transfer tax would apply in the event of transfer of the property. And just how could this type of network be properly registered? On 1 November 2000, Chief Registrar Wim Louwman wrote in a legal journal that registration in the automated Dutch registry was definitely possible. On 6 February 2003, the Supreme Court, the highest authority in the Dutch judicial system, cut the proverbial Gordian knot: referring to the Chief Registrar’s article, the Supreme Court decided that a cable network – which after all is intended to remain in place for the long term – must be considered immovable property. The decision would have serious implications that went beyond the fiscal practice alone. Utility company financiers were also somewhat alarmed by the decision, because, at a stroke, a right of pledge established in the past was suddenly worthless, namely because, under Dutch law, a right of pledge can only apply to movable property and not to immovable property. Only a right of mortgage on the cable network could offer the financier sufficient certainty.
In the years following the decision, utility companies called the Supreme Court’s decision into question, and voiced their fears of administrative chaos. However, their arguments were not met with success. The legislature decided to codify the Supreme Court’s decision, and on 1 February 2007, the status of a cable network as immovable property that must be registered in Kadaster’s public register was officially laid down in law.
The Supreme Court’s decision, and the subsequent codification in legislation and regulations, created a situation in the Netherlands that was similar to the one in 1832, the year in which Kadaster started registration, before plots existed. It now appears that a large amount of registered property (approximately 1.75 million kilometres of cable networks) is not registered in the public registers or in the cadastral registration.
The importance of cable network registration
Generally speaking, there are two reasons why it is important at this time for utility companies to register cable networks.
The first reason is that the law prescribes formalities for the transfer of immovable property and for establishing real-estate rights. Whereas for movable property the transfer title alone is sufficient to transfer ownership of a movable property, for immovable property, the law requires that there be a notarial deed of transfer, followed by mandatory registration in the public register of Kadaster.
In addition, real-estate rights, such as rights of mortgage, can only be established legitimately if a notarial deed is prepared, followed by a mandatory registration in the public register of Kadaster.
Without registration of a cable network, therefore, a valid transfer of title or establishing real-estate rigths is no longer possible.
In addition to these points, another important reason why it is essential for utility companies to register cable networks is that the rules of protection of third parties also apply to cable networks. The law provided for a transitional period of 3 years (ending on 1 February 2010), during which all cable network owners were given the time to register ownership of their cable network.
Protection of third parties has the consequence that, since 1 February 2010, anyone who purchased a cable network or who obtains a right of mortgage from a registered owner can also be considered the actual owner of the cable network. An owner who has not used that 3-year period to have their cable network registered has waived their rights to the network. The law does have a provision for disputing the ownership of an owner. In that case, a claim of ownership can be registered that is also the starting point for a procedure in which the court formally determines ownership. This possibility to register a claim has now been used once, in a situation in which both a municipality and a utility company believed that they were entitled to the ownership of a cable network. The court will have to give a final judgement in this matter.
The procedure for registration of cable networks
The procedure for registering cable networks is carried out in two phases:
- The deposit (3.1)
- The initial registration of the network (3.2)
In this phase, a cadastral designation is requested for the cable network and a drawing is deposited with the registrar.
- a) The request for cadastral designation
To be able to register the cable network first and foremost, cadastral identification must be possible for the object. In other words: a specific designation is required for the cable network.
The cadastral designation of a network consists of the word ‘network’, the name of the region in which the network is located, a section letter for the type of pipeline and a sequence number. The following section letters are used:
Thus, the first telecom network registered in the Rotterdam region was given the cadastral designation: Rotterdam T 1.If a cable network spans several regions, the network will be given multiple cadastral designations, although it is true that only 1 cadastral designation is possible per region. The number of regions depends on the number of databases across which the cadastral designation is subdivided; there are 15 databases in total.For electricity networks, a more specific (cultural) description is added, indicating whether it is a high-, medium- or low-voltage network.The registrar will only give a cadastral designation if the network is an independent functional unit.In order to determine whether this is an initial registration, the applicant requires specific information from the owner. The applicant can have a Kadaster check for this information by asking the registrar to search for any previous registrations.
- b) The drawing
The drawing that must be deposited with the registrar contains a so-called centre line, which is projected on a cadastral map. The centre line is the middle of a piece of ground. The cables or pipes of the network are located above, on or beneath this piece of ground. The cadastral designation of all parcels transected by the centre line must be able to be displayed legibly through enlargement of parts of the network diagram in the public registers. This cadastral parcel designation is required to be displayed in order to ensure that a network registered in the public registers is adequately discernible (this is a legal requirement for a valid transfer laid out in Section 3:84 of the Civil Code) and to make it possible to conduct a conclusive investigation for registered claims. A unique situation can arise when a bailiff wishes to register a claim on a network that is not registered. In that case, it is not very practical to expect that the owner will offer its cooperation to this process and will register the cable network. For that reason, registrars will only accept claims in which the cadastral designation of only one transected parcel is reported. The registrars then officially assign that network a cadastral designation. By comparing all the parcels from a specific interval around the centre line of newly registered networks with the parcel indicated in the claim, during a later registration, the registrar can ascertain whether it is a new registration or if the network has previously been seized.Once the network drawing is prepared and is deposited with the registrar, the registrar examines whether the drawing fits within the coordinate system of the cadastral map. Furthermore, the registrar checks whether the drawing is in the proper PDF format and, if the network drawing is created by someone other than Kadaster, whether the information of the cadastral map and the creation date are correct.If the drawing satisfies each of these requirements, the registrar will assign a cadastral designation and deposit the network drawing under a unique deposit number.The initial registration of the networkIn this phase, a declaration in regard to the existence of the cable network, along with documents that proof the ownership and the deposited drawing, are registered in the public register of Kadaster.It is also important that Section 5:20 of the Civil Code enacted on 1 February 2007 with respect to the ownership of cable networks specifies that the authorised builder of a cable network or its legal successor is considered to be the owner of the network. A great deal of attention was paid to this aspect, because how exactly do you demonstrate ownership of a network that has already been spread out across thousands of cadastral parcels for several decades? Do you need a separate permit for each individual parcel? Or the contractual permission of the property owner?Or can you simply assume that a limitation period for networks that have been in the same place for more than 20 years has elapsed? This point was considered debatable because, for a lapse of a limitation period, it is necessary for the owner to also have acted as owner for a period of more than 20 years. This was not considered reconcilable with the situation that has been pronounced by the Dutch Supreme Court only since 2003 that the accession rule – wherein the property owner also owns everything in the ground beneath the property – has been overridden.For this reason, the notarial professional group and the registrars pressed the legislature to lay down presumptive evidence in law. To achieve this, a proposal is now pending in the Dutch parliament that is currently awaiting decision. Generally speaking, the bill provides for the following:
- The individual that acted as the owner of the network as of 1 February 2007 can then be registered in the public registers and can transfer and encumber that network with lreal-estate rights.
- After registry in the public registers and publication in the “Staatscourant” (the Government Gazette; the official medium for decisions of the central government), no one may dispute the ownership of the registered owner after a period of 1 year has elapsed, unless that party have submitted a claim in the public register prior to that deadline.
- For a period of 3 months after publication of the registration in the Staatscourant, the cable network cannot be transferred or encumbered with real-estate rights.
- If, after the 3 months have elapsed, a transfer in ownership or encumbrance with real-estate rights occurs, the acquirer will be legally protected; in other words, the acquirer can assume that the registered owner is also the actual owner. However, this is not applicable if a claim has been registered by an individual who disputes the ownership, or if the acquirer had specific knowledge of facts that would indicate that the registered owner was not the actual owner.
The size of the networkThe court has now issued its initial decision on the interpretation of the legislation concerning cable networks. The decision by the District Court of The Hague dated 15 April 2009 related to a dispute before the Court specifically with regard to the size of the cable network. A municipality had installed a portion of a sewer system beneath a project developer’s land. According to the municipality, the project developer was the contractor and thus would have formally qualified as the authorised builder. The project developer disputed that assertion and indicated that the sewer system did not qualify as an independent functional unit. Rather, the sewer system was part of the main network of which the municipality itself was the owner and therefore by accession would become owner of the subnetwork. Now, neither the municipality nor the project developer (or the project developer’s legal successor) wished to be considered the network’s owner. The reason for their reticence was undoubtedly the high maintenance costs that would be charged to the network’s owner.Ultimately, the court decided that the question of where the boundary lies between two subnetworks would have to be resolved based on public opinion. In that way both social aspects, such as reasonably discernable separation, and technical aspects, such as whether the connection between the two subnetworks can reasonably be made, can play a role. In the case at hand, the border between the two sewer systems was not marked by connection points or unblocking units. There was also no connection ordinance from the municipality, which is an ordinance with which the rules are drawn up on where a municipal sewer system ends and a home connection begins. This led the district court to conclude that this was one and the same network, as a result of which the owner of the main network (the municipality) by accession had become the owner of all parts of the main network, including the portion that had been installed in the project developer’s land.Issuing of informationFor the sake of public order and security, the cadastral map with up-to-date parcel numbers does not indicate networks. In the Dutch system, anyone can inspect the cadastral registration; that party need not demonstrate a specific interest in the network. In this type of system, if the exact position of the network were to be made public, this could make the cable network easy prey to individuals with malicious intentions. This would make the network, which in many instances has an essential function in the energy supply, more vulnerable to sabotage or even complete destruction. The risk involved is simply too high.However, a copy of a deed registered in the public registers can be obtained, including registered network drawings as attachments. The copy will not be provided in the same format that is required for registration, which, when enlarged, shows the precise location of the network. Like the copies of the registered deeds, copies of these attachments themselves will be provided as a so-called grid file. Because this type of file can only be slightly enlarged, the parcels that are crossed by the network cannot be discerned.New aspectsIncreasing numbers of utility companies have now switched to registering cable networks. As of 1 April 2010, a total of 200 cable networks were registered with Kadaster. The largest cable network registered to date (late December 2009) had a combined length of 34,000 km! If the parliament decides to pass the bill by which ownership of the network on 1 February 2007 demonstrates presumptive evidence of ownership, it is expected that registrations will start to raise.Regardless, the simple decision that a cable network is immovable property, has added a number of entirely new aspects to the day-to-day work of Dutch registrars. After all, 10 years ago, who would have thought:
- that in 2010, we could designate objects on various levels: the cadastral parcels that underlie the cadastral map with their location at ground level on the one hand, and drawings of cable networks that are located underground and aboveground and that are associated with deeds that are registered in the public register on the other hand.
- that in 2010, we could reach the conclusion that more than one million kilometres of cadastral objects are unregistered?
- that a country totalling 41,500 square kilometres in area can contain a cadastral object with a total length (almost) equal to the equator?!