Although this distinction may matter less if the lease covers an office or other “space,” the distinction could be significant if a lender has ground lease or lease collateral on an outparcel that the lender believes conveys a leasehold estate maintaining certain foreclosure rights. As stated above, the stipulation between the parties in the lease document may not be binding upon the third party, and Georgia courts will view the lease holistically. As an underwriting matter, borrowers and lenders should pay close attention to the value of the collateral described in the lease, and whether foreclosure rights cover a mere usufruct or an estate for years.
Pandemic – The Novel Coronavirus, or COVID-19
An unexplored—but increasingly pressing—concern with the distinction could arise in the event of a statewide pandemic like the novel coronavirus. As discussed above, a usufruct grants a mere right to use, rather than treating the tenant as the owner of the real estate. Therefore, termination of the lease agreement by the tenant for the direct and indirect consequences related to a COVID-type event or modification of the lease could be justified if the lease is a usufruct. Since the usufruct’s primary purpose is frustrated by the pandemic, i.e., the tenant cannot use the premises as leased from the landlord, then it would seem that termination is a viable option.
An estate for years, however, is not afforded the same leeway. Since the grantee is treated as the owner of the premises under the lease, then the grantee does not have the same basis to cry foul and seek lease termination under the Georgia Code and case law.
Conclusion
The consequences distinguishing a usufruct from an estate for years are as apparent as the legal distinction drawn in the Georgia Code. Whether assessing tax liability, or clarifying the rights and duties owed under a lease, the resulting property interests carry inherent significance. As such, it is important to keep the distinction top of mind during real estate lease drafting and negotiations, especially to reduce the uncertainty and unintended consequences that lie in wait.
1 Joseph B. Foltz, Usufructs and Estates for Years Distinguished, 18 GA. ST. B. J. 116 (1982).
2 Georgia remains the only common law jurisdiction in the United States that makes the distinction between the landlord-tenant relationship which is treated as a usufruct and a lease which is treated as an estate for years. Louisiana – with its civil law traditions – is the only other state that recognizes the usufruct concept.
3 Foltz, supra note 1.
4 Chatham Cty. Bd. of Assessors v. Jay Lalaji, Inc., Airport Hotels, No. A20A0867, 2020 WL 5938675, at *1 (Ga. Ct. App. Oct. 7, 2020). The authors would like to thank Mr. W. Brooks Stillwell of Brooks Stillwell, LLC in Savannah, Georgia for bringing this case to our attention.
5Id. at *1.
6Id.
7Id.
8Id. at *4.
9 Foltz, supra note 1; O.C.G.A. §§ 44-6-1–44-6-206 (2020); O.C.G.A. §§ 44-7-1–44-7-119 (2020).
10 O.C.G.A. § 44-7-1(a) (2020).
11 Pinnacle Properties V, LLC v. Mainline Supply of Atlanta, LLC, 319 Ga. App. 94, 96, 735 S.E.2d 166, 169 (2012) (citing Read v. Ga. Power Co., 283 Ga. App. 451, 453, 641 S.E.2d 680 (2007)).
12 O.C.G.A. § 44-6-100(a)–(b) (2020).
13 O.C.G.A. § 44-6-201(a) (2020).
14Pinnacle Properties V, 319 Ga. App. at 96, 735 S.E.2d at 169.
15 Roe v. Doe, 246 Ga. 138, 140, 268 S.E.2d 901, 904 (1980) (quoting Martin v. Heard, 239 Ga. 816, 818, 238 S.E.2d 899, 901 (1977)).
16 State v. Davison, 198 Ga. 27, 37, 31 S.E.2d 225, 230 (1944).
17 Evans Theatre Corp. v. De Give Investment Co., 79 Ga. App. 62, 65–66, 52 S.E.2d 655, 658 (1949).
18 Midtown Chain Hotels Co. v. Bender, 77 Ga. App. 723, 726, 49 S.E.2d 779, 782 (1948).
19 Id.
20 O.C.G.A. § 48-5-3 (2020); Diversified Golf, LLC v. Hart Cty. Bd. of Tax Assessors, 267 Ga. App. 8, 10, 598 S.E.2d 791, 793 (2004).
21 1 GA. Real Estate Law & Procedure § 4:12 (7th ed. 2020 update).
22 Allright Parking of Georgia, Inc., et al. v. Joint City-Cty. Bd. of Tax Assessors for the City of Atlanta Cty. of Fulton et al., 244 Ga. 378, 385, 260 S.E.2d 315, 320 (1979) (citing Delta Air Lines, Inc. v. Coleman, 219 Ga. 12, 131 S.E.2d 768 (1963)); see also Evans Theatre Corp., 79 Ga. App. at 66, 52 S.E.2d at 658 (stating that the “owner of an estate for years is liable for the taxes on the land, whereas a tenant is not, where there is a mere tenancy”).
23 Allright Parking, 244 Ga. at 385, 260 S.E.2d at 320 (citing Whitehead v. Kennedy, 206 Ga. 760, 761, 58 S.E.2d 832, 833 (1950)); see also Diversified Golf, 267 Ga. App. 8, 598 S.E.2d 791 (holding that the lessee took a usufruct under the lease, and thus the property was exempt from ad valorem taxation); see also Macon-Bibb Cty. Bd. of Tax Assessors v. Atlantic Southeast Airlines, 262 Ga. 119, 414 S.E.2d 635 (1992) (supporting the proposition that a usufruct is not considered an interest in land and therefore it is not subject to ad valorem taxation).
24 Id.
25 Pinnacle Properties V, LLC v. Mainline Supply of Atlanta, LLC, 319 Ga. App. 94, 96, 735 S.E.2d 166, 169 (2012).
26 Evans Theatre Corp., 79 Ga. App. at 69, 52 S.E.2d at 660.
27 Jekyll Development Assoc. v. Glynn Cty. Bd. of Tax Assessors, 240 Ga. App. 273, 275, 523 S.E.2d 370, 372 (1999).
28 Id. at 276, 523 S.E.2d at 373.
29 Diversified Golf, LLC v. Hart Cty. Bd. of Tax Assessors, 267 Ga. App. 8, 11, 598 S.E.2d 791, 794 (2004).
30 See, e.g., Allright Parking of Georgia, Inc., et al. v. Joint City- Cty. Bd. of Tax Assessors for the City of Atlanta Cty. of Fulton et al., 244 Ga. 378, 386, 260 S.E.2d 315, 320 (1979) (describing the difficulty associated with administering the Court’s balancing test due to “the fact that various sections of the lease are indicative of the grant of an estate for years, whereas other sections of the lease are characteristic of the grant of a usufruct only”); Ginsberg v. Wade, 95 Ga. App. 475, 478, 97 S.E.2d 915, 917 (1957) (demonstrating that a jury is authorized to find that a landlord-tenant relationship exists, even when considering “the intention of the parties and the severability of the amount of rent to be paid for different years”).
31 Allright Parking, 244 Ga. at 385, 260 S.E.2d at 320.
32 John Taylor, A Loss for the Tax Man: Usufructs in Georgia, Taylor English Duma LLP Blog (Aug. 14, 2018),
33 Roe v. Doe, 246 Ga. 138, 140, 268 S.E.2d 901, 904 (1980).
34 Allright Parking, 244 Ga. 378, 260 S.E.2d 315.
35 Pinnacle Properties V, LLC v. Mainline Supply of Atlanta, LLC, 319 Ga. App. 94, 100, 735 S.E.2d 166, 172 (2012).
36 Allright Parking, 244 Ga. at 381, 260 S.E.2d at 318 (stating that although Section 4a of a parking lot conveyance stated, “[I]t is acknowledged and agreed that, upon execution of this Agreement, Tenant’s interest in the Premises shall be only a usufruct,” third persons not parties to the agreement, such as tax assessors, health officials, subtenants, sublessees, or creditors, are not bound by that stipulation).
37 Macon-Bibb Cty. Bd. of Tax Assessors v. Atlantic Southeast Airlines, 262 Ga. 119, 119–120, 414 S.E.2d 635, 636 (1992).
38 Id. at 120, 414 S.E.2d at 636.
39 O.C.G.A. § 44-7-1(b) (2020).
40 Id.
41 Diversified Golf, LLC v. Hart Cty. Bd. of Tax Assessors, 267 Ga. App. 8, 10, 598 S.E.2d 791, 794 (2004) (citing Macon-Bibb Cty., 262 Ga. 119, 414 S.E.2d 635); see also Ginsberg v. Wade, 95 Ga. App. 475, 478, 97 S.E.2d 915, 917 (1957) (stating that “it is also true that all leases for five years do not necessarily create an estate for years but that there is a presumption that a lease for five years does convey an estate for years”).
42 See, e.g., Hutcheson v. Hodnett, 115 Ga. 990, 42 S.E. 422 (1902) (supporting the proposition that the other provisions of the lease are examined by the Courts to determine if they evidence an intent contrary to the presumption created by the term provision); Warehouses, Inc. v. Wetherbee, 203 Ga. 483, 46 S.E.2d 894 (1948) (stating that an express designation would be controlling if consistent with a presumption of usufruct or estate for years created by other provisions in the agreement); Camp v. Delta Airlines, Inc., 232 Ga. 37, 205 S.E.2d 194 (1974) (discussing the rebuttable presumption that an agreement to lease for more than five years conveys an estate for years).
43 Warehouses, Inc., 203 Ga. at 484, 46 S.E.2d at 896.
44 Id. at 485, 46 S.E.2d at 896.
45 Camp, 232 Ga. at 40, 205 S.E.2d at 196.
46 Diversified Golf, 267 Ga. App. at 10, 598 S.E.2d at 794.
47 Pinnacle Properties V, LLC v. Mainline Supply of Atlanta, LLC, 319 Ga. App. 94, 99, 735 S.E.2d 166, 171 (2012), citing Diversified Golf, 267 Ga. App. 8, 598 S.E.2d 791.
48 City of College Park v. Paradies-Atlanta, LLC, 346 Ga. App. 63, 66, 815 S.E.2d 246, 249 (2018) (citing Richmond Cty. Bd. of Tax Assessors v. Richmond Bonded Warehouse Corp., 173 Ga. App. 278, 325 S.E.2d 891 (1985)) (stating, “To resolve whether the presumption has been overcome in this case, we must examine the terms of the lease agreements and determine what interests the parties intended to convey”).
49 Camp, 232 Ga. 37, 205 S.E.2d 194.
50 Id. at 40, 205 S.E.2d at 196.
51 Id.
52 Jekyll Development Assoc. v. Glynn Cty. Bd. of Tax Assessors, 240 Ga. App. 273, 275, 523 S.E.2d 370, 372 (1999); see also Diversified Golf, 267 Ga. App. at 10–11, 598 S.E.2d at 794 (stating “if the lease imposes sufficient conditions and limitations upon the use of the premises to negate the conveyance of an estate for years the interest passed is reduced to a mere usufruct”).
53 Diversified Golf, 267 Ga. App. at 14, 598 S.E.2d at 796.
54 Id.
55 Id. at 13, 598 S.E.2d at 795.
56 Id. at 13, 598 S.E.2d at 796.
57 Southern Airways Co. v. DeKalb Cty., 216 Ga. 358, 360, 116 S.E.2d 602, 604 (1960).
58 Id. at 365, 116 S.E.2d at 607. The same emphasis on control was evident in Midtown Chain Hotels Co. v. Bender. There, a five-year hotel lease—which met the presumptive period mark—was deemed a usufruct because the landlord maintained the right to enter and retake the premises, limit the premises to hotel use only, prevent assignment or sublease, and prevent any structural repairs by the tenant.
59 Buoy v. Chatham Cty. Bd. of Tax Assessors, 142 Ga. App. 172, 173, 235 S.E.2d 556, 558 (1977) (stating in full that “This lack of dominion or control is what distinguishes this case from Southern Airways”).
60 State v. Davison, 198 Ga. 27, 42, 31 S.E.2d 225, 233 (1944).
61 Order Granting the Operators’ Motion for Summary Judgment at 3, In re Airport Rental Car Facility Tax Appeals, 2016-CV-283425 (Super. Ct. of Fulton Cty. Apr. 19, 2017).
62 Id. at 11.
63 Id. at 16.
64 Final Order, In re Airport Rental Car Facility Tax Appeals, 2016-CV-283425 (Super. Ct. of Fulton Cty. May 30, 2017).
65 Allright Parking of Georgia, Inc., et al. v. Joint City- Cty. Bd. of Tax Assessors for the City of Atlanta Cty. of Fulton et al., 244 Ga. 378, 381, 260 S.E.2d 315, 318 (1979) (stating that third persons not parties to the agreement, such as tax assessors, health officials, subtenants, sublessees, or creditors, are not bound by a stipulation found between the parties of an agreement).