According to HUGO.legal lawyers, there has been an increase in cases where people wish to withdraw from a gift agreement. The desire to cancel the gift agreement often arises from the fact that the recipient of the gift behaves poorly towards the donor or has failed to fulfill the obligations agreed upon in the gift agreement. Since withdrawing from a gift agreement is a complex and time-consuming process, HUGO.legal lawyers recommend preferring a will over a gift agreement.
A gift agreement is generally made for the transfer of real estate, either within a family or to acquaintances, with the donor retaining the right to personally use the gifted object until the end of their life, but only if this is explicitly stated in the gift agreement. Recently, gift agreements have started to include maintenance obligations, meaning the recipient of the gift has certain responsibilities towards the donor, such as buying food, covering medical expenses, and providing transportation for the donor.
According to HUGO.legal lawyer Kristel Kangilaski, the Law of Obligations provides the possibility to withdraw from a gift agreement under certain conditions, but in practice, withdrawing from a gift agreement is very difficult. “Human relationships become more complicated the larger the amount of money or property at stake. In the case of a gift agreement, it is generally assumed that the recipient of the gift will take care of the donor and that the relationship will remain good. Unfortunately, as lawyers, we have seen many situations where the relationship between the donor and the recipient of the gift has changed after the gift agreement was made, and with this, the donor has developed a desire to withdraw from the gift agreement. However, once the gift agreement is made and the transfer of ownership is recorded in the land registry, it is very difficult to withdraw from the agreement,” said Kangilaski.
Kangilaski recommends considering making a will instead of a gift agreement because a will can be changed even ten times a day. “A will is essentially very similar to a gift agreement – a person can decide who and under what conditions they leave their property to. The key difference between the two transactions is the possibility of withdrawing from the agreement – it is difficult and expensive to withdraw from a gift agreement, whereas a will can be changed at any time, and this fact should motivate recipients of the will to maintain good relationships and honor the agreements,” added Kangilaski.
Why is it difficult to withdraw from a gift agreement?
The main obstacle is that in order to withdraw from a gift agreement, both material and formal conditions must be met. The formal requirements for withdrawing from a gift agreement include adhering to the deadline for withdrawal and the donor having to submit a formal withdrawal declaration. As for the material condition, there must be a valid reason for withdrawing from the gift agreement. The donor must prove that the conditions for withdrawal have been met, which in practice can be difficult and often impossible.
Under which law and under what conditions can one withdraw from a gift agreement?
If the gift agreement has been fulfilled, according to the Law of Obligations (VÕS) § 268, the donor may withdraw from the agreement and demand the return of the gifted item under the unjust enrichment provisions of VÕS § 267 paragraphs 1–3 in the following cases:
- The recipient of the gift has shown gross ingratitude towards the donor or the donor’s close relative through their actions;
- The donor is unable to fulfill their legal maintenance obligations or maintain themselves reasonably, unless the donor has placed themselves in this situation intentionally or due to gross negligence, or if the recipient pays the necessary maintenance money;
- The recipient unjustifiably fails to fulfill the obligations or conditions related to the gift.
- Additionally, according to VÕS § 270 paragraph 1, the donor can withdraw from the gift agreement within one year from the time they learned or should have learned about their right to withdraw.
Why do people want to change or cancel a gift agreement?
In everyday life, gift agreements are mainly concluded when the subject of the gift agreement is real estate. The most common reason for considering the cancellation of an already signed gift agreement is when the donor feels that the recipient of the gift is behaving poorly or has failed to perform the agreed obligations in the gift agreement. According to VÕS § 268, when the gift agreement has been fulfilled, the donor may withdraw from the agreement and demand the return of the gifted item under the unjust enrichment provisions of VÕS § 267 paragraphs 1–3 in the following cases.
The main reason for withdrawing from the gift agreement is the failure to fulfill the donor’s right to personal use or the maintenance obligation stated in the agreement. Personal use refers to the right stated in the gift agreement for the donor to live in the gifted property (such as an apartment or house) until the end of their life. The maintenance obligation typically refers to the recipient’s duties towards the donor, such as covering expenses related to housing, food, medical treatment, etc.
In practice, withdrawing from a gift agreement is very difficult
The Law of Obligations provides the possibility of withdrawing from a gift agreement under certain conditions, but in practice, withdrawing from a gift agreement is very difficult. The main obstacle is that since it is a withdrawal from a contract, the party withdrawing from the agreement (the donor) must first use the corresponding legal remedies and give the recipient time to correct the breach and fulfill the contract. These actions, which are required by law, are often not performed, and this can lead to the court rejecting the claim.
How often do gift agreement makers want to change or cancel the agreement?
Once a gift agreement is signed and the transfer of ownership is recorded in the land registry, it can no longer be changed. Withdrawals from gift agreements are rare, as awareness of the implications of signing a gift agreement has increased. In this case, it would be good to encourage future potential parties to a gift agreement to consult a lawyer regarding the terms and consequences of the transaction before proceeding.
What is a gift agreement and how is it concluded?
A gift agreement is, according to § 259 of the Law of Obligations, a contract in which one party (the donor) commits to transferring property that belongs to them to another party (the recipient of the gift) for free, making it possible for the ownership to transfer to the recipient, or renouncing a property right in favor of the recipient, or in some other way enriching the recipient. Gifts can be made of both movable property, real estate, or rights, and essentially it is a one-sided transaction. The donor’s declaration of taking on obligations arising from the gift agreement must be in writing unless the law specifies otherwise. In practice, gift agreements are mostly concluded for the transfer of real estate, and in such cases, the gift agreement must be notarized.
