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When buying real estate can you rely on the record of ownership rights in the Land Register or do you also have to review the acquisition titles of previous owners (purchase agreement, etc.)?
Two contradictory principles are applied when acquiring ownership rights to real estate recorded in the Land Register. The first is the principle of protection of ownership rights (belonging to the owner who rightfully acquired the ownership rights earlier and has not lost them yet). Pursuant to this principle, the ownership rights cannot be transferred in violation of the law only because a third party was incorrectly recorded as the owner in the Land Register, for example based on an invalid purchase agreement. The second principle is of legal certainty and protection of good faith of the buyer who acquires ownership rights from the person recorded in the Land Register as an owner. These contradictory principles may conflict in practice, making it necessary to choose which one is preferred.
This conflict is regulated by Section 984 (1) of the Civil Code, which sets the conditions under which protection is provided to the acquirer acting in good faith. According to this provision, if the state registered in a public register is not in accordance with the actual legal state, the registered state is in favour of the person who has acquired the ownership right for consideration in good faith from the person authorised thereto according to the registered state. Therefore, if the buyer acquires the real estate for consideration and in good faith, they become the owner, regardless of whether they acquire the ownership right from the real owner or not.
An owner who was not properly recorded in the Land Register (but should be), can challenge this. Section 986 of the Civil Code gives them the right to demand the erasure of an incorrect entry in the Land Register. If the not registered owner does so within a month from the day they learned of the incorrect entry or at most within three years from the execution of the incorrect entry, they can enforce the erasure of such an entry with effectiveness towards everyone, i.e. all other persons that acquired the real estate after the incorrect entry. Should this period pass, demanding the erasure of the incorrect entry is possible only towards persons who acted in bad faith.
In the case law regarding good faith, we can encounter cases where the legally established option of a contractual party to rely on the entry in the public register was overruled by additional findings of new circumstances related to the conclusion of a contract, resulting in its invalidity. It must also be noted that the currently valid Civil Code is relatively new (effective since 2014) and case law related to the above-mentioned provisions is not yet available.
Therefore, to eliminate possible risks related to relying on the entry in the Land Register, it is recommended to review all acquisition titles to the real estate covering the last 10 years. If this review does not reveal any discrepancies, it is safe to conclude that the owner recorded in the Land Register acquired the ownership right by prescription (subject to fulfilment of statutory conditions) and it is no longer necessary to rely on the entry in the Land Register.
authors: Viktor Pakosta, Jáchym Bém
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Attorney at Law