The Chamber of Deputies approved a government bill on the land register (Cadastral Act) on 17 May 2013, which, if approved by the Senate and signed by the President, should come into effect on 1 January 2014.

In conjunction with the New Civil Code, the new Cadastral Act brings significant changes in relation to the land register, the most important of which are described below.

Principle of material publicity

One of the most significant changes brought by the new legislation is the reinforcement of the principle of material publicity (principle of confidence). According to current legislation and case law, if an entry in the land register does not correspond to the real situation, this situation takes precedence over the given entry. The new bill completely reverses this principle. Let’s demonstrate the difference in the following example.

A buyer purchases a property from a vendor who is entered in the land register as the owner of that property. However, the real situation does not correspond to this entry, as the registered owner – vendor had previously sold the property to another party.

Under current legislation, the sales contract would be invalid as the vendor was not the owner of the property at the time of the sale and was therefore not authorised to dispose of this property. The buyer would therefore not have acquired ownership of the property and would only be entitled to compensation of any damages resulting from the invalidity of the contract.

Under the new legislation, the situation is exactly the reverse. If the buyer purchased the property in good faith in the entry in the land register (i.e. did not know that the vendor had already sold the property), the sales contract would be valid and the buyer would become the owner of the property.

Application for registration

The above principle of material publicity is related to the manner in which registration proceedings are commenced, which will only be possible on the basis of an application. In terms of entry in the land register, it will apply that the rights of the party submitting an application first will be registered.

Buyers will thus be motivated to submit timely applications, thereby eliminating the possibility that the property will be sold to someone else. The party who submits an application faster will be registered as the owner of the property. The party whose application is submitted subsequently will not be registered as the owner and will only be entitled to compensation for damages against the owner, however he will not able to claim the purchased property.

Notification of registration (entry)

The cadastral office will notify all participants of registration proceedings of the entry of ownership in the land register. If a participant of proceedings is represented on the basis of a power of attorney, notification under the new legislation will be sent to not only the representative, but also to the represented participant. This is to prevent fraudulent transfers of properties carried out on the basis of falsified powers of attorney.

Dispute note

In the event of an entry in the land register, anyone who claims to have been affected in their rights by this entry without legal basis (e.g. the real owner of the property, in case of ownership rights entered on the basis of a falsified contract) has the right to request the relevant cadastral office to enter a so-called dispute note in the land register. The contested right must be exercised in the form of complaint submitted to the court within no more than two months of requesting entry of the note, otherwise the cadastral office will delete the dispute note.

The recorded dispute note then precludes the good faith of any other potential buyers of the property, so that if the false owner were to transfer the property to another party, this transfer would be invalid.

If the motion for the entry of a dispute note is made within one month of the day the petitioner learned of the entry (usually within one month of receiving notice of the entry having been made), or within three years of the entry being made if the petitioner had not been duly informed of the entry, the dispute note is effective against the party in whose favour the disputed entry was made and all other persons who achieve later entries in the land register on this basis. Thus, in this case, the dispute note can act retrospectively, in extreme cases by up to three years.

However, if the original owner does not submit a motion for the entry of a dispute note in the period indicated above and the false owner transfers the property to a third party in the meantime, this party becomes the legitimate owner of the property. The original owner can only seek compensation for damages against the party who unlawfully sold his property.

Conclusion

The new Cadastral Act reinforces the principle of material publicity (principle of confidence), thereby protecting property buyers who act in good faith in the entry in the land register. If the buyer acts in good faith in the entry in the land register, he does not have to worry that the vendor is not authorised to sell the property and that the sales contract will be invalid.

This principle will thereby force property buyers to show greater responsibility, given that the buyer who applies for registration of their ownership in the land register first will be entered as the owner of the property by the cadastral office. By delaying with the submission of an application for registration, buyers face the risk that the property will be transferred to another party who submits an application first and is therefore entered in the land register as the owner of the given property.

Owners are protected against the abuse of the principle of material publicity by notification of the commencement of registration proceedings and the execution of an entry in the land register. By requesting the entry of a dispute note, owners can then seek protection against unlawfully made entries, even retroactively.

Each property owner should therefore verify that they are still entered in the land register as the owner of their property at least once every three years. This will ensure that in the event of an unlawful transfer, of which the owner was not informed, the three year statute of limitations for the entry of a dispute note with retroactive effect is preserved.