Czech Republic: Acquisition of Real Estate from Non-Owners

Protection of ownership or protection of good faith?

When acquiring ownership to real estate registered in the land registry, two legal principles apply: (i) the principle of protection of ownership and (ii) the principle of legal certainty and the protection of good faith. Yet, in certain cases, the application of one of these principles leads to the exclusion of the other. In such cases, the question arises as to which of these principles has priority, the ownership right of the real owner or the protection of the legal certainty of a third person acquiring from a non-owner in good faith?

It is the principle of material publicity of public registries under which the conflict between these two principles is resolved. By introducing the principle of material publicity, the legislator opts in favour of the protection of legal certainty by allowing for the acquisition of real estate by third parties from non-owners. The legislator thereby weakens the protection of the real owner and forces him to closely follow entries into the land registry regarding his ownership rights. Failure to do so may result in loss of ownership.

The principle of material publicity does not apply to every situation in which ownership is being transferred from a non-owner to a third person. The principle applies only if certain statutory conditions, described below, are met. Furthermore, the legislator gives the real owner various tools to protect himself against the negative consequences that would otherwise arise under the principle of material publicity.

Under what conditions can a third person acquire ownership?

Several conditions must be met for the principle of material publicity to allow the acquisition of real estate from a non-owner.

A third person must acquire the property from the non-owner (i) on the basis of a valid legal act (eg, via a purchase agreement), (ii) for consideration, (iii) in good faith (ie, the acquirer did not know and could not reasonably have known that the non-owner did not own the immovable) and (iv) the non-owner must be registered in the land registry as the owner of the respective real estate.

Finally, there must be a discrepancy between the real legal status of the legal relationship regarding the real estate and the status entered into the land registry. The reasons leading to such a discrepancy may be:

• the initial absence of a legal title on the basis of which the real owner’s ownership right might have been transferred to the non-owner (eg, a forged or invalid purchase agreement on the basis of which the non-owner’s ownership right was entered into the land registry); or
• the initial legal title for transfer of the real owner’s ownership right to the non-owner ceases to exist (eg, the seller withdraws from the purchase agreement).

How can the real owner protect himself against loss of ownership?

To prevent the loss of ownership, the Civil Code grants the real owner different defences he may employ to protect his rights. Subject to certain statutory conditions, the real owner may request the land registry office to enter a note on disputableness (“note”) and claim the removal of the discrepancy as soon as he finds out that somebody else’s ownership right has been entered into the land registry. In certain cases, the real owner may also dispute entries of ownership carried out prior to registration of the note in the land registry. Also, the real owner must lodge an ownership claim with the competent court for his ownership right to be confirmed and then entered into the land registry.

New regulations on cadastral proceedings should benefit real owners’ position

New regulations on cadastral proceedings also aim at the protection of the (registered) owners and the prevention of dispositions of real estate without their knowledge. The competent land registry office must send the registered owner a notification informing him that the legal relationship of the real estate has been affected by a change – at least within one day after receipt of the deed (agreement). If the owner is represented in the cadastral proceedings on the basis of a power of attorney, the owner’s signature on the power of attorney must be verified. The land registry office may perform the entry of ownership of a new acquirer no sooner than 20 days after sending the notification.

This regulation also delays the transfer of ownership.

Several conditions must be met for the principle of material publicity to allow the acquisition of real estate from a non-owner.

authors: Martin Kubánek, Miroslav Dudek