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Can we trust the information disclosed in the land and mortgage registers?

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by ​Paweł Szpot

23 February 2023


The answer is yes, but with some reservations. 

The vast majority of the information disclosed in the land and mortgage register files is accurate. There are exceptions, though. What makes such cases worse is that you may often be unable to spot inconsistencies based alone on the information disclosed in the online land and mortgage register (be it the current or the full content of an entry). Reading the (paper) documentation deposited in the files of the relevant land and mortgage register (or even multiple registers – when the legal status of the real property of interest has been subject to significant changes, including divisions) will not allow us to identify inconsistencies, either. 

Where do errors in land and mortgage registers come from?


Most frequently, inconsistencies result from failure to report and disclose up-to-date information or are caused by an error made during the legal transaction underlying the inaccurate entries. Errors or irregularities may arise because the transaction actually has implications different to those intended by the parties and other than those disclosed in the land and mortgage register, or even because it is invalid and causes no effects at all.

Deletion of an entry of an expired easement – an example


Our lawyers of the Litigation and Dispute Resolution Team have often supplemented or amended the data disclosed in land and mortgage registers because the consecutive property successors failed to apply for relevant entry updates or the interested parties failed to request the deletion of entries relating to expired rights, such as easements or mortgage. It is clear that a review of the actual facts and circumstances before a planned transaction has a significant impact on the client's ability to make the right decision. 
An interesting example is a case of a planned purchase of a real property which – according to the land and mortgage register – was encumbered with the right of way allowing each of the owners of the neighbouring plots to cross the property.

The client's investment project could not have been implemented if that easement had still been in force. Our lawyers took steps, such as an on-site check, review of the entries in the land and mortgage register and a legal review of the facts, and established that after ten years of not being exercised that easement had, in fact, expired by operation of law – in accordance with Article 293 of the Polish Civil Code.
So the client purchased the real property and filed an appropriate action against the easement holders. Our lawyers had the outdated entry deleted and the client could freely pursue his project. 

Similarly, we have led to the deletion of a number of other outdated entries, e.g. about a mortgage established in favour of the Social Insurance Institution (ZUS), a state authority. It should be borne in mind that debtors (property owners) may intentionally leave outdated entries on encumbrances in the land and mortgage register, as such entries discourage creditors from pursuing enforcement against such real property – the disclosed number and amount of encumbrances may suggest that enforcement against the real property will not satisfy the claim.

No relevant consent and defective declarations of intent


In addition to the failure to update entries, inconsistencies in the land and mortgage registers are most often caused by:

  • failure to obtain the relevant approvals for the transaction underlying the entry, including corporate approvals or the spouse’s consent (the transaction is carried out by only one of the spouses while the property is in fact part of the spouses' joint property);
  • defects in declarations of intent. 

The consequences of such inconsistencies are usually very serious. They often make the transaction null and void. 

In many cases, the principle of public credibility of land and mortgage registers comes to aid. It says that discrepancies between the legal status of a real property disclosed in the land and mortgage register and its actual legal status are resolved in favour of the person who acquires the ownership or another property right in a legal transaction with a person who according to the register entry is entitled to conclude it. Therefore, valid will be the acquisition of real property from a person who at the date of signing the notarial act of sale or donation is disclosed as owner in the land and mortgage register. However, this principle is subject to restrictions regarding both the transaction and its parties.
The public credibility principle does not protect those who:

  • acted in bad faith – i.e. those who knew of the inconsistency of the entry in the land and mortgage register with the actual legal status or those who could easily find out about it;
  • acquired the item free of charge, e.g. under a donation agreement;
  • acquired a real property for which no land and mortgage register was maintained.

In our law firm, we handle cases of clients who having trusted the land and mortgage register entries and often the declarations of the contracting parties themselves, concluded transactions with an entity disclosed in the land and mortgage register as the holder of the legal interest in the real property, and then found out that that entity had either only a part of (a share in) that legal interest (usually ownership) or no interest at all. If detected, such circumstances are a sound basis for invalidating the transaction.

Examples 


Recently, our lawyers represented a client in a case in which the opponents, a married couple who were the sellers, claimed that a preliminary property sale agreement with the client was invalid because it was concluded by only one of the spouses, while in fact the real property had become the joint property of both spouses over ten years earlier without the knowledge and intention of the sellers. Obviously, also without the client's knowledge, as the land and mortgage register showed only one real property owner throughout that period. According to the opponents, as the preliminary agreement was invalid the client could not conclude the final agreement. 

In another case, we represented an official receiver who was asked to rectify an entry in the land and mortgage register according to which the bankrupt was the owner. In the lawsuit, the bankrupt claimed that the transaction which would make him the owner of the real property was invalid as it was a sham transaction as defined in Article 83 of the Polish Civil Code. The claimant's intention was to have the ownership of the real property returned to the previous owner and thus excluded from the bankruptcy estate; this would have prevented it from being sold and used to pay the bankrupt's debts in the bankruptcy proceedings.

In both cases, we obtained rulings favourable to the clients, confirming that the concluded agreements were valid. The list of claims and allegations, in each case adapted to the circumstances of the particular case, included, among others: invoking the protection provided by the provisions on the public credibility of land and mortgage registers, a meticulous review of the contested agreement indicating its nature and qualification, or defining who and what actually required the consents to effect the transaction in question. The rulings allowed the clients to take further legal steps to pursue their economic interests and ensure that the other parties performed their obligations.

Recommendations


Given the number of facts and the complexity of potential legal issues that should be considered prior to concluding a real property transaction, we recommend the following steps in order to either avoid disputes or be on the winning side should a dispute arise:

  • verify thoroughly the documents in the land and mortgage register file maintained for the real property of interest and, as the case may be, documents on file in other registers; in the case of transactions of significant value, it is a standard practice to carry out a comprehensive due diligence review, which allows you to identify irregularities and appropriately mitigate potential risks before the transaction is finalised, and also protects the client by appropriate structuring of the legal relationship;
  • obtain, still before the transaction is finalised, information and documents necessary to remove potential doubts as to the legal status of the real property, as well as carry out steps necessary to ensure that the land and mortgage register entry regarding a real property is consistent with the property's actual legal status – this includes, as the case may be, rectifying the entries in the land and mortgage registers or performing actions (most often before a notary) that may underlie a true and accurate entry;
  • if there is a risk of a dispute over the compliance of the legal status disclosed in the land and mortgage registers with the actual legal status, it is reasonable to seek professional legal assistance, which will provide reliable assessment of the validity of the arguments presented by the parties to the dispute, taking steps to resolve the case amicably and out of court and mount effective defence in court proceedings. 


Do you have questions about buying or selling real property and land and mortgage registers? You are welcome to contact our experts.

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Paweł Szpot

Attorney at law (Poland)

Senior Associate

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Anna Smagowicz-Tokarz

Attorney at law (Poland)

Associate Partner

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