Hidden charges and overriding interests

1. Are there any such hidden charges in your system? If so, please list them, and explain how a buyer can discover them. Explain if there is any simple way that the property can be freed from them.

Yes, there can be hidden charges arising from the legal acts or contracts. All immovable are entered in the land register which means that related real rights and notations are also entered in the land register. But there may be some additional restrictions which either cannot be mentioned in the land register or do not have to be mentioned in the land register, and which will continue to burden the property even after it has been sold to a third party acting in good faith who was not aware of them.

Those restrictions may concern:

• Acquisition of immovable property by foreign persons/companies.
• Specific purpose of the immovable property.
• National defence reasons.
• Transfer of obligations and debts.
• Acquisition of immovable property in special areas (such as on the coast or near military-related sites or in national parks, in the mountains, etc.).
• Acquisition of immovable property and listed monuments and memorials.
• Planning activities.
• Land readjustment activities.
• Public rights of way (footpaths, roads etc).
• Contracts etc.

2. Do any of these, or any other similar matters, have priority over a mortgage, where the lender was acting in good faith and was unaware of them? Explain if there is any simple way that the property can be freed from them.

Real rights entered in the land register receive a ranking by entry in the land register. Entries in the land register are made in the order of arrival of applications. Since the real right contract entered into for the establishment of a mortgage has to be notarised, notary who certifies the contract makes all the necessary enquiries to find out hidden charges which may influence the value of the immovable.

If hidden charges base on legal acts, one cannot usually free property from them. These are the restrictions owner has to tolerate and they may influence the value of the property.

When talking about hidden charges, acquisition in good faith is also an important subject. According to the Law of Property Act, if, on the basis of information entered in the land register, a person acquires immovable property ownership or a restricted real right by a transaction, information entered in the land register is deemed to be correct with regard to the person unless an objection is entered in the land register concerning the correctness of information entered in the land register or the acquirer knew or should have known that the information entered in the land register was incorrect.

If the right of a person to dispose of a right entered in the land register is restricted for the benefit of a certain person, the restriction is valid with respect to the acquirer only if it is entered in the land register or if the acquirer is or should be aware of the restriction on transfer. If the making of an entry in the land register is required for the acquisition of immovable property ownership or a restricted real right, the time of submission of the registration application is determinative with respect to the good faith of the acquirer.

Recovery of assets is also something to consider with. In foreclosure proceedings a claimant may file an action against a debtor and counterparty and demand that a court declare the transaction which damages the interests of claimants invalid. A claimant may demand recovery if the claimant has an enforcement instrument and the claim of the claimant has fallen due and making a claim for payment on the assets of a debtor has not brought about satisfaction of the claim of the claimant in full or there is reason to presume that making the claim for payment does not result in the satisfaction of the claim.

If a court revokes a transaction by way of recovery procedure, a counterparty is required to grant the proceeds of the transaction together with the fruits and other gain for the benefit of a claimant to the disposal of the bailiff conducting enforcement proceedings.

The bailiff must organise the distribution of the proceeds between claimants according to the order of filing of claims. A counterparty may demand that a debtor return that which was delivered according to the transaction and, if returning is impossible, compensation for the value of that which was delivered within six months as of the entry into force of the court judgment on the basis of which assets were recovered from the counterparty, but if the counterparty has delivered the assets subject to recovery to the claimant without a court judgment, as of the date of delivery of the assets.

In bankruptcy proceedings the court can revoke transactions which were concluded or other acts which were performed by the debtor before the declaration of bankruptcy and which damage the interests of the creditors. If a transaction subject to recovery is concluded or any other act subject to recovery is performed during the period from the appointment of an interim trustee until declaration of bankruptcy, the transaction or act is deemed to damage the interests of the creditors.

A court shall revoke transactions concluded:

• During the period from the appointment of an interim trustee until declaration of bankruptcy.
• Within one year before the appointment of an interim trustee if the other party knew or should have known that the transaction damages the interests of the creditors.
• If the transaction was concluded within three years before the appointment of an interim trustee and the debtor intentionally damaged the interests of the creditors by the transaction and the other party to the transaction knew or should have known that the debtor damaged the interests of the creditors by the transaction.
• Within five years before the appointment of an interim trustee if the debtor intentionally damaged the interests of the creditors by the transaction and the other party to the transaction was a person connected with the debtor and knew or should have known of the damage.

If a transaction was concluded within six months before the appointment of an interim trustee, the other party to the transaction is presumed to have known that the debtor damaged the interests of the creditors by the transaction. A person connected with a debtor is presumed to know that the debtor intentionally damaged the interests of the creditors by a transaction.

If a court revokes a transaction by way of recovery procedure, the other party is required to return the proceeds of the transaction to the bankruptcy estate together with the fruits and other gain.