Authorization of contracts on transfer of real estate

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As of September 1, 2009 the legal regulation of real estate transfers has been amended, which has significant impact on services provided by advocates in this regard. 

Besides the previously applicable procedure employed by real estate transfers, involving (among other steps) execution of the respective contract between the parties, with official verification of signatures by transferors, and subsequent registration of transfer in the Land Register within 30-day period (or in accelerated procedure for extra fee within 15-day period), now there is also another option, i.e. to have a contract on transfer authorized by licensed advocate. Such authorization results in several benefits for the parties to the contract on transfer, as far as their legal safeguards the procedure of realization of the transfer of ownership are concerned, including different proceedings at the Land Register.  

Authorization of contract by advocate comprises drafting of the contract on transfer of real estate, verification of identity of the parties or persons acting on their behalf, assessment whether the contract complies with the law and good morals, whether it does not evade the law and whether its execution will not cause damage to the parties concerned.  The authorization is exercised by attachment of an authorization clause including the advocate’s stamp. The authorization can only be made by advocate personally and only in the document prepared by the respective advocate involved.  

Compared with the regular procedure concerning real estate transfer, employing the authorization of contract on transfer brings about the following significant consequences for the advocate’s client being a party to such contract (either as a transferor pr acquirer of real estate):

  • advocate verifies the identity of all contractual parties and their representatives, by all available means so that full certainty is established in this respect and any potential frauds by unauthorized persons in connection with real estate transfers;
  • based upon the aforementioned obligation to verify identity, advocate bears a strict liability for damages – unless he/she is assured about the parties’ identity, advocate shall refuse to authorize the contract, otherwise he/she shall not be able to avoid liability for damages if any damage is incurred by either of the parties, not only by his/her client, due to misuse of identity – this shall not apply if it is proved that the injured party has had the knowledge of the circumstances which led to the damage being; in relation to his/her client directly, advocate bears also general liability in regular wider scope – i.e. also for any other damage caused by advocate when providing legal services);
  • the liability for damages is covered by the respective mandatory liability insurance of advocate; in this regard advocate shall inform the contractual parties about the amount of insurance coverage and the insurance company involved; 
  • advocate shall also notify the contractual parties of the payment conditions stipulated in the contract and to include in the contract the parties’ representations that they have been acquainted with the payment conditions;
  • authorized contract does not require to have the official verification of parties’ signatures attached thereto; 
  • more simple proceedings at the Land Register: legal aspects of the authorized contract shall not be examined, subject to assessment and verification is only its compliance with Land Register data and fulfillment of procedure rules - thereupon the registration shall be allowed (within max. 20-day period, compared to regular 30-day period), whereby only the basic registration fee amounting to EUR 66 shall be paid, compared to extra fee EUR 265.50 for accelerated procedure with 15-day period.  

It is necessary to emphasize that the existing procedure without using the authorization of contract by advocate remains applicable. It includes official verification of the transferors’ and more comprehensive examination of documents at the Land Register, with the respective registration fees paid in this regard. 

Besides the newly introduced authorization of real estate transfer contracts, we would also like to point out to some additional current changes of legal regulation of the proceedings at the Land Register:  

  • Only one type of the certificate of ownership shall be issued – usable for legal acts (EUR 8 fee). 
  • Upon allowing the registration, the respective decision on registration as a separate documents shall be issued (not by marking the contract directly), which includes the relevant information as set forth by the law; its copy shall be sent to the parties of the proceeding within 15 days from the date of issuance of the decision; the decision comes into legal force as of the date of issuance thereof.