Acquisition of ownership title from a non-entitled seller

Czech Republic: Both Civil Code and case law allow for the acquisition of ownership rights from a non-entitled party

Current Czech law, as embodied in the “New Civil Code” (Act No. 89/2012) in force since 1 January 2014, allows for the bona fide acquisition of ownership of real property from a non-owner by a purchaser (provided the legal requirements are met), but previously remained silent on this issue and the courts regularly decided that such acquisition from the non-owner was in fact impossible. Their argument in this respect may essentially be condensed to the proposition that no one can transfer more rights to someone else than they themselves have.

The Constitutional Court attempted to break away from this practice, which caused a rather substantial rift between it and the Supreme Court (whereas the latter endorsed the above-described case law). In the light of this, ruling IV. ÚS 402/15 by the Constitutional Court of 8 June 2015 is of fundamental importance insofar as it states that the acquisition of title to real property recorded in the cadastral register from a non-owner had to be possible even under the laws in force until 31 December 2013, based on the acquirer’s good faith in the public record.

In the explanatory part of its ruling, the Constitutional Court noted that the good faith of the purchaser in the cadastral record enjoys the same legal protection as the property right of the original owner. In such a case, a clash must necessarily occur between two basic rights: the right of the bona fide acquirer on the protection of property within the meaning of Article 1 of Protocol 1 to the European Convention on Human Rights, and the original owner’s ownership within the meaning of Article 11 of the Czech Charter of Fundamental Rights and Freedoms. This conflict, says the Constitutional Court, must be resolved by the general courts in consideration of the fundamental idea of equity and fairness, taking into account both its general implications and the specific circumstances of the individual case. In such cases, the assessment of good faith on the part of the acquirer is of supreme importance, and a court that fails to engage in such an assessment violates the right to a fair trial of the acquirer (who is potentially in good faith) within the meaning of Article 36 (1) of the Charter of Fundamental Rights and Freedoms.

Within the context of its ruling, the Constitutional Court made it clear that the general courts are no longer allowed to dissent from the legal opinion of the Constitutional Court in substantiated exceptional cases if the Constitutional Court expressly repudiated the proposed alternative view, because enforceable ruling by the Constitutional Court are binding for all entities, authorities and persons pursuant to Article 89 (2) of the Constitution. This principle of precedent, which applies to rulings of the Constitutional Court, also binds the Supreme Court which in fact has to abandon its own case law in such a situation, by adopting the legal opinion embodied by the Constitutional Court’s ruling wholesale.

Under the new Civil Code, such legal disputes are a thing of the past: the basic provision of Sec. 1111 of the Civil Code stipulates that anyone who is objectively in good faith regarding the legitimate right of the transferor to transfer to them the ownership title to a thing shall acquire the ownership title and become the new owner as long as they avail of a proper title of acquisition (i.e., as a rule, a purchase agreement). In cases of doubt, proof must be rendered to demonstrate that the transferee, taking into account all circumstances, held the legitimate belief that they were acquiring the thing from the true owner.

By contrast e.g. to German or Austrian law, Czech law allows a similar bona fide acquisition from the non-owner also in the case of things which are entered in a public register – i.e., including real property accounted for in the cadastral record. This is a manifestation of the principle known as “material publicity”, according to which the state of affairs recorded in a public register enjoys priority over the actual legal state of affairs where the two are in conflict. However, unlike the case of acquisition of movable assets, the bona fide acquisition of such property is tied to an additional requirement – namely, the property must have been acquired for consideration. In other words, the title to real estate cannot be acquired from a non-owner by way of a donation. In addition, the Civil Code’s transitional provisions on the process of legal unification of ownership of land and buildings erected on the same (in accordance with the superficies solo cedit doctrine) recognize a special case of acquisition from a non-owner where the purchaser of a land plot acquires also the building on the same (even though it did originally not form a part of the land plot) as long as the purchaser believed in good faith in the unity of land and building. However, in such a case, the previous owner of the building has recourse to the transferor, who must pay compensation in an amount equal to the value of the building.

 

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