A bill amending the Act on Entries is before the legislature. Under current Czech law, transfers of ownership (and the creation of other rights in rem) of real estate generally must be registered in the Real Estate Cadastre. Registration is a constitutive act which causes the transfer of ownership.
Therefore, ownership in real estate may be transferred only on the basis of a legal title (eg, a purchase contract) followed by registration in the Real Estate Cadastre. As long as a transaction is not registered, the parties to the contract have only a contractual claim for performance against the other party. The process of registering rights in the Real Estate Cadastre is regulated by Act No. 265/1992 Coll., on Entries of Ownership and Other Rights in rem to Real Estate (Act on Entries). Only the limited principle of good faith regarding entries in the Real Estate Cadastre applies under Czech law. In case of a discrepancy between reality and the entry in the Real Estate Cadastre, reality prevails (except for special cases, such as usucaption). Currently, a bill amending the Act on Entries is in the legislative process (the Bill), with anticipated effect from 1 January 2012.
Note of litigiousness
Currently, if an ownership right over real state is challenged by the court, the cadastral office will enter the note about the lawsuit into the Real Estate Cadastre. If new proposals on entering rights in rem are submitted to the cadastral office with respect to this real property, it will generally suspend the proceeding upon entry of the rights until the court proceeding is over.
Now, the cadastral office will enter a so-called “note of litigiousness” on the basis of (i) a notice from a court that proceedings have commenced to determine ownership of the real estate, (ii) invalidity/rescission of a legal act (on the basis of which a right in rem should be registered), or (iii) a motion by the plaintiff. The entry of the note of litigiousness does not generally interrupt the cadastral proceedings and the consequent legal impossibility of the owner of the real property to dispose over it (easements, mortgages, etc.).
If the note is entered after filing an application for registration, the cadastral proceedings will not be interrupted if all parties to the cadastral proceedings agree. This regulation enables the parties to assess the eventual risk and to make the corresponding decisions. Should the cadastral proceedings not be interrupted, the cadastral office reflects the current entries in the Real Estate Cadastre and issues a decision in the cadastral proceedings. If a right in rem is registered and the court decides in the parallel court proceedings contrary to this registration, the cadastral office deletes all entered registrations and announces this fact to all persons whose rights were deleted.
Entry of records into the Real Estate Cadastre
In general, under the current regulation the cadastral office must enter records of rights in rem into the Real Estate Cadastre that were established, for example, by the decisions of the authorities, especially courts. According to the Bill, cadastral offices will now examine not only possible mistakes in the disclosed deed (eg, court decision) but also if the deed corresponds to the current state of the Real Estate Cadastre. Under the current regulation, the cadastral office may have to record ownership rights on the basis of a court decision even if the owner entered in the Real Estate Cadastre was not a party to the court proceedings and therefore does not know the reason for the loss of his ownership right. This procedure will be eliminated by the regulation introduced by the Bill. The new regulation should also eliminate any duplicate entries in the Real Estate Cadastre. Now, a person disclosing a deed that is without mistakes but does not correspond to the current state of the Real Estate Cadastre will have to petition to a court.
Legal remedies in the cadastral proceedings
The Bill further specifies the proper legal remedies against a negative decision of the cadastral office on the registration of rights in rem. Only a lawsuit filed within 30 days from the delivery of such a negative decision will be permitted. There will be no possibility to appeal against a negative decision of the cadastral office under the Act. No. 500/2004 Coll., Administrative Procedure Code. Until the above period expires, if a lawsuit is filed before the court decision, all other proceedings will be interrupted.
Commencement of cadastral proceedings
The Bill specifies more closely the moment in which the proceeding on registration of rights in rem into Real Estate Cadastre will be deemed as having commenced (whereby the rights in rem are registered retroactively with the effect to the commencement of the proceeding under the Act on Entries). Currently the moment of registration of the application was determinate only by days. It will now be the day, hour, and minute of submission, meaning more applications can be filed on the same day. The new regulation conforms better to practical requirements, especially to real estate transactions financed by banks (registration of the ownership right followed by registration of the mortgage based on the mortgage contract with the new owner of the real estate).
Deeds as annexes to the application
The Bill requires that a deed, on the basis of which a right in rem is to be entered into the Real Estate Cadastre, be attached to the application. Otherwise, the cadastral office will not accept the application. This regulation addresses current speculation regarding the possibility of disclosing a deed only after filing the application, which makes it possible to file applications even if the deed does not exist in order to ensure a better position (eg, with mortgages).
Only the limited principle of good faith regarding entries in the Real Estate Cadastre applies under Czech law. In case of a discrepancy between reality and the entry in the Real Estate Cadastre, reality prevails.