Examination of legal status of real estate – land and mortgage register is not enough

Land and mortgage register in Poland constitute a type of public register kept in order to establish the legal status of real estate. The land and mortgage register is kept by the competent departments of District Courts. Currently, land and mortgage register is maintained in the ICT system.

Thanks to the fact that the information contained in the land and mortgage register are publicly available, each potential investor has the right to acquaint himself with the content of the land and mortgage register in order to examine the legal status of the real estate disclosed in view of the planned purchase or lease transaction. The information contained in the land and mortgage register allow to check, among other things:

• in section I – basic information about given property (land, building, residential or commercial premises), where it is located, what area it is, what is the geodetic reference number of the real estate,
• in the section I-Sp – are there any rights connected with the ownership of the property, e.g. is there an easements of necessary way through the neighboring plot or if perpetual usufruct of the real estate was established, if so, for how long it was established?
• in section II – who is disclosed as the owner of the real estate and perpetual usufructuary of the real estate,
• in section III – whether the real estate is encumbered with limited rights in rem (e.g. easements or right of use by a third party), whether a restriction in the regulation has been established (e.g. a court prohibition of sale or encumbrance of real estate for the duration of the legal process), whether there are rights or claims of third parties in relation to real estate (e.g. pre-emption right, real estate lease).
• in section IV – whether the property is encumbered with mortgages.

In addition, in the land and mortgage register you can also find references to filed motions, indicating a potential change in the legal status of real estate disclosed in the register, e.g. sale of real estate or establishment of a mortgage. Appearance of a reference in the land and mortgage register takes place immediately after registration of the motion in the land and mortgage register. In practice, the reference to the motion means that recently the legal status of the real estate has changed, and the land and mortgage court has received a request to disclose the change in the land and mortgage register. Another important information, often disclosed in the land and mortgage register, is a warning regarding the discrepancy of the legal status disclosed in the land and mortgage register with the real estate legal status. It should also be emphasized that in accordance with the applicable provisions, it is presumed that the public right from the land and mortgage register is entered in accordance with the actual legal status, and the law deleted from the land and mortgage register does not exist.

The above means that the verification of information contained in the land and mortgage register allows the potential investor to check a few of the most significant information regarding the current legal status of a given property. On the other hand, the analysis of the land and mortgage register before making a decision on a given transaction is highly recommended, because in the light of the applicable regulations, no one may plead ignorance of entries in a land and mortgage register, nor of applications which have been noted therein. This means that the real estate buyer cannot, for example, require the cancellation of the contract or claim compensation from the real estate seller, due to the mortgage or easement of the land register revealed, if the buyer did not check the land register before signing the real estate sale agreement, limiting basis of his decision to the statement of the seller of the real property being not encumbered.

The information disclosed in the land and mortgage register provides a certain basic level of legal security for the real estate buyer. In the event of discrepancies between the legal status of the real estate disclosed in the land and mortgage register and the actual legal status, the content of the register shall decide in favor of the buyer of the real estate, who has, by performing an act in law with the person entitled under the contents of the register, acquired the right of ownership (land and mortgage registers’ public credibility warranty). In the light of the above information, can the study of real estate be restricted before making the transaction only to the land and mortgage register? Definitely not. First of all, the land and mortgage register contains official data regarding only the legal status of the real estate. However, data regarding the actual physical condition of the real estate, such as the land area or premises, or the course of property boundaries, do not benefit from the legal protection provided for land and mortgage register. Such data shall be verified in the land and building record, and sometimes also through the survey of an expert surveyor, e.g. in the case of the risk of crossing the property boundary when constructing a building or doubts about the real surface of the land.

In addition, there is a category of rights of third parties and restrictions on the right to use real estate, which for their effectiveness do not require disclosure in the land and mortgage register. In other words, these rights and restrictions bind the property buyer, regardless of whether he knew of their existence at the time of purchase.

The most important of them include:

• statutory pre-emption rights vested in the Municipality,
• statutory pre-emption right for the lessee of agricultural real estate,
• statutory pre-emption right for the State Treasury in respect of land with stagnant water,
• statutory pre-emption right for the State Treasury in respect of land determined as a forest in the land and buildings record or intended for afforestation specified in the local spatial development plan or in the decision on land development conditions, or covered by a simplified forest management plan,
• the right of annuity (the obligation of the owner of real estate to provide for a specific person or persons with food, clothes, housing, light and fuel, provide appropriate assistance and nursing in the disease and funeral),
• easement of the necessary way established by court order or acquired through adverse possession,
• transmission easement established for the benefit of the transmission entrepreneur (supplier of gas, electricity, heat) on the basis of an agreement, court decision or by adverse possession,
• administrative restrictions of the right to use real estate resulting from provisions of law or local spatial development plan,
• right to use the property by lessee.

Therefore, audit of real estate before a purchase or lease of real estate should be not confined only to the data contained in the land and mortgage register. Although they are essential for the analysis of the legal status of real estate, they do not give a full picture of the property and do not guarantee a proper security of the transaction. In order to obtain comprehensive information about legal status of real estate and risks involved with planned transaction it is usually necessary to perform due diligence audit by professional team of lawyers on the basis of information and documents received from second party of transaction as well as from different public authorities.

Our Law Firm has a team of specialists in the field of real estate and construction law, which deals with the audit of the legal status of real estate and consultancy on the purchase or lease of commercial or residential real estates. We encourage you to contact our Law Firm in order to get to know the offer in the scope of the above services.