Does public credibility of land and mortgage registers apply in every case?

Public credibility of land and mortgage registers is one of the fundamental institutions of property law, the main purpose of which is to protect persons acting in good faith when acquiring rights to real estate. Pursuant to Article 5 of the Land and Mortgage Register Act, in the event of a discrepancy between the legal status disclosed in the land and mortgage register and the actual legal status, priority is given to the person who trusted the entry in the land and mortgage register. This means that the purchaser may obtain the right even if the person entered as the owner was not in fact entitled to dispose of the property.

However, it should be clearly emphasised that public credibility does not operate in an absolute and unlimited manner. The legislator has introduced numerous exceptions to ensure a balance between certainty of trade and the protection of third party rights.

The basic conditions for public credibility

For public credibility of land and mortgage registers to take effect, the following conditions must be met:

• The acquisition of the right must be based on a legal transaction

Public credibility does not apply to acquisitions ex lege (e.g. by adverse possession) or by court decision.

• The purchaser must act in good faith

Good faith consists in an erroneous but justified belief that the person entered in the land and mortgage register as the entitled party actually has the right at their disposal.

• The acquisition must relate to a right that is subject to registration

Public credibility  primarily applies to ownership rights and limited property rights, such as perpetual usufruct, mortgages and easements.

Cases excluded from public credibility

Despite the broad protection that public credibility provides to market participants, there are situations in which its application is excluded by law. The most important of these include:

• Claims entered in the land and mortgage register

If a claim, warning or note has been disclosed in the land and mortgage register, the purchaser cannot effectively invoke public credibility. This means that information such as a warning about the legal status not corresponding to the actual status, a claim for transfer of ownership or for the establishment of an easement excludes the purchaser’s protection.

• Acquisition from a person whose right is not covered by the content of the register

The public credibility only protects situations where the land and mortgage register presents an incorrect but complete legal status. If the right has not been disclosed at all, it cannot be enforced against the person who holds it by virtue of law.

• Rights that are not subject to entry in the land and mortgage register

Certain rights in rem, effective against the purchaser by operation of law – e.g. rights of way established by court decision – may bind the purchaser regardless of the warranty, even if they have not been disclosed.

• Land and mortgage registers kept for properties excluded from trading

Public credibility does not protect the acquisition of rights to real estate which, in fact, cannot be freely traded, e.g. real estate occupied by public roads, if their legal status results from specific laws.

• Acquisition in bad faith

A person who knows or, with minimal diligence, could know that an entry in the register is inconsistent with the actual state of affairs cannot invoke public credibility. This also applies to situations where the purchaser deliberately avoids reviewing the source documents or ignores obvious doubts.

Why does public credibility does not always work?

Public credibility is intended to stabilise real estate transactions by ensuring that a person who trusts the register does not suffer the negative consequences of someone else’s mistakes or negligence. On the other hand, giving the purchaser complete privilege could lead to prejudice against owners whose rights remain hidden for reasons beyond their control.

Statutory exclusions from the guarantee are therefore intended to:

• protect rights that should be known to participants in the transaction,
• prevent abuse resulting from bad faith,
• maintain a balance between protecting the good faith of purchasers and protecting owners and creditors.

Summary – when is public credibility effective and when it is not?

Public credibility of land and mortgage registers does not apply automatically in every case of real estate acquisition. It is an exceptional institution, applicable only when the purchaser meets the conditions of acting in good faith and there are no warnings, notes or claims in the register indicating a risk of inconsistency between the content of the register and the actual state of affairs.

In practice, this means that before purchasing real estate, it is advisable not only to familiarise yourself with the contents of the land and mortgage register, but also to use the services of a solicitor specialising in real estate law, who will perform a legal analysis of the property, assess the legal risk of the transaction and, in many cases, advise on how to conduct the entire transaction.