The sale of real estate requires an analysis of the contract and the buyer’s entity

On November 9, 2017. The Court of Appeals in Katowice, in a case ref. no. I ACa 491/17, issued a ruling that is important for ensuring certainty and security of real estate transactions in Poland. The case in question concerned the issue of the real estate sale by a company that had previously acquired the property with a violation of law. Although the sale of real estate to the final purchasers was made by an unauthorized entity, according to the Court, the act was effective due to the good faith of the buyers and the warranty of faith of the land and mortgage registers protecting them.

In the justification of the judgment, the Court of Appeals pointed out that “the extreme position that the warranty of public faith prevented the validity of the contract from being challenged on the basis of the provision of Article 58 § 2 of the Civil Code should be rejected, as well as that it is inadmissible in a case for determining the invalidity of a contract to weigh the goods of the counterparties to successive contracts. In each case, the validity of the contract must be evaluated with reference to the established facts. The provision of Article 5 of the Civil Code does not apply in this case, since it is a general clause that is out of the question when a special provision also refers to the assessment of validity of a given legal relationship in terms of principles of social intercourse. In this case, such a provision is the provision of Article 58 § 2 of the Civil Code.”

In addition, the Court emphasized that the mere fact that it was determined in other proceedings that, due to the invalidity of the agreement, the company did not acquire ownership of the property from the original owners, did not result in the automatic invalidity of the subsequent agreement for the sale of the property.

The above judgment has procedural significance, as it may provide the basis for other decisions issued by the Courts in similar cases.