NOVE successfully represented a client in the Supreme Court in a dispute influencing land registry practice

NOVE attorney-at-law Urmas Volens successfully represented a client in a dispute that resulted in a Supreme Court precedent ruling that plays a crucial role in the formulation and meaning of preliminary notation, notarial and land registry practices and significantly increases legal certainty.

In the civil case 2-18-13609 that led to the Supreme Court 12.11.2019 ruling, the parties disputed whether the purchaser of the immovable property in whose favour the preliminary notation, which secures the transfer of title, was entered in the land register, can, after entering the preliminary notation in his favour in the land register, claim in court the consent of the mortgagee of a court mortgage secured under a court order for the deletion of the mortgage without explicitly mentioning the right to freely encumber the immovable property. In the dispute, the Tallinn Circuit Court had held that the judicial mortgages entered in Section IV of the land registry part did not prevent the transfer of the immovable property to the plaintiff, and therefore the establishment of the mortgages was not in conflict with the purpose of the preliminary notations. Thus, in essence, the decision found that, if the preliminary notations intended to secure the transfer of the ownership of immovable property sought to avoid further encumbrance on the immovable property to be transferred, those precedents need not be expressly mentioned in the content (eg by reference to source documents).

However, the Supreme Court, on the basis of NOVE’s appeal in cassation, held that the prior notice entered in the land registry to secure the transfer claim did not require substantive specification and in the wording, “a precedent for a title transfer claim” is sufficient to establish the position of the land registry at the time the preliminary notations are entered in favour of the person entitled to the preliminary notation. Thus, when making the preliminary notations guaranteeing the transfer of the ownership of immovable property, it is not necessary, in accordance with the instructions given by the Supreme Court, to specify that the property is to be transferred without encumbrance or to refer to contracts. The Supreme Court thus accepted NOVE’s arguments in the appeal and emphasized that this approach takes into account the fact that the preliminary notation precedes subsequent dispositions and also conforms to the principle of an objective interpretation of land registry entries. The Supreme Court also considered it necessary to clarify that it would not be appropriate or practicable to interpret, according to the law of property law, all types of encumbrances from which the property is intended to be vacant or to refer to the provisions of the sales contract. This would distort the legal meaning of the preliminary notations, unnecessarily burden the land registry, develop the inconsiderate practice of preliminary notation, and reduce (contrary to the main purposes of the land registry system) legal clarity and certainty.

Urmas Volens is a co-founder and senior associate of NOVE, an associate professor of civil law at the University of Tartu, who has previously contributed to the development of the Estonian land register and property law and land registry system. Among other things, Urmas Volens has been responsible for the development of today’s electronic land register. Urmas Volens is the head of General Contract Law, Mergers & Acquisitions and Corporate Law, Relations with State, Policy Development and Research, among others, and is a member of the NOVE’s Real Estate team.