When concludinga realestate contract,it is importantto ensure thatyou are purchasingproperty from a seller entitledto transfer it. The seller may nothave such a right if the transferof property is prohibited orrestricted by mandatory statutoryprovisions. If it turns out thata property was purchased from aperson not entitled to sell it, thequestion of property revocationfrom the buyer and its return tothe legitimate owner will arise.
There is a principle in civillaw that real estate cannot berevoked from an honest acquirer's i.e., a person who did not andcould not know that the propertywas acquired from a person notentitled to transfer it. Lithuania'sCivil Code provides for two exceptionsto this rule: if the ownerlost the property due to a crimecommitted by other persons or ifthe property was acquired gratuitously.However, real estate canalways be revoked from a dishonestacquirer. If it is establishedthat a buyer knew or was supposedto know that the seller ofthe property was not entitled totransfer it, the property will bereturned to its legitimate owner.
In such cases the rights of a dishonestacquirer are not protected.Considering the above, whenconcluding a sale-purchase contractfor real estate, it is particularlyimportant to be an honestasset acquirer 's i.e., to act withcaution and care and ascertainthat the property is purchasedfrom a seller entitled to transfer it.Lithuanian case-law provesthat in order to acquire propertyhonestly, the buyer must performcertain actions to ascertain thatthe contract to be signed is legitimate.For instance, the SupremeCourt has stated that an honestacquirer is considered to be a personwho has verified by themeans available whether thecounterparty has creditors andwhether their interests will notbe violated by concluding the contract.
Thus prior to signing a salepurchasecontract it is requiredto verify the seller, his/her financialstatus as well as authorizationsto conclude the said contract.Such verification, however,should not constitute a breach oflaws and should cover only whatis usually required in order toconclude a contract.To be sure, it is not sufficientto inquire about the seller. Anassessment should be made ofany other obstacles to propertyacquisition in accordance withthe law. It should be noted thatsuch obstacles, as well as thebuyer's obligations prior to concludingthe contract, mostlydepend on the status and natureof the property purchased.For instance, when purchasingstate land or other real estateowned by the state, it is importantto ascertain that there are nopersons who by law can claim theright to restore ownership overthe property.
In one of the latestrulings Lithuania's SupremeCourt stressed the fact that thebuyer did not receive information,or received incompleteinformation, about the claimantsdoes not mean that he/she hasproperly fulfilled an obligation toascertain the legal status of theproperty. This means the buyer isconsidered "honest" only ifhe/she proves to have been misinformedby a state institution thatwithheld the information on theclaimants.Furthermore, the buyer'sobligations depend not only onthe seller and the propertyacquired, but also on the legalstatus of the buyer.
Lithuaniancase-law acknowledges that entitiesor businessmen have betteropportunities to verify the statusof the property being purchased,the seller's rights to conclude acontract, and other legitimacyaspects of a contract. A legal entity(businessman) is required toperform even more rigorous verificationsand take greater cautionand care when concluding realestate contracts.
Sandra Bliuvaite is associate advocateof the law firm Jurevicius, Balciunas &Bartkus, a member of Baltic Legal Solutions,a pan-Baltic integrated legal network of lawfirms including Teder Glikman & Partnerid inEstonia and Kronbergs & Cukste in Latvia,dedicated to providing a quality "one-stopshop" approach to clients' needs in theBaltics.
