When concluding
a real
estate contract,
it is important
to ensure that
you are purchasing
property from a seller entitled
to transfer it. The seller may not
have such a right if the transfer
of property is prohibited or
restricted by mandatory statutory
provisions. If it turns out that
a property was purchased from a
person not entitled to sell it, the
question of property revocation
from the buyer and its return to
the legitimate owner will arise.
There is a principle in civil
law that real estate cannot be
revoked from an honest acquirer
's i.e., a person who did not and
could not know that the property
was acquired from a person not
entitled to transfer it. Lithuania's
Civil Code provides for two exceptions
to this rule: if the owner
lost the property due to a crime
committed by other persons or if
the property was acquired gratuitously.
However, real estate can
always be revoked from a dishonest
acquirer. If it is established
that a buyer knew or was supposed
to know that the seller of
the property was not entitled to
transfer it, the property will be
returned to its legitimate owner.
In such cases the rights of a dishonest
acquirer are not protected.
Considering the above, when
concluding a sale-purchase contract
for real estate, it is particularly
important to be an honest
asset acquirer 's i.e., to act with
caution and care and ascertain
that the property is purchased
from a seller entitled to transfer it.
Lithuanian case-law proves
that in order to acquire property
honestly, the buyer must perform
certain actions to ascertain that
the contract to be signed is legitimate.
For instance, the Supreme
Court has stated that an honest
acquirer is considered to be a person
who has verified by the
means available whether the
counterparty has creditors and
whether their interests will not
be violated by concluding the contract.
Thus prior to signing a salepurchase
contract it is required
to verify the seller, his/her financial
status as well as authorizations
to conclude the said contract.
Such verification, however,
should not constitute a breach of
laws and should cover only what
is usually required in order to
conclude a contract.
To be sure, it is not sufficient
to inquire about the seller. An
assessment should be made of
any other obstacles to property
acquisition in accordance with
the law. It should be noted that
such obstacles, as well as the
buyer's obligations prior to concluding
the contract, mostly
depend on the status and nature
of the property purchased.
For instance, when purchasing
state land or other real estate
owned by the state, it is important
to ascertain that there are no
persons who by law can claim the
right to restore ownership over
the property.
In one of the latest
rulings Lithuania's Supreme
Court stressed the fact that the
buyer did not receive information,
or received incomplete
information, about the claimants
does not mean that he/she has
properly fulfilled an obligation to
ascertain the legal status of the
property. This means the buyer is
considered "honest" only if
he/she proves to have been misinformed
by a state institution that
withheld the information on the
claimants.
Furthermore, the buyer's
obligations depend not only on
the seller and the property
acquired, but also on the legal
status of the buyer.
Lithuanian
case-law acknowledges that entities
or businessmen have better
opportunities to verify the status
of the property being purchased,
the seller's rights to conclude a
contract, and other legitimacy
aspects of a contract. A legal entity
(businessman) is required to
perform even more rigorous verifications
and take greater caution
and care when concluding real
estate contracts.
Sandra Bliuvaite is associate advocate
of the law firm Jurevicius, Balciunas &
Bartkus, a member of Baltic Legal Solutions,
a pan-Baltic integrated legal network of law
firms including Teder Glikman & Partnerid in
Estonia and Kronbergs & Cukste in Latvia,
dedicated to providing a quality "one-stop
shop" approach to clients' needs in the
Baltics.
