Written by: Stjepan Lović
The effect of dispute registration on real estate burdened by a separable right (mortgage or enforcement) has caused conflicting interpretations in the procedures for selling such real estate at public auction, resulting in legal uncertainty for potential buyers. Namely, courts have provided conflicting interpretations regarding the deletion of dispute registration in cases of real estate sales at public auctions, which has resulted in weak buyer interest in purchasing such real estate or its sale for a price significantly below its market value. Consequently, it has become common for debtors or persons close to them in bankruptcy and enforcement proceedings, even after several years from the registration of the mortgage and receipt of the amount secured by the mortgage, to file unfounded lawsuits, often to establish null pledges or to determine marital property, in order to prevent or complicate the sale of that real estate.
‘Automatic’ registration of dispute
As soon as they file such a lawsuit, they request the responsible land registry department to register the dispute, which that department ‘automatically’ carries out as it is not authorized to assess the validity of the lawsuit. It is not uncommon for lawsuits with unfounded claims to be filed by interested acquirers of certain real estate, often through third parties and through a simple limited liability company, in order to deter others from participating in the auction and thus enable themselves to acquire the real estate at auction (as the only bidders) for a price that is significantly lower than the estimated value. In some cases, courts, especially in bankruptcy proceedings, have delayed the sale of real estate until the dispute regarding such a lawsuit is conclusively resolved. And then, after the conclusion of one proceeding, a new lawsuit would suddenly appear… All such and similar abuses of procedural powers should now be prevented by the effect and reasoning from the Supreme Court’s decision of November 21, 2024, under case no. Rev-1435/2024-2. With this decision, the Supreme Court annulled the decisions of the Commercial Court in Split and the High Commercial Court that rejected the proposal for the deletion of dispute registrations, reasoning that although the subject real estate was sold (and awarded) in enforcement proceedings, neither the Land Registry Act nor the Enforcement Act stipulates that in such a situation the dispute registration should be deleted.
The Supreme Court, in its decision, confirms the conclusion of lower courts that there was no basis in the Land Registry Act for deleting the subject dispute registrations, but warns that the Enforcement Act stipulates that real servitudes, real burdens, and the right to build on real estate do not cease upon the sale of the real estate, and personal servitudes registered in the land registry before the right for which the enforcement is conducted do not cease upon sale, while other personal servitudes and real burdens cease upon the finality of the decision on the award of the real estate. Since the provisions of the Enforcement Act do not stipulate that the dispute registration does not cease upon the finality of the decision on the award, the High Court believes that the deletion of the subject dispute registrations should have been carried out upon the issuance of the award decision.
