We learned in this previous blogpost how to download the title deed, how it is constructed and how to read data. If you read this blogpost you may already know that the 3rd part of the title deed contains the encumbrances. In case of a communal property you may also be able to analyze the title deed to determine that whether the part of the real estate which you plan to buy is connected with an encumbrance.
If data shows you that one or more encumbrances are registered on the title deed question may arise that how will you own an encumbrance-free real estate? Legal options for deletion depends on the type of the encumbrance, therefore this article will analyze the most common ones and also the ways to delete them.
Registered: 3rd part of the title deed
Legal basis of the deletion: consent of the mortgagor
Performed by: seller, or lawyer with PoA
If the seller financed her buy with a bank loan it is likely that the 3rd part of the title deed will contain an entry of mortgage. The bank puts an entry of mortgage on every title deed of real estate which was financed with a loan in order to secure back-payment even if the debtor later becomes insolvent. In case of insolvency the entry of mortgage ensures that the bank can sell the real estate to get the loan back. Therefore it is highly important to buy the real estate without mortgage being registered on the title deed.
It is common when you buy real estate that the seller still owes the loan to her bank and the entry of mortgage is on the title deed. On the other hand, it is among the rarer cases when the seller paid the loan back but did not delete the mortgage from the title deed. The bank’s permission for deletion is required in both cases. In the latter case the permission in automatically granted, but in the former case the seller should pay the remaining debt back beforehand. The safest solution for you as a buyer is that you pay the remaining amount of the loan back instead of the seller. Practically it means that the seller should request the bank to issue a certification on the remaining amount of the loan for a certain date (which should be the day of the singing of your real estate sale & purchase agreement), and you pay the amount directly to the seller’s bank, and your agreement should include that payment as a part of the purchase price. As soon as the bank issues the permission for deletion it can be submitted to the land registry and the mortgage will be deleted.
Registered: 3rd part of the title deed
Legal basis of the deletion: consent of the entitled person or entity
Performed by: seller, or lawyer with PoA
Restraint on alienation and encumbrance is a supplementary entry on the title deed. The restraint on alienation and encumbrance secures another entry on the title deed at all times. The restraint’s legal effect is that it prevents the real estate to be transacted or encumbered without the consent of the entitled person or entity of the restraint. This entity is usually the bank who also holds the entry of mortgage. Restraint on alienation and encumbrance can only be deleted if the entry which is secured by the restraint is deleted. Practically the bank’s permission for deletion should include both the permission to delete the mortgage and the permission to delete the restraint on alienation and encumbrance.
Registered: 3rd part of the title deed
Legal basis of the deletion: compensation or death certificate
Performed by: seller, or lawyer with PoA
If there’s an entry of lifetime tenancy on the title deed it has to be identified that who is the lifetime tenant. If tenancy is in effect only for a certain amount of time it has to be checked that whether the tenancy expired. If it expired, deletion can be requested without further permission to obtain. If the tenancy is for lifetime (or didn’t expire) before the buy the seller should give you further information on whether the lifetime tenant is alive. If the tenant is dead, you can ask for deletion by submitting the death certificate to the land registry. If the tenant is alive, she should be a third-party of your sale & purchase agreement wherein it has to be determined based on the Act of Duties that how much is the value of her right of lifetime tenancy.
Lifetime tenancy is a “part” of ownership and as a property right has its own value. It doesn’t mean that the real estate will worth more: the value of lifetime tenancy decreases the value of ownership. Let’s say that the value of lifetime tenancy comes out at 1/5 of the real estate price. Then the purchase price should be divided between the seller and the lifetime tenant in 4/5-1/5 proportions. The seller and the lifetime tenant may stipulate in the sale & purchase agreement that they are ok with receiving the purchase price on a bank account owned by only one of them, acknowledge the single transfer contractual and undertake to settle between each other according to their own separate agreement.
Registered: 3rd part of the title deed
Legal basis of the deletion: payment of the seller’s debt
Performed by: Bailiff
The right of enforcement can be registered on the title deed if the seller didn’t pay his debts in due time. If the seller didn’t pay for example condo expenses, duties or other state fines and the creditor filed an enforcement against the seller the competent bailiff can register the right of enforcement on the title deed. If the real estate is sold privately or on auction in the course of enforcement proceedings the purchase price (plus interests) partly will go into the pockets of the creditor.
If such debt (plus interests plus costs of the bailiff) was paid entirely by the seller by the time of your buy the bailiff will send a check to the seller to pay the cost of land registry deletion and as soon as the seller paid it the bailiff will submit his request for deletion. If the seller’s debt is not paid in full by of the time of your buy it is recommended to request the bailiff to issue a budget on the debt, plus interests and costs of the enforcement. Like in the case of outstanding bank loan it is also advised for you to pay the seller’s enforced debt directly to creditor and the bailiff instead of the seller which should be a part of the purchase price in your agreement. Right of enforcement can only be deleted by the bailiff if the enforced debt plus interests and costs of the enforcement is paid first.
Registered: 1st part of the title deed
Legal basis of the deletion: cannot be deleted
If there is an entry on the title deed’s first part regarding historical or wildlife conservation, the state, the district of Budapest, or other appointed authority has a pre-emption right to buy the real estate. This right is not indicated as an encumbrance on the 3rd part of the title deed but in fact it can influence your buy more like an encumbrance. These authorities rarely exercise their pre-emption rights but the land registry cannot oversee the rules therefore we have to request these authorities to waive their pre-emption rights before we submit your real estate sale & purchase agreement. If they give their consent to your buy, or they fail to respond until the given deadline it should be deemed that they do not want to exercise their pre-emption rights. In the previous case their consent, in the latter case their receipt of delivery should be attached to your request of your registration of ownership.
Registered: 3rd part of the title deed
Legal basis of the deletion: cannot be deleted
The entry on power lines is one of the encumbrances on the title deed which is registered on legal basis instead of request. It means that the service provider is entitled to restrict the use of the real estate which has such entry on its title deed for the sake of the electric network. The reason of such restriction is the protection of life. It is extremely dangerous to do any activity within the safety zone of the power lines. The size of the safety zone depends on the voltage value of the power lines. Within the safety zone it is prohibited to scaffold, fuel up a vehicle, grow runner plants, build a fence more than 3 meters high or to climb up. The owner of the real estate has no right to refuse or debate the registration of the entry on power lines.
If your buy’s title deed is encumbered with entry on power lines you have to buy the property with it, since it cannot be deleted. If the restriction of use is unreasonable or it makes the use of the real estate impossible and the power lines were built not more than 10 years ago you can sue for compensation at court.
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