When the Land Register stays or refuses registration: what the sale agreement should settle in advance

A sale agreement for a flat or a house is usually written for the situation in which everything goes to plan: signature, payment into escrow, registration application, entry, release of the price. Between the filing of the application and the decision, however, the Land Register may stay the proceedings and call on the parties to remedy defects in the application or its annexes within a set period (Section 31a(c) of the Cadastral Act), or may refuse registration (Section 31(3)). At that moment what matters is whether the agreement gives the parties the tools for a swift remedy, or whether the deal depends on the goodwill of someone who has meanwhile had second thoughts.

Who files the application and who corrects it

The agreement should determine who files the registration application and who is entitled to communicate with the Land Register on the parties’ behalf, supplement annexes and remedy defects in the application. The simplest course is to give a power of attorney to one person, typically the lawyer who drafted the agreement. If the agreement requires the transferor’s signature to be certified, their signature on the power of attorney must be certified too (Section 30(4)(c) and Section 42(3)); in the case of an agreement authorised by a lawyer this requirement does not apply.

The attorney may correct the application and supplement the annexes, but not the agreement itself:

If, after the registration application has been filed, the agreement contains errors in writing or in calculation or other obvious inaccuracies, the parties to the proceedings may make the correction only by an amendment to the agreement.

— Section 42(4) of the Cadastral Act (unofficial English translation)

An amendment is a change to the agreement and must therefore be signed by all the contracting parties. How such a correction proceeds is examined in the question correcting an error in the agreement after filing the application.

Cooperation with a deadline, not with goodwill

If a party fails to remedy the defects within the period set in the call, the Land Register discontinues the proceedings (Section 31b(1)(f)) and, once the decision on discontinuance becomes final, also removes the annotation that preserved the instrument’s priority (Section 44(1)). The agreement should therefore contain not merely a general undertaking to “provide cooperation”, but an obligation to sign an amendment or deliver the missing instrument without undue delay after the call, and at the latest within a period shorter than the one set by the Land Register, together with a sanction for the party who fails to do so. With a contractual penalty, bear in mind that, absent a different agreement, it is not payable for a breach that was not culpable (Section 545(3) of the Civil Code).

Another useful tool is a stay of the proceedings on the concurring application of all parties, for a maximum of 60 days (Section 31a(d)). It is suitable where the parties know that an instrument will arrive later, for example the bank’s consent to deletion of a lien. The agreement may provide in advance that, at the call of one party, they will jointly apply for such a stay.

With a flat, annexes that neither party holds

On the transfer of a flat, the agreement must also contain the acquirer’s declaration of accession to the agreement on the owners’ association or on the management of the building (Section 5(1)(f) of Act No. 182/1993 Coll.), and annexed to it is the confirmation of the building manager or the chair of the association that the seller has no arrears (Section 5(2)). The confirmation is issued by a third person, so the agreement should determine who will obtain it and by when, and what happens if the Land Register calls for a more recent one. We explain the background in the questions the requirements of an agreement on the transfer of a flat and the building manager’s confirmation on the sale of a flat.

When the Land Register refuses registration

An appeal against a refusal may be lodged within 15 days of service of the decision (Section 31(7)). If the ground for refusal lies in the content of the agreement, the solution tends to be a new, corrected agreement. Filing the same agreement again makes no sense, because where a registration application has already been refused in the matter on a ground under Section 31(1), the Land Register discontinues the proceedings (Section 31b(1)(c)). We compare the two routes in the article a refused registration: appeal or a new agreement.

So that the new agreement does not depend on whether the seller still wishes to sell, each party undertakes in the original agreement that, following a refusal, it will conclude a new agreement of the same content in which the ground for refusal is removed. Such an undertaking has the character of an agreement on a future contract:

The parties may undertake in writing to conclude an agreement by an agreed date; in doing so, however, they must agree on its essential elements.

— Section 50a(1) of the Civil Code (unofficial English translation)

If a party failed to conclude the new agreement by the agreed date, it is possible within one year to seek a court ruling substituting its declaration of intent (Section 50a(2)). At the same time the agreement provides that the purchase price remains in escrow until registration under the new agreement has been decided. If the Land Register refused registration on the ground that the whole agreement is invalid, this clause too could be called into question, so in riskier transactions it is worth placing the undertaking in a separate instrument.

Withdrawal only as a last resort

The agreement should also say when there is no longer any point in continuing, for example if registration cannot be achieved by an agreed date, and what then happens to the money and to the flat if the buyer is already using it. Beware of withdrawal during the proceedings: if a party withdraws from the agreement before the decision on registration, the Land Register discontinues the proceedings (Section 31b(1)(b)). Withdrawal should therefore not be an instrument of pressure in a situation that can be resolved by an amendment.

We prepare these provisions as a standard part of a sale agreement for a flat and of an agreement for a house, and we keep watch over them on a purchase as part of our legal assistance with buying property. If the proceedings are already at a standstill, we will take them over as part of our stayed and refused cadastral proceedings service.