Czech Republic, Hungary & Slovakia Case Studies
Yet despite the rapid growth in these markets, the land registry systems have not responded to the increasing demand for property located in the Czech Republic, Hungary and Slovakia, so as to minimise the title risks, which may affect the property. For example, in 1995 there were only 3.3% of land parcels with clear ownership in Slovakia because part of the Slovakian cadastral documentation was destroyed or lost during the Second World War and was not updated by the land registry. In summary, this meant that changes in the ownership of Slovakian property were not registered. Again in Hungary the cadastre and Legal Registry (Grundbuch) was only integrated in 1971 on a legal and institutional level, which meant the title documents and registration of numerous Hungarian properties is far from complete.
The incompleteness of the public records means that title defects such as instruments executed under an expired or fabricated power of attorney, the lack of competency, capacity or legal authority of a party, or a forged signature on title deeds are risks that could result in the sale purchase agreement or the transfer of ownership being declared null and void at any time. Furthermore, in the Czech Republic, Hungary and Slovakia the right to own property is subject to restitution claims by persons who had their property confiscated after the Second World War. There are various legal provisions which grant entitled persons to stake their claim for the return of the property that was confi scated from their relatives. In each of the three countries the restituted owners can request for a handover of the property by applying to the court for a declaration of ownership of the property.
Restitution searches at the relevant land office or municipality may be inconclusive. Given the problems with the land registers and the lack of state guarantee in the Czech Republic, Slovakia and Hungary, sellers’ warranties are often of limited value and lawyers’ due diligence reports can prove inconclusive because they are unable to review all the title documents. For this reason, title insurance is of vital importance to developers, lenders and lawyers, which is proven by the fact that, last year, First Title insured 10 billion euros worth of property in Europe.