The state registration of property rights and encumbrances in the practice of the Supreme Court was discussed by Dr. of Law, Associate Professor, Head of the Analytical and Legal Department of the Grand Chamber of the Supreme Court Lyudmyla Kozlovska during a professional development event for lawyers held at the National Academy of Advocacy.
The lecturer thoroughly analyzed with the participants the Supreme Court’s practice regarding the state registration of property rights and encumbrances, including:
- 1. Disputes over the state registration of property rights in the Grand Chamber’s practice at the Supreme Court.
- 2. Application of protective measures established by special legislation (Law No. 1952-IV) in disputes without property claims regarding property rights and encumbrances.
- 3. Legal significance of state registration of property rights and protection of rights violated by illegal registration.
- 4. Application of the principle jura novit curia (“the court knows the law”) in the Supreme Court’s practice. Change of subject and grounds of claim in disputes over state registration of property rights.
- 5. State registration of property rights and encumbrances during the validity of legislative and judicial restrictions on alienation of property rights.
Regarding the characteristics of state registration of property rights and encumbrances in the practice of the Supreme Court, emphasis was placed on the following:
1. Disputes over the state registration of property rights in the Grand Chamber’s practice at the Supreme Court
The Grand Chamber has developed a general approach that the state registration of property rights by a third party constitutes a violation of the plaintiff’s property rights, therefore, any dispute over state registration with a third party is a dispute over rights.
In the decision of the Grand Chamber in case No. 823/2042/16, it was determined that since the plaintiff was not the applicant regarding the contested registration actions, i.e., they were carried out at the request of another person, such a dispute is a civil law dispute regardless of whether the state registration of property rights was carried out by the state registrar in compliance with the requirements of the law and whether claims are made, in addition to the claims for cancellation of the challenged decision, for recording in the state register of rights, also claims for declaring the transactions on the basis of which the challenged decision was made null and void, made the challenged entry.
Declaring unlawful and canceling the decision, the entry regarding the state registration of the lease right to a land plot in the State Register of Property Rights on Real Estate by a third party is a protection of the plaintiff’s rights to the land plot from their violation by another person, for whom a similar right regarding the same real estate is registered.
(Decision of the Grand Chamber of the Supreme Court dated September 4, 2018, in case No. 823/2042/16).
2. Application of protective measures established by special legislation (Law No. 1952-IV) in disputes without property claims regarding property rights and encumbrances
In the decision of December 5, 2018, the Grand Chamber emphasized that after the legal positions expressed in cases No. 823/2042/16, a person can challenge state registration without property claims only if the decision on state registration concerned the registration of the plaintiff’s rights, not another person’s.
In the judicial practice of the Supreme Court, in cassation courts, different approaches have been formed regarding the application of the provisions of para. 3 of Art. 26 of Law No. 1952-IV regarding the court’s adoption of a decision to cancel the decision of the state registrar on state registration of rights, recognition of invalid or cancellation of documents based on which state registration of rights was carried out, as well as cancellation of state registration of rights exclusively with simultaneous recognition, change, or termination of these decisions by the court, encumbrances of property rights registered in accordance with the law (if such rights exist).
Disputes in which only a claim for cancellation of the decision of the state registrar is filed:
The Cassation Court of the Supreme Court considered it necessary to depart from the conclusion set out in the decision of the Cassation Court of the Supreme Court dated 27.10.2021 in case No. 545/1883/20, which established that satisfying the claim for cancellation of the decision of the state registrar on state registration of ownership rights would lead to the restoration of the plaintiff’s violated rights and does not require additional protective measures, such as the restoration of ownership rights on such grounds. This was once the position of the Supreme Court, which referred to para. 4 of Art. 2 of the Civil Code.
In the opinion of the panel of judges of the Cassation Court of the Supreme Court, the satisfaction of the claim without resolving the substance of the dispute over the right of ownership between the parties will not only result in the restoration of the plaintiff’s rights but will also lead to a state of legal uncertainty regarding the disputed real estate.
The justification of the cassation court related to the interpretation of para. 3 of Art. 26 of Law No. 1952-IV. “If such rights exist” – a clarification that allowed the Cassation Court to decide cases solely on claims for cancellation of registration.
On December 21, 2022, in case No. 914/2350/18 (914/608/20), the Grand Chamber of the Supreme Court resolved the issue of protective measures for property rights violated by illegal state registration. During the consideration of the case, the wording of para. 26 of Law No. 1952-IV was changed three times.
The content of para. 3 of Art. 26 of Law No. 1952-IV in different editions:
In the edition valid until July 26, 2022, the court’s decision to cancel the decision of the state registrar could only be made simultaneously with the resolution of the dispute regarding the recognition, change, or termination of property rights. 1
On May 2, 2022, the wording of para. 3 of Art. 26 of Law No. 1952-IV was changed again. As follows from the current wording of para. 2 of Art. 3 of Law No. 1952-IV, the court’s decision can recognize property rights and their encumbrances, but if such recognition is absent, the property rights and their encumbrances are restored based on an integral archival component. For this purpose, it is sufficient for the court to decide to cancel the state registration, rights, or documents based on which state registration was carried out. The same applies to the registration of changes, termination of property rights, encumbrances of property rights regulated by para. 3 of Art. 26 of the Law. It is specified that the relevant rights or encumbrances return to the state that existed before the relevant state registration, through the registration of changes or acquisition of such property rights, encumbrances of property rights.
The changes establish the “automatic” termination of property rights and encumbrances in case of cancellation by the court of the decision on state registration and the “restoration” of property rights (encumbrances) based on the court’s decision or in accordance with the archival part of the Register. Without the mandatory resolution of a separate dispute over the recognition, change, or termination of property rights.
3. Legal significance of state registration of property rights and protection of rights violated by illegal registration
According to the Civil Code of Ukraine, para. 1 of Art. 182 defines: “The right of ownership and other property rights to immovable property, encumbrances of these rights, their emergence, transfer, and termination are subject to state registration.”.
Also, para. 4 of Art. 334 of the Civil Code states that property rights subject to state registration arise from the date of such registration in accordance with the law.
According to para. 2 of Art. 3 of Law No. 1952-IV, property rights to immovable property, an unfinished construction object, a future real estate object, and their encumbrances subject to state registration under this Law arise, change, and terminate from the moment of such registration (para. 2 of Art. 3 as amended by Law No. 3588-IX of February 22, 2024).
These provisions define the constitutive significance of state registration and confirm the final transition in Ukraine to the formed “title” system of registration of the acquisition of property rights.
The traditional construction of civil law contracts, their real-consensual nature, has long ceased to perform the functions of ensuring civil turnover. This led to the establishment in the legislation of a registration system for the emergence of property rights and their encumbrances and, as a result, the legal significance of state registration.
The registration of ownership rights to real estate is only an official recognition of the right of ownership by the state. The state registration of ownership rights in favor of a specific person is not an indisputable confirmation of the existence of the right of ownership in that person, but creates a rebuttable presumption of the right of ownership of that person.
In the presence of state registration of ownership rights in favor of a specific person, state registration of ownership rights to the same property in favor of another person can be carried out with the consent of that person or by a court decision that has entered into legal force regarding the right of ownership of real estate. Decision of the Grand Chamber of the Supreme Court dated March 12, 2019, in case No. 911/3594/17.
Under the current legislation of Ukraine, a person acquires the right of ownership of real estate and has the opportunity to fully exercise it, including the right to dispose of their property, after the state registration of the right of ownership of real estate, i.e., the adoption of a decision on state registration of the right of ownership of real estate, the entry and subsequent preservation (existence) of the relevant registration record in the State Register of Rights.
The Constitutional Court’s decision on the conformity of a separate provision of the Law of Ukraine “On State Registration of Property Rights to Real Estate and Their Encumbrances” (regarding the inviolability of the right of ownership):
The conclusion of a contract or the performance of another legal act aimed at acquiring the right of ownership of real estate by a person is not a sufficient legal fact for the emergence of the right of ownership in that person.
The acquisition of the right of ownership of real estate is based on several legal facts: the basis for the emergence of the right of ownership in the understanding of Article 11 of the Code (contract and other legal acts, etc.), the decision on state registration of rights, the relevant registration record in the State Register of Rights. These legal facts together constitute a constitutive complex legal fact.
Under the current legislation of Ukraine, a person acquires the right of ownership of real estate and has the opportunity to fully exercise it, including the right to dispose of their property, after the state registration of the right of ownership of real estate, i.e., the adoption of a decision on state registration of the right of ownership of real estate, the entry and subsequent preservation (existence) of the relevant registration record in the State Register of Rights.
(Decision in a case under a constitutional complaint of PJSC “Odesaoblenergo” No. 9-r(II)/2022 dated November 16, 2022).
4. Application of the principle jura novit curia (“the court knows the law”) in the practice of the Supreme Court. Change of subject and grounds of claim in disputes over state registration of property rights
If the plaintiff makes one of the claims that, in terms of legal consequences, correspond to the protective measures established by para. 3 of Art. 26 of Law No. 1952-IV, regarding the challenge of state registration (“cancellation of the decision of the state registrar on state registration of rights, recognition of invalid or cancellation of documents based on which state registration of rights was carried out, as well as cancellation of state registration of rights”), such claims may be qualified by the court as the proper protective measure.
The issue arises of distinguishing the legal qualification by the court of the plaintiff’s claims and the change of the subject and grounds of the claim, the application of another protective measure.
“The subject of the claim is a specific material-legal claim of the plaintiff against the defendant, for which the plaintiff requests the court to make a decision. The grounds of the claim are the circumstances by which the plaintiff justifies their claims for the protection of a right or a legally protected interest. Legal grounds of the claim should be distinguished from the legal grounds of the claim (legal justification of the claim) – the legal qualification of the circumstances by which the plaintiff justifies their claims.
At the same time, the court’s disagreement with the legal justification provided in the statement of claim regarding the disputed legal relations is not a reason for dismissing the claim, as the court, in accordance with the principle jura novit curia (“the court knows the law”), during the consideration of the case, must independently carry out the legal qualification of the disputed legal relations. Similar conclusions were formulated in the decision of the Grand Chamber of the Supreme Court dated December 4, 2019, in case No. 917/1739/17 (points 81, 83, 84).”
In the practice of the Cassation Court of the Supreme Court, in cases of challenging state registration, instead of the principle jura novit curia, a different approach is applied, according to which inaccuracies in the wording of the plaintiff’s claims from the standpoint of the law are a linguistic issue, not an issue of applying proper protective measures.
The Cassation Court believes that determining the defendants, the subject, and the grounds of the dispute are the plaintiff’s right. Instead, establishing the defendants’ affiliation and the justification of the claim are the court’s duty, which is performed during the consideration of the case.
(Decision of the Cassation Court of the Supreme Court dated September 15, 2021, in case No. 372/2583/18).
5. State registration of property rights and encumbrances during the validity of legislative and judicial restrictions on alienation of property rights
According to para. 6 of Art. 24 of the Law of Ukraine “On State Registration of Property Rights to Real Estate and Their Encumbrances,” state registration of rights and encumbrances may be refused if an application for state registration of rights related to the alienation of real estate is filed after the state registration of encumbrances established for this property.
In the presence of prohibitions on alienation of objects of real estate in the Unified Register, the entry on the prohibition of alienation of the disputed property, the state registrar had no right to carry out registration actions until such encumbrance was removed.
(Decision of the Grand Chamber of the Supreme Court dated April 3, 2019, in case No. 755/5072/17).
With the opening of proceedings in a case of the insolvency of the debtor, given the purpose and objectives of the Bankruptcy Code, legitimate actions regarding the enforcement of the debtor’s property, which will be carried out within the framework of the bankruptcy proceedings, can be considered. The presence of proceedings in bankruptcy cases indicates the existence of a dispute over the right to the debtor’s property, thus excluding the filing of independent claims challenging state registration of property rights and encumbrances on the debtor’s property.
(Decision of the Grand Chamber of the Supreme Court dated December 21, 2022, in case No. 914/2350/18 (914/608/20) https://reestr.court.gov.ua/Review/108480607).
Another category is disputes with independent claims for recognition as unlawful and cancellation of the decision of the state registrar, in which a general legislative prohibition concerns the enforcement of the debtor’s individually identified property, for example, established by the Law of Ukraine “On a Moratorium on the Enforcement of Property of Ukrainian Citizens Provided as Security for Foreign Currency Loans”.
Illegal state registration of property rights and encumbrances during the period of legislative and judicial restrictions on alienation indicates the absence of a dispute over the right, therefore, the proper way is to consider canceling state registration.
Registered encumbrances of property rights to real estate as a basis for refusing state registration of the relevant rights:
One of the grounds for refusing state registration of rights is the presence of registered encumbrances of property rights to real estate (para. 6 of Art. 24 of Law No. 1952-IV). Refusal of state registration of rights on the basis specified in para. 6 of the first part of this article is not applied in the case of state registration of ownership rights to real estate by a mortgage holder – a financial institution in the manner provided for in Art. 33-38 of the Law of Ukraine “On Mortgage.” The presence of registered encumbrances after state registration of the mortgage, other property rights, including the mortgage, on the transferred property does not prevent the enforcement of the mortgage on the mortgage object by the mortgage holder and the state registration for him (including for a new creditor who acquired the rights of the mortgage holder from the bank or another financial institution) of the right of ownership of this object in the manner provided for in Art. 37 of the Law of Ukraine “On Mortgage”.
(Decision of the Grand Chamber of the Supreme Court dated June 8, 2021, in case No. 346/1305/19).