It is good practice in every real estate transaction - regardless of whether it is an assets or share deal - to conduct a legal investigation of the title to the real estate in question. This legal check generally covers a ten-year period and also considers the legal basis on which the owner ten years ago acquired the real estate. This is all based on consistent Supreme Court case law which holds that a transfer of real estate ownership rights by a non-owner is absolutely null and void and automatically nullifies all subsequent contracts.
This issue was the subject of a disagreement between the Supreme Court and the Constitutional Court which culminated in Constitutional Court decision No. I. ÚS 2219/12 dated 17 April, 2014. In this verdict, the Constitutional Court systematically summarised both its previous case law and that of the Supreme Court. It then set out principles for deciding on the acquisition of ownership rights from a non-owner before 1 January, 2014, also reflecting the legal effectiveness of Act No. 89/2012 Coll., the Civil Code, as amended (CC).
The Constitutional Court concluded that even before the CC took effect, it was possible based on the general principle of the rule of law to infer the valid acquisition of ownership rights from a non-owner, provided that the acquirer acted in good faith. In the Constitutional Court’s opinion, persons relying in good faith on the accuracy of Cadastral (Real Estate) Register records should not bear the risk and responsibility for the invalidity of contracts concluded by persons whom they consider to be their legal predecessors. The Constitutional Court also suggested that even where rights and duties are assessed under the previous legal regulation, core CC principles should be implied. Among other things, these include the principle of protection of persons acting good faith. This good faith principle can therefore prevail over the principle of protection of ownership rights.
Based on this decision, we may conclude that it was possible to acquire ownership rights from a non-owner even before the CC came into effect so long as the acquirer acted in good faith. This would mean that there was a primary - and not derivative - acquisition of ownership rights. It also implies that the acquisition of ownership rights based on good faith is a primary method for acquiring ownership title akin to acquisitive prescription (in Latin: usucapio). Nevertheless, it remains an open question how the Supreme Court will treat this Constitutional Court decision. We therefore expect that checks of legal title during the time of possible acquisitive prescription will continue despite this Constitutional Court verdict.