The state registry and the notarial system play a pivotal role in the acquisition of rights over real estate.
According to the Operative Information Center-OMM, the Supreme Court of Azerbaijan has released new guidance regarding the legal risks associated with the real estate market.
The Supreme Court emphasizes that these two institutions complement each other, serving both to protect the property rights of citizens and to ensure that civil commerce is conducted in a secure and stable manner. In its recent ruling on the application of legislation regarding the good faith of third parties in acquiring property rights, the Supreme Court stressed that the proper implementation of the institution of good-faith acquisition depends not only on the behavior of the parties involved but also on the registry and notarial systems fulfilling their duties appropriately.
The primary duty of the registration authority is to conduct the state registration of rights over real estate and to ensure the recognition and protection of those rights. The state registry is not merely a database but an institution of public trust. Participants in civil commerce rely on the information contained in the registry when making decisions regarding property. Therefore, the registry authority should not merely accept documents formally; it must verify the legal basis of the submitted documents, investigate contradictory or suspicious circumstances, and take appropriate measures when necessary. Failure to perform these duties properly may result in legal liability if individuals suffer damages as a result.
Judicial practice reveals several recurring problems regarding the state registration of real estate rights, which directly affect the security of civil commerce and the rights of property owners and buyers. Common violations include:
- unjustified registration in the name of a non-owner;
- delays in the registration of rights for individuals who acquired property on legal grounds;
- registration of the rights of multiple persons over the same real estate (double registration);
- failure to enter, or timely entry of, protests regarding real estate into the registry.
Such situations are among the primary causes of subsequent disputes and can jeopardize the rights of both actual owners and those who acquire property based on registry information.
Before certifying a contract, a notary must verify several critical issues. First, it must be determined whether the person disposing of the property has the authority to sell it. Furthermore, the notary must investigate whether the property is subject to mortgages, pledges, seizures, or other restrictions, and whether the property was acquired during marriage. This information, as reflected in the registry, must be clearly explained to the parties.
However, the notary's duty is not limited to formal verification. The Supreme Court emphasizes that the notary must also determine the true will and intent of the parties to conclude the contract. The notary must ensure that the parties understand the legal consequences of the document they are signing and must refuse to certify the contract if any signs of deception, pressure, or threats are detected.
Practice shows that in some cases, participants in civil commerce do not formalize their legal relationships in accordance with their true content. One reason is the parties' inability to accurately express the type of contract they require. In other instances, it involves the unjustified refusal to formalize transactions that are not contrary to legislation but are not widely applied in notarial practice.
A frequently encountered issue in practice is the formalization of a sale and purchase agreement for real estate (land, houses, etc.) belonging to a borrower (or their relatives) in the name of the lender (or another person designated by them) to secure a debt. Instead of using legally provided mechanisms like pledges or mortgages, the parties formally treat the real estate as a sale, while the actual purpose is to provide security for a debt.
While this method may appear convenient to the parties at first glance, it can lead to serious legal problems later. The primary risk is that because the contract is formally concluded as a sale, the property legally passes into the ownership of the other person. When a dispute arises, the borrower usually claims that the contract was not intended for sale but as security for a debt, which the other party denies.
In such cases, the burden of proof falls on the plaintiff, who must provide credible evidence that the contract was not intended as a sale. This often creates a significant evidentiary burden. The Supreme Court stresses that in such situations, a notary should not adopt a formal approach but must clarify the true intent of the parties and the legal outcome they wish to achieve. The notary should take necessary steps within their authority and, if necessary, propose the appropriate type of contract to the parties.
The use of powers of attorney is another issue that frequently causes disputes in property transactions. The Supreme Court notes that a notary is not obligated to contact the person who issued the power of attorney every time a property is sold based on that document. However, when the power of attorney is issued, the legal consequences it may create must be explained in detail to that person.
At the same time, if a notary detects circumstances clearly indicating that the legal transaction is contrary to the interests of the represented person (the owner), they must take necessary measures to determine the true intent. For example, when using a power of attorney issued between spouses during marriage after a divorce, or when selling real estate at a price significantly lower than its value, or when alienating real estate based on a physical power of attorney issued abroad, the notary should verify the true intent of the issuer via phone, video call, or other possible means.
If a notary determines that a transaction is legally risky, they must inform the buyer. If the person insists on proceeding with the transaction despite being warned of the risks, they must bear the consequences of those risks themselves. If a notary fails to perform their duties properly, either intentionally or through negligence, and this results in damage to a person, they bear civil liability as provided by law. If other persons participated in the creation of the damage, joint liability may arise. In this case, the injured party can file a claim against the notary, other responsible persons, or all of them simultaneously.
In cases where the notary's professional liability is insured, a claim for compensation can also be brought against the insurer. In practice, there are cases where parties conceal their true intentions from the notary. If deception, threats, or other illegal circumstances were intentionally hidden by the parties and it was objectively impossible for the notary to detect them, the subsequent revelation of those facts does not create liability for the notary.
A notary is only liable for violations that were apparent, should have been known, or could have been seen in advance. Thus, according to the Supreme Court, the security of real estate turnover depends on the functioning of the registry and notarial systems. The registry authority must ensure the correct registration of rights, while the notary must investigate both the legal situation and the true intent of the parties. Violations of these duties can result in the obligation to compensate for damages caused to individuals.
