Legal problem of multiple sales of real estate to various buyers

07.08.2020 Andrejs Sviksh, lawyer

In court practice, there are quite often cases when one property is sold to several buyers in a short period of time. Disputes arise in the event that the first of several expropriations for one reason or another was declared illegal. A typical example can be considered the case when the first of the sales is carried out by a person who has been declared insane.

Unfortunately, cases when a person is not aware of his or her actions, it is not always possible to identify before the transaction.

It happens that an absolutely normal-looking person decides to sell his or her property. Together with the buyer, he or she goes to the notary to complete the transaction. The notary, as required by law, verifies the legal capacity of the parties. There is no data on mental problems for any of the participants in the transaction. Subsequently, it turns out that the seller had a mental disorder. To avoid problems, the property is being sold to another buyer. And so several times.

In such disputes, the practice of the court is very unstable and largely depends on the point of view held by the judge.

Some people believe that it is enough to state a serious defect in the transaction (the presence of a mental disorder) to invalidate all subsequent transactions. The majority of judges believe that it is necessary to examine the integrity of all purchasers.

Transactions, as a rule, are cancelled if signs of unfairness of the transaction are found, such as an underestimated purchase value, identical purchase agreements for all purchasers in the chain. So, in one case, the court stated that the first seller lived in the apartment all the time. The court in its decision indicated that the mere fact that the plaintiff lived in the apartment, despite the fact that three sales contracts were concluded along the chain, should have raised doubts in the buyers about the legality of the transactions concluded and the discrepancy between the will and interests of the real owner of the real estate.

It is also worth paying attention to the compliance of the terms in the contract with the actual situation. For example, situations are not credible when one of the parties claims that it has acquired property at a lower value because an agreement has been reached with the previous owner about his residence in this property, while the contract states that the previous owner must move out of the apartment within three days.

With bona fide purchasers, the situation is different, here the court comes to diametrically opposite results. The two above-mentioned concepts work in parallel.

In some cases, the court is of the opinion that the transaction itself and all subsequent transactions are subject to cancellation if there is a defect of will or the norms of the law are not observed or if one of the parties to the transaction is found to be in bad faith. For example, these are cases when a power of attorney is issued by mentally unhealthy people who are not aware of their actions or do not understand their consequences, and subsequently the property is sold several times. Another case is when a criminal act is committed during the first sale: documents are forged, a third person pretends to be the owner.

In judicial practice, the opinion has also been tested that the good faith of the acquirer is of decisive importance. Namely, in the decision of November 3, 2004 in case No. SKC-614, the Senate indicated – since the court of appeal established that at the time of the conclusion of the sale and purchase agreement (..) the disputed property was registered in the Land Register in the name of the transferring party and in land register, prohibitions on alienation or other encumbrances were not registered, then, in accordance with Article 994 of the Civil Law and the Land Register Law, the disputed property was acquired by a bona fide person from whom the real estate cannot be reclaimed.

Summarizing the above, it becomes clear that when purchasing real estate, you must carefully check the seller and the property. There are a number of factors that give rise to doubts about the advisability of the transaction. For example, multiple resale within a short time at a cost below market value, the seller’s age – if this is an elderly person who speaks up, anything raises doubts about his sanity, a more detailed check of the transaction is necessary.

We would like to draw your attention to the fact that in practice, transfer transactions are usually challenged by the heirs of elderly people with dementia. They provide medical documents on the mental disorders of the signed relatives and on this basis challenge the transactions. In Latvia there is no register of all people who suffer from such deviations, the notary can only check the legal capacity of a person. This means that you need to be as careful as possible when checking the terms of the transaction. Any carelessness, negligence can be costly for the purchaser.

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