1. Concept and Legal Nature of Off-Registry Ownership
Off-registry ownership refers to the right of ownership over real estate that is not registered in the real estate cadastre. This means that a person has acquired ownership of the property based on law, a legal transaction, inheritance, usucaption (adverse possession), or another method provided by law, but for some reason, the registration of that right in the real estate cadastre is not possible.
The most common example of the inability to register ownership rights over real estate in the cadastre is the construction of buildings without a building permit, which, despite significant efforts by the legislator to suppress it, was once more the rule than the exception. In addition to this situation, ownership may be acquired through usucaption but without the necessary court or administrative procedure for registration, or the off-registry owner may lack the complete documentation required for registration, among other similar cases.
In such cases, the owner is not formally registered as the holder of ownership rights and therefore does not enjoy the same rights as full legal owners. Thus, off-registry ownership does not produce all the legal effects of registered ownership – primarily in terms of legal certainty, evidentiary value, and the ability to dispose of the property – but it is legally relevant, especially when supported by valid evidence of its existence.
2. Is the Transfer of Off-Registry Ownership Possible?
To answer this question, it is first necessary to clarify the conditions that must be met in order to acquire ownership rights over a specific piece of real estate.
In our legal system, acquiring ownership rights over a specific piece of real estate requires the cumulative fulfillment of two conditions:
- The existence of a legal basis for acquisition – such as a real estate purchase agreement, an inheritance decision, a lifetime support agreement, a gift contract, etc.;
- Registration of ownership rights in the real estate cadastre – initiated by submitting a request for the registration of ownership rights to the competent real estate cadastre, managed by the Republic Geodetic Authority.
Since in the case of off-registry ownership the mandatory condition of registering ownership rights in the real estate cadastre is not fulfilled, the rights of such property owners are limited, most notably in the fact that these properties cannot be the subject of legal transactions.
The legislator’s intention to prevent the trade of real estate that is not registered in the cadastre is particularly evident in the prescribed obligation of the competent legalization authorities to provide the cadastre office with information about properties undergoing legalization, so that a notice of prohibition of disposal can be registered on such properties until the legalization process is completed and the property is entered into the land registry.
3. Specific Treatment of Off-Registry Ownership in Enforcement Proceedings
It should first be noted that the concept of off-registry ownership was not recognized in Serbian legislation, despite the large number of unregistered properties in Serbia, until the adoption of the Law on Enforcement and Security.
This law made it possible to transfer off-registry real estate for the purpose of protecting creditors’ rights and preventing abuse by debtors who, by hiding behind “off-registry ownership,” seek to avoid repayment in situations where there is property from which creditors could be satisfied.
Articles 209 and 210 of the Law on Enforcement and Security prescribe the conditions that must be met in order for enforcement proceedings to be conducted on off-registry real estate.
If the motion for enforcement designates as the object of enforcement a property or part of a property that is not registered in the real estate cadastre and for which ownership cannot be registered, the enforcement creditor must submit a statement confirming that ownership registration is not possible and attach it to the motion. In such a case, the court shall issue an enforcement decision on the property in the off-registry ownership of the enforcement debtor, provided that the enforcement creditor submits or identifies, as evidence of the debtor’s off-registry ownership, a building permit issued to the enforcement debtor. If no such permit exists or it is not issued in the debtor’s name, other documents proving the debtor’s off-registry ownership may be submitted. Upon the creditor’s request, the court may order the enforcement debtor or another person to provide documents proving the debtor’s off-registry ownership, under threat of a monetary fine.
Following the issuance of the enforcement decision, the enforcement officer proceeds with the listing (inventory) of the property. The enforcement officer invites the enforcement creditor, the enforcement debtor, the owners of neighboring properties, and the current possessor of the property (if different from the debtor) to attend the listing meeting.
Since a property under off-registry ownership is not registered in the real estate cadastre, the enforcement decision cannot be recorded as a notice in the cadastre either. Therefore, the record of the property listing serves as the legal equivalent of a registration of the enforcement decision in the cadastre and, once drafted, is published on the electronic notice board of the Chamber of Enforcement Officers.
After the listing, the next steps are the appraisal of the property’s market value and its sale. The sale is carried out either through a public auction or by direct negotiation. The sale notice must clearly indicate that the property is off-registry, include all known information about the building, a warning that the property may not be legalized, and any other relevant details.
If a property under off-registry ownership is sold in enforcement proceedings, the enforcement officer issues a decision on the handover of the property, ordering the current possessor to deliver possession of the property to the buyer. In addition, the record includes an order for the registration of the acquired right in the competent public registers.
4. A Double-Edged Sword?
Despite the legislator’s best intentions to protect creditors’ interests by enabling the otherwise prohibited transfer of off-registry property, the question arises whether this creates fertile ground for abuses aimed at alienating property that could not otherwise be sold.
Imagine a situation in which the owner of an off-registry property wants to sell it, and there is a buyer willing to purchase it as such. Hypothetically, it would be sufficient for the buyer and seller to fabricate a debt, have the buyer initiate enforcement proceedings to “recover” that debt, and then acquire the property through an entirely legal process—gaining a level of legal certainty that would otherwise not exist in the transfer of off-registry property. Of course, this would involve some enforcement-related costs, but these are minimal compared to the benefit of being able to alienate—or acquire—a property that otherwise could not be legally transferred.
Ultimately, it should be noted that a person who acquires an off-registry property in this manner also holds a limited form of ownership, since the property cannot be further transferred. However, it is often the case that a person purchases such property for personal use, without the intention of reselling it.
Given the specific nature of this issue, we believe that the legislator should consider introducing certain amendments to the Law on Enforcement and Security when it comes to the transfer of off-registry property. In order to protect all participants in the enforcement process, provisions should be adopted requiring proof of the existence of a debt, or of a business or other legal relationship, through an appropriate procedure, with enforcement on the debtor’s off-registry property permitted only after the conclusion of such a procedure.
5. Conclusion
The concept of off-registry ownership, although formally less protected and scarcely recognized in our legislation, plays an important role in practice—especially considering that there are currently around 2.1 million illegal structures in Serbia.
Although the Law on Property Relations and the Law on the Transfer of Real Estate do not recognize the concept of off-registry ownership, we believe that a significant step forward has been made by introducing this concept into the Law on Enforcement and Security, thereby allowing for the transfer and collection of claims from properties that physically exist. We hope that the large number of off-registry properties and the growing recognition of the importance of this concept will encourage the competent cadastre authorities to act more efficiently, especially in matters of property legalization.
The goal of the legislator—and more importantly, of each of us—should be to align the formal status in the real estate cadastre with the actual material situation, thereby contributing to greater legal certainty in real estate transactions. Finally, it is important to emphasize that concluding a legal transaction (contract), possessing the property, and regularly paying taxes are not sufficient to acquire ownership rights. In other words, none of these make you the legal owner until your right is registered in the public records.
Author: Selena Gojković, Senior Associate at Injac Attorneys
The information contained in this document does not constitute legal advice on any specific issue and is provided solely for general informational purposes.
