Contents, efficacy and liability of controls during the process of real estate ownership variation or modification – a comparison between the notary’s examination and the examination carried out by the public authority in charge of keeping the register
Contents, efficacy and liability of controls during the process of real estate ownership variation or modification – a comparison between the notary’s examination and the examination carried out by the public authority in charge of keeping the register
di Federico Tassinari
Notary in Imola, Italy
real estate publicity in the European Union.
In the 28 member States of the European Union there is
no single body of legal rules that governs real estate rights, their transfer
and public land registers.
Each Country retains its own legal tradition and its
own specific rules, both as far as the so-called substantive law is concerned,
that is the rules covering real estate rights and contracts suitable to
determine the changes to these rights, and the so-called publicity rules, that
is the terms whereby an interested party may learn the exact description of
each property and the rules covering its taxation (land register), as well as
the owner/s of the rights related to each property (real properties and land
Indeed, real estate law is perceived by European
people and institutions as a matter strictly for the sovereignty of each
national state and therefore to be kept under national law and authority.
Real estate law is typically the expression of local
law; therefore up to now the European Union has refrained from dictating
uniform rules or even minimal harmonization rules in this field.
Despite the substantial differences between the
various national systems, it is however possible:
first of all, to
identify “legal families” to which the various national systems belong, thus
making a distinction between the systems that are of British origin, that
historically escaped the Napoleonic conquests of the 19th Century
and the consequent “exportation” of the French revolution principles; and the
so-called continental systems that were deeply affected by this process. From
the point of view of their system of real estate publicity, the latter can be
split into systems of French origin where publicity relates to the title that
confers the right, and systems of German origin where publicity relates
directly to the transferred right, albeit through the title;
secondly, despite the
complexity and the diversity of the various national systems, to identify a
common feeling that unites all 28 members of the Union, according to which the
State must create and keep the necessary registers to guarantee legal certainty
and the possibility to know the legal details of each property. Indeed, this is
an essential prerequisite if every interested party is to obtain legal
identification of the owner of every property so that this identification can
be used for purchases or real security.
In the light of the above, I would like to emphasize
that the European experience taken as a whole, including therefore also Great
Britain and the Scandinavian Countries (that is the Countries that do not have
a tradition of the civil-law notary), is profoundly different from the
experience of the United States of America.
In the USA, for specific historic reasons related to
the wide availability of free geographic space, legal rules governing
publicity, which would require time and the investment of financial and human
resources, were not introduced so as not to hamper the colonization of the
Frontier. Rather than guaranteeing legal certainty for the identification of
real estate ownership, the US leave the safeguard of the right to know with
legal certainty the owner of each property to the private sphere. Therefore,
irrespective of the different value a trial before a judge might have in that
system, purchase deeds and professional examinations of the titles of each
property, that are kept individually, are left up to the opinion of legal
At a time when the colonization of empty spaces is
long gone and what is needed most is reliable legal instruments to regulate
claims on the same property made by more than one party, because the resource
that is scarce now is not men but land, it is obvious that the North American
solution, given its historic peculiarity, is to be considered an exception
hardly exportable to those areas even outside Europe, that have never known the
experience of the frontier, and certainly won’t in the 21st Century.
It is therefore possible to say that the need for the
State to have legally valid instruments to guarantee the ownership of every
property on national territory is a fact in the European Union and is unlikely
to be challenged by any new evolution in this field and in this area: it should
indeed be an objective for all those Countries that have different legal
The need for a source of legal certainty such as a
land register will therefore be the starting point of this paper.
carried out before entering data in public land registers.
In all European Union countries, ownership details as
well as details on other real estate rights, be these life estate or real
security, are left up to the free market and therefore they are usually the
result of an agreement reached by a buyer and a seller, or a creditor demanding
real security and a debtor willing to cede it.
Within the limits laid down by the law for the sake of
contract validity, everyone is free to enter into any type of real estate
However, for public land registers to carry out their
fundamental task, which as defined above, consists in offering legally valid
information on ownership, the deeds and the rights must be reviewed and
filtered prior to being made public (in the form of an entry, a registration or
In other words, the titles and rights must undergo a
series of public examinations prior to access to the public register.
Tradition on this point is extremely varied in the
single Countries, however there are basically two systems that can be defined
respectively as “minimum control systems” and “extended control systems”.
In the minimum control systems, the main concern is to
limit State intervention in the area of individual liberties, by introducing
specific compulsory procedures.
In these systems, if the title or right to be entered
in the public register can be traced to a known person, that will suffice and
the Authority in charge of the examination will, in principle, just check that
the title refers to a property located in the area under the jurisdiction of
the public register being applied to for publication and that it actually comes
from the person indicated on it, by simply authenticating the person’s
Whereas in the extended control systems, it is felt
that, through the public land register, the State should offer a further
guarantee: it should ensure that the title or the right whose publication is
being requested is in conformity with the law and that the description of the
property is correct and complete.
Entering data relating to invalid or defeasible contracts,
or data with an approximate or incorrect description of the property in the
public register would in fact represent, from this point of view, an
inadmissible offence against the trust and the certainty that the public
register itself intends to protect. This cannot be combated simply by setting
things right thanks to mechanisms that safeguard custody in hands of a third
party (correcting all entries already officially made in the public register
and found to be invalid under certain conditions, safeguarding the effects of
publication whenever the property can actually be identified, etc,), what is
needed is “preventive" measures to avoid invalid or incomplete deeds being
entered in the public register wherever possible.
These latter systems, though very different from each
other when it comes to the exact contents of these more detailed checks, have
seen the establishment of the figure of the civil-law or Latin notary, as the
official who represents the Sovereign State and who, in order to meet the needs
of the market and also to ensure the State’s need to guarantee the more
extended control prior to entering deeds or rights in the public registers,
carries out a liberal profession. This means the notary is chosen and paid by
the interested parties to carry out the operation, however he is directly
responsible for carrying out his duties accurately and correctly both to the
parties (according to private law rules) and to the State (according to public
It is difficult to say in abstract terms which of the
two types of control is more suitable for a modern State.
Maybe, given its absolute character, the question is
It is a fact however, that at European Union level the
so-called extended control entrusted to notaries prevails by far since it
applies in different ways to 21 of the 27 States and covers more than
350,000,000 of the approximately 440,000,000 European Union inhabitants.
In most of the 21 Countries in which it exists, the
notarial profession has acquired very considerable social recognition, having
gained recognition also for having increased quality and security in
contractual relations, unrelated to public register needs, as well as for
services rendered in the initial phase of real estate transactions (the so-called
preliminary contract), even where there is no rule of law that obliges the
parties to turn to a notary in this phase.
Finally, in many Countries, this increased recognition
of the notarial profession has allowed the State to use the notarial deed also
to enforce specific public law obligations concerning for example the respect
of construction laws, the safeness and healthiness of buildings, even checking
on the absence of harmful materials in buildings. This is done by conferring
liability to the notary and by laying down that the notarial deed include all
It is clear, therefore, that the prerogatives of the
notary in the real estate field, or rather the “field of competence” of
notaries as defined by the law, includes keeping the public register but that
is not all, it covers a much broader range of tasks.
It follows therefore that the notary and the legally
recognized field of competence of notaries could well coexist also with a
minimum control system for access to land registers and therefore, that the
“cost” of the notary and of notarial services should not be considered as
related exclusively to extended control systems, since this profession also, to
a greater or lesser extent, carries out a liberal profession and this, in
abstract terms, is perfectly compatible with the minimum control solution.
3. The examination
carried out by the public authority in charge of keeping the public register.
The extended control system has developed and asserted
itself, though to a varying extent, in many member Countries of the European
Union not as the result of a conscious legislative policy choice, but rather as
a result of the historic evolution of a process in which the role of the
controller has slowly shifted from the public sphere to the private sphere,
following the natural trend of various sectors of the legal system of the main
European Countries over the last twenty years.
We will come back to this issue in the final part of
Here, it is useful to stress how traditionally the
keeping of land registers was envisaged and set up in connection with specific
control tasks to be carried out by the public Authorities in charge of keeping
the public register or by other public Authorities expressly involved in this
procedure, often the judiciary authority.
The are two main basic reasons for this historic
choice: the technical competence and the moral reliability of the Authorities
As for technical competence, Countries belonging to
the sphere of French legal tradition appreciate the sound reliability of the
so-called Registrator of land registers, that is the official who is personally
in charge of keeping each register, whereas the Countries belonging to the
sphere of Germanic legal tradition prefer a judicial Authority with territorial
jurisdiction, that is one or more judges who therefore acquire an actual
specialization in real estate and property rights, and who are known as land
I might stress that in the 19th Century,
when the public land registers of the European States with more economic clout
and legal tradition (starting with France and Germany) were created, the
notarial profession had not yet asserted itself, and the notary had not yet
been entrusted with high level legal tasks (some countries didn’t even require
a university law degree in order to practice as a notary).
As for moral reliability on the other hand, the issue
is rather more complex.
Until the 1980s, the most deeply-rooted idea in
European historic tradition was that “the controller” absolutely had to belong
to the State, the State administration or the judiciary in order to be free of
the pressure that comes from being chosen and paid by the party to
More precisely, in the history of European administrative
and procedural law, the figure of the private operator performing public
functions was unknown, or in any case relegated to marginal activities, such as
authentication or certification and to specific professional figures (lawyers’
citations, engineers’ projects, etc.) or the public notarial deed, only in a
private enterprise and mainly formal dimension, thus linked mainly to the
paramount need to ensure document conservation rather than to ensure the
quality and completeness of its contents.
It must be stressed that this recourse to public
Authorities for control (minimal or extended) produced good results since up to
the 1980s at least, no Country envisaged reforming the system in order to
entrust this control to private individuals.
The situation only changed towards the end of the 20th
Century and for two reasons mainly: globalisation of markets and of the economy
and the computer science revolution.
These two factors have become complementary to each
other and foment each other, thus leading to the rapid obsolescence of the
traditional conservation systems used for public land registers.
Progress in computer science has led to the need to
keep public registers not with documents and paper archives, but with
computerized archives. This transformation actually began to take place in the
Indeed, especially these last few years, in
Anglo-Saxon Countries, this revolution has created the need for even real
estate trading to embrace the new computer technologies, turning a personal
trading system into a system where it is in the interest of both parties to use
electronic trading and to follow the rules governing e-commerce
This new system not only leads to lower costs but also
to increased information and contacts in cases of real estate purchases, by
using the web to actually find property to buy and to obtain a comparative
assessment with other properties.
Irrespective of any future developments that
e-conveyancing may introduce to the real estate trading sector, which for the
moment are difficult to forecast (especially for Countries where, from the
sociological point of view, the purchase of property still usually takes place
in the traditional manner and where the prime need to ponder and physically
check out property prevails over the need for a wealth of offers and rapid
negotiations), we must note that at the beginning of the 21st
Century almost all European systems have already introduced or are about to
introduce land register reforms whereby they will change from the paper to the
The result of this transformation is that the most
important skills needed to manage the office in charge of keeping the public
register are no longer those of a jurist but those of an electronic engineer,
able to guarantee that the technical rules necessary to ensure a correct
conservation of the electronic archive are respected, as well as the specific
rules introduced by each national legislator and by the European Union itself
to rule documents and electronic signatures.
The technical skills that have become indispensable to
guarantee the introduction of this computer science revolution have, needless
to say, meant that the head of the administrative office is now less suitable
to carry out that typically legal role of he who checks the origin and the
legality of the deeds to be entered in the public register and this has had an
even greater impact on Countries where public control had been entrusted to
civil servants rather than judges.
However, even where control was traditionally
entrusted to judges, the legal profession was found to be less suited to
carrying out the procedure of entering data in the public land register with
the new computer technology, because it belongs to the State system and is
therefore slower to invest in technology than the more organised and
long-sighted professions and therefore often ends up slowing down and
complicating the entire procedure.
So what is happening to a greater or lesser extent in
all major member Countries of the European Union is that the computer science
revolution and the globalization of markets condition each other, since the
former foments the latter and the latter, having increased the number of
individuals who can participate in some way in the real estate market, contributes
in turn to modify traditional trading techniques and, above all, the actual
mentality operators have when dealing with public authorities. In fact, even
though the contractors, as often happens in the real estate sector, reserve
themselves ample opportunity to ponder over a transaction, they now expect the
State to be agile, fast and able to perform its still fundamental function of
guarantor of legal certainty and legality at ever lower costs.
carried out by the notary or by any other professional entitled to draw up
contracts for the transfer of real estate rights.
The two factors described above have therefore
contributed to privatize the control of documents to be entered in public land
Indeed, the trend triggered by these factors is even
more evident in the world of business and public trade registers (company
registers, etc.), where globalization has an even greater impact on the
competitiveness of the system.
Here, the Italian experience is all the more
significant because the introduction of law n° 340 in the year 2000 suppressed
the preventive legality controls of all joint-stock company and cooperative
deeds by the Courts, which dated back to 19th Century codifications,
and entrusted this task exclusively and directly to the notary who was already
entitled by law to draw up all the memoranda of association and modifications
Law n° 340 entrusted this control to the notary but it
also laid down penalties for those who violate the obligations introduced by
this law, moreover it requires the notary to access the public register
exclusively through electronic instruments he must set up and pay for himself.
The Italian experience with public trade registers,
where the control exercised by notaries has produced results deemed
satisfactory by the public institutions, may be important in order to
understand the likely evolution of land registers in the member States of the
We have already stressed that the computer science
revolution is the contingent and most visible element that favoured this
However, we have also noted that the strongest impulse
to make the change came, after the new technologies, from the globalization of
markets and from the new mentality that this globalization generated (that
spread rapidly from Country to Country) in all those operating in the sector,
be they professionals or private consumers.
In a society of globalization, the State is allowed,
in fact is expected to ensure adequate public control.
New computer technology as well as the new techniques
of trading and remote transmission of documents have increased the need for
legal security and effective prevention of possible abuse.
However, this mentality demands that public
institutions be efficient, cut costs and speed up procedures but this is rarely
compatible with administrative and judicial activities carried out directly by
The key to this new process must be “competitiveness”,
and it concerns each single State not only as guarantor of the rules governing
the activities of its citizens and its companies, but also as creator of legal
rules that compete with those created by other States, where the rule preferred
by the market may shift huge flows of investments and may have an impact on the
economic performance of all national economies.
The market also influences the real estate sector, and
in particular, the rules introduced by each State to guarantee both security
and efficiency in the related trading.
Indeed, in an ever more integrated economy, even the
real estate market is more and more influenced not only by the choices of
private citizens, but also by the choices made by institutional investors from
It is therefore obvious that each single Country will
have to take measures to guarantee the protection of the traditional values of
legality and security in trading and protect them with new and more modern
means that must be appropriate and indeed competitive. Indeed, neither
information technology nor globalization have in any way tarnished these
values, quite the contrary they have enhanced them.
When this preventive control of data to be entered in
the public land register is entrusted to others, both the control we defined
earlier as minimal and the other control we defined as extended must be subject
to verification precisely in the light of these requirements.
It therefore ensues that the control must:
first of all, be able
to guarantee maximum speed, that is it must be carried out effectively without
in any way slowing down the real estate transaction;
secondly, be an
integral part of the market in as far as possible and able to dialogue with the
thirdly, go hand in
hand with severe and effective liability for controllers who do not do their duty.
This is why at least in the European Union member
States, the trend is more and more to choose a private operator to perform this
public function, a Latin notary or any other professional, rather than have the
public Authority carry out the control directly.
I must spend a few more words on the process under
a) The need for the property registration procedure to
be carried out with maximum speed is the main issue in a recent report issued
by the World Bank and entitled Doing Business 2005, that supplies
circumstantiated details, Country by Country, on the time, the number of
procedures and the cost needed for a real estate event to be definitively
entered in the public register and this is meant also to influence the granting
of support and financial loans by the World Bank itself.
It is a fact that the professional who is chosen and
paid directly by the applicant is in principle more susceptible to heed the
need for speed than a State department (especially in cases where the
professional, as is the case with notaries in many European Union member
States, is the only party accessible to the applicant, able to take the
application through all the competent public offices).
b) The fact that the control under study must be ever
more in tune with the commercial and operational needs of the parties is
confirmed by the evolution under way in the private law of the European Union
Countries as well as in European community law, where economic approaches and a
professional mentality are preferred to the rigour of abstract theory and
traditional legal dogmas.
The European Union chooses more and more professionals
rather than academics among its free-lance experts; the law of the European
Union is becoming more a question of empirically governing the existing complex
society and less the expression of general principles imposed by philosophical
Undoubtedly therefore, the notary or other type of
professional that performs notary duties, is more likely to understand this
reality than a State department, because he is faced with it and operates in it
One of the reasons for the afore mentioned Italian
reform of the year 2000 that rules the control of company deeds is precisely
that the controller must operate in a practical not a theoretical manner, must
not level judgement but express, as far as possible, opinions, must not impose
or reject anything, but wherever possible must talk with and convince the
private operator including him in the process, and this is seen as the modern aspect,
if we can call it that, of the public power of the State.
c) Finally, whether the private operator who trusts
State control has to apply to a judge or an official, to a notary or another
professional, he demands not only that the limitation of his liberties be
proportionate to the social value of the activity of the controller for the
transaction carried out, but also and more and more that it be possible to
fully verify the activity carried out by the latter and that the professionalbe
subject to adequate and effective forms of liability, also covered by forms of
compulsory insurance that guarantee the solvability of the party who has to
actually pay any damages.
Once again it is clear that the control entrusted to a
party carrying out a liberal profession must be in principle covered by forms
of liability (under private law and not public law) that are more in line with
the qualities required, because these are easier to assert and to ensure.
Wherever this private control has established itself,
public control limited its role in order to avoid useless duplication, which
means that the public office simply makes sure that the documentation presented
to it has been checked by the private party who, as we have seen, is the one
who takes on complete liability.
In Countries where there is a civil-law or Latin
notary, the notary feels and is generally considered as a representative of the
Sovereign State, even though he carries out a liberal profession.
Consequently, the attitude of the notary by definition
cannot be corporatist, as if he were promoting his product, instead he must
take on the calm tone of detached and problematic reflection.
The notary does not want to be useful at all costs, he
simply wants to explain the meaning of his function in the most complete manner
possible, using his experience and sensitivity as a bridge and direct contact
between the world of public institutions and that of private enterprise.
It will then be up to each State, having been duly
informed and having assessed all the circumstances, to make the necessary
decisions, taking into account its traditions, its specific situation and its
For these reasons, having given an initial series of
arguments that explain first the importance of retaining public land registers
that are able to guarantee legal certainty and public trust, second the trend
towards privatizing the necessary preventive public control, illustrating its
causes and its main reasons, I must underscore a further and conclusive aspect.
The establishment of preventive control entrusted to
parties who carry out a liberal profession can not be achieved simply thanks to
a law of the State, it must be based on reliable professionals.
In fact, private control by nature is more exposed to
dangers such as corruption and conditioning than public control, and therefore
requires professionals who are not only technically competent but also morally
reliable, who have a strong sense of the State and its institutions, and this
takes time and money.
A young notarial profession that is not yet mature
could be damaged by reforms that, though proceeding in the right direction, do
so too quickly (as we have seen, it has taken the European profession of
notaries many years to build up the trust that people and the institutions have
in them now).
If the prospects described in this paper are shared,
this might induce certain Countries that feel they do not have a sufficiently
experienced notarial profession, to prefer a certain degree of duplication during
a transition phase, by retaining public control as well as the control carried
out first by the notary, thus creating the premise to develop their own legal
system taking into account the competitiveness that modern civil society seems
to demand more and more even in the real estate sector.