In its landmark Judgment Case No. III. ÚS 3503/25[1], the Constitutional Court addressed a question of fundamental importance to anyone acquiring real estate in the Czech Republic. The core issue examined was the purchaser's good faith (dobrá víra) and the extent of "investigative duty" (investigativní aktivita) required to verify whether the entry in the public register corresponds to the true legal status.
Factual Background of the Case
The case involved successive transfers of the same property:
- In 2017, the original owner transferred the real estate to a third party under a purchase agreement.
- That party subsequently transferred the property to a second acquirer.
- The original owner brought a declaratory action claiming he remained the rightful owner, arguing that he signed the 2017 contract while suffering from a mental disorder that rendered him incapable of performing legal acts.
The general courts ruled in favor of the original owner, concluding that due to the invalidity of the first purchase agreement, the intermediate transferor never acquired ownership because they were not acting in good faith.
The Court of Appeal based its ruling primarily on the fact that the transferor knew the property was actually occupied by individuals other than the registered owner and possessed information that the original owner was an "alcoholic." According to the appellate court, the acquirer should have engaged in investigative activity to ascertain the true legal status rather than relying solely on the entries in the Land Register (katastr nemovitostí). The Supreme Court subsequently dismissed the appellate review (dovolání), endorsing the appellate court’s reasoning.
Material Publicity and the Principle of Good Faith
The Constitutional Court first recalled the foundational principle of Section 984 of the Czech Civil Code—the principle of material publicity (zásada materiální publicity) of public registers. The purpose of this provision is to protect an individual’s reliance on entries recorded in public registers and to enhance legal certainty in commercial and civil transactions.
- General Rule: Ordinary care (běžná opatrnost) fundamentally does not require an acquirer to take active steps to verify whether the public register entry matches the actual legal reality.
- Conflict with Presumption: Imposing a general duty of proactive verification would directly contradict the statutory presumption that recorded entries are accurate and would undermine the core purpose of material publicity.
Limits of the "Investigative Duty" (Investigativní aktivita)
The Constitutional Court acknowledged that proactive verification is not completely ruled out. Case law has long established the concept of investigative activity: when objective circumstances exist that give rise to legitimate doubts regarding the accuracy of a public register entry, an acquirer may be expected to actively verify the facts.
However, the Constitutional Court emphasized that this requirement has strict limits and cannot be interpreted broadly:
Standard Required to Overturn Good Faith
To refute an acquirer’s good faith based on a lack of investigative activity, a court cannot simply state that the acquirer failed to take action or vaguely assert that the party should have been more cautious. Instead, the court must explicitly demonstrate:
- Objective Cause: Why specific established facts, evaluated as a whole from the perspective of an honest and reasonably prudent acquirer, objectively triggered a need for further inquiry.
- Proportional Scope: What specific additional actions were reasonably expected in that scenario.
- Expected Outcome: What concrete information those actions would have uncovered.
- Causality: A direct causal link between the lack of inquiry and the acquirer’s ignorance of the disparity between the registered state and legal reality.
Without establishing this causal connection, good faith cannot be rebutted. The Constitutional Court cautioned that an expansive application of investigative duty would effectively reverse the statutory presumption of good faith under Section 7 of the Civil Code, placing an undue burden on acquirers to continuously audit public records.
Specific Findings of the Constitutional Court
1. Medical Capacity vs. Personal Circumstances
The appellate court attached significant weight to the fact that the acquirer knew the original owner was an "alcoholic." The Constitutional Court ruled that alcoholism is not a legal category and does not automatically imply mental incapacity, restriction of legal capacity (svéprávnost), or the invalidity of legal acts. The appellate court failed to explain what specific details this information entailed, its context, or why it should have raised doubts for a reasonably prudent acquirer.
2. Physical Occupation of Real Estate
The Court highlighted that the mere fact that a property is occupied by persons other than the registered owner does not in itself indicate a discrepancy between registered title and legal reality. While occupation may be one factor in evaluating whether further inquiries are necessary, it does not automatically exclude good faith. The decisive question is whether specific circumstances undermining the transferor's title could have been uncovered.
Key Takeaways for Real Estate Transactions
Judgment Case No. III. ÚS 3503/25 serves as an important reminder that the statutory protections of Section 984 of the Civil Code cannot be eroded by ex post requirements for active title investigations created by courts.
- For Property Buyers: Relying on the Land Register remains the statutory default. Unless clear, objective red flags arise, buyers are not legally required to conduct exhaustive private investigations into a seller's past personal or medical history.
- For Litigators and Courts: Rebutting good faith requires a rigorous, four-part test demonstrating specific facts, reasonable expectations, potential findings, and direct causality.
[1] Available at: https://www.zakonyprolidi.cz/judikat/uscr/iii-us-3503-25-1
This text was translated by AI.
