A) Internal effects: effects to the right itself and the entitlement
a) Registration and the process of transfer/acquisition of property rights
Constitutive vs. declarative
In Finland, the deed of sale is given the main effect with regard to the transfer of ownership. In other words, the agreement as such is the reason for the acquisition of ownership of real estate. The same applies to acquisition of other property rights as well. The ownership, and other property rights respectively, is transferred from the conveyor to the new titleholder simultaneously as the deed of sale (the agreement) is signed. Therefore, the registration, which takes place after the acquisition, is only declarative by it´s nature. In some respects, however, mainly in respect of some third parties, the registration of the acquisition of ownership or other property rights significantly improves the legal status of the new owner or of another holder of a property right. This concerns especially the so called cases of double disposition.
Compulsory vs. voluntary
It is compulsory to apply for registration of the acquisition of title in Finland. However, failing to apply for registration does not have an influence on the transfer of ownership or on the acquisition as such. The acquisition has already taken place and the title has passed onto the new owner on the grounds of the agreement. But on the other hand, failing to apply for registration may have other negative implications. The registration must be applied for in a statutory time limit, which is 6 months from the date of the deed of sale. Failing to obey this time limit leads to an increased transfer tax. The tax can be raised double as high as the basic tax, which is 4 per cent of the purchase price. Failing to apply for registration means also that the new titleholder´s status as an owner is not as secured as it could be – for example in the cases of double dispositions undertaken by the former titleholder.
It is also compulsory to apply for registration of some other property rights, not only the acquisition of title. This obligation to apply for registration concerns certain types of land lease agreements.
b) Effects to legitimize the owner
Legal presumptions. Registration as evidence of the right
The registration of title does not have an influence on the legal relationship between the former owner (conveyor) and the current owner. The transfer of ownership takes place only on the grounds of the deed of sale. The agreement as such legitimizes the transfer of ownership. The registration is only declarative by it´s nature. The buyer does not need the registration to get the ownership passed from the seller to the buyer. On the other hand, the registration of title in the name of the buyer does not prevent the seller from bringing an action against the buyer in order to get the real estate returned to him / her, if there is some legal defect, which burdens the acquisition.
However, the registration of title functions as a sufficient legitimation of ownership in respect of third parties. After the title has been registered in the name of the buyer the third parties, who have undertaken legal transactions with the new owner, are allowed to rely on the registration. The former owner cannot invoke the defects of the acquisition against such third parties, who have been in so called well-founded good faith (bona fides).
Effects of registration and possession: adverse possession
Remedies and procedural actions derived from registration: actions derived from registration.
B) External effects: effects to third parties
Negative effect: opposing effect of registered rights against non registered rights.
In some respects the Finnish system of land registration reflects the negative public reliability. This principle does not, however, apply to so called strong property rights. The legal protection of these rights is very strong. Even in a case, where the registration of this kind of a right would be missing, the right will be binding against the new owner. Only if the new owner is in well-founded good faith in respect of the strong property right, which the previous owner had established before the conveyance, and if the new owner applies for the registration of his / her title earlier than the holder of a strong property right (primus) applies for the registration of his / her right, the new owner will be protected against such a strong right. The group of strong property rights consists of (e.g.) the right of ownership and of many registrable special rights pertaining to real estates (for instance usufructs).
Positive effect. Indefeasibility principle. Bona fides effect. Requirements
One of the most important features of the Finnish system of land registration is the positive public reliability of the register. The third parties are allowed to rely on the registration of title. They are allowed to rely on that the natural or legal person, who has been registered as a titleholder of a real estate, is the legal owner of the object. Legal transactions concerning a certain real estate with the registered title holder of that real estate can be concluded principally without any risks – with regard to a question if the person, who disposes of the real estate as an owner, really is the rightful owner of the object.
The protection of the third parties, which is given by the positive public reliability of the register, concerns the trust of the third parties on, that the acquisition of the registered titleholder is valid. It means, they are protected against the claims of the predecessors of the current titleholder. This principle includes protection all the way back in the chain of acquisitions concerning the real estate in question.
Protection given by the positive public reliability does not include the protection against the double dispositions of the current titleholder. Because the negative public reliability of the register is incomplete, the protection against such double dispositions can only be obtained by applying for registration as soon as possible. For instance in the case in which the current registered titleholder had already sold the property to someone, and is now conveying the same object to someone else, the latter buyer (in good faith) can get protection against the first buyer by applying for registration of his / her acquisition as soon as possible, in any case earlier than the first buyer.
There are two inherent counterparts to the protection, which is given to the third parties by the positive public reliability of the land register. These counterparts are like the other side of the same coin.
The first one is the right of the rightful owner, in the other words of the predecessor of the current titleholder, to get due compensation from the state funds for the damages imposed to him / her, if he / she loses his / her property for the benefit of a third party, who is protected on the grounds of the public reliability of the register.
The second one is the profound legal checks which the acquisitions must go through before they can be granted the registration of title. In this strict legal consideration only valid acquisitions are accepted, invalid acquisitions are rejected. Positive public reliability applies, then, to those invalid acquisitions, which should have been rejected but which have been accepted because of the mistake in the consideration of the Register Authority.