On the Empowerment of Notaries

Historically, the organization and structure of Notaries in various states directly depends on their legal framework or legal family. Thus, in the Anglo-Saxon legal framework, the institute of notaries did not develop and expand in such a way rather than in the countries of the continental legal framework. Traditionally, the lawyers play a main role in the countries of the Anglo-Saxon legal framework, and notaries play an insignificant role, which mainly comes down to certifying signatures and copies of documents.

The notary in the Anglo-American legal framework is not the author of the document; he receives a document already prepared by interested parties or lawyers. He only certifies the documents and confirms their authenticity. In addition, a public notary is not required to be a lawyer by education. In particular, in the USA it is enough to be an honorary citizen appointed by the governor.

Latin notaries certify the documents prepared by them. According to the Latin legal framework, the documents drawn up by the notary have full legal force (that is, they do not need additional confirmation, as required by the Anglo-American legal framework), substantiation that cannot be disputed. This means – in order to prove the illegality of the notarial act, it is not enough to present opposing evidence – it is necessary to prove in court that the notary has committed a falsification, i.e. deliberately distorted the facts occurring or stated in his presence.

In modern Russian reality, the notary personifies the link between the economic entity and the state. At the same time, there is a tendency to expand the powers of notaries in the legal community, as well as to expand the limits of their liability.

The notary is the only legal institute in Russia that bears full property responsibility for the results of its professional activities. Currently, a four-tier client insurance protection system has been organized: in the event of property damage caused by a notary to an individual or organization, the injured person is paid compensation under the civil liability insurance agreement entered into with such a notary, and if it is not sufficient, then the compensation is paid under group insurance agreement entered into with the notary association. If these measures are insufficient, the damage is compensated at the expense of the personal property of the notary, and if the latter is insufficient, at the expense of the indemnification fund of the Federation of Independent Trade Unions.

The effective operation of the institute of notaries is impossible without a system of measures ensuring the responsibility of the participants in this type of legal relationship. Property responsibility is a guarantee in the field of protection of the rights, freedoms and legitimate interests of both individuals and legal entities. Summarizing the above, it can be stated that, when notaries perform certain public functions on behalf of the state, there are no regulatory obstacles to impose civil liability on relevant officials in the event of damages to individuals or legal entities when these functions are performed by notaries. The regulation on the conclusion of a notary’s civil liability insurance agreement applies only to notaries engaged in private practice and does not oblige local government officials who commit notarial actions to enter into civil liability insurance agreements.

It is also worth emphasizing that the person who applied to the notary gets an additional witness in court, a document of increased evidentiary force and the possibility, if it is specified in the text of the agreement, of extrajudicial collection of debt thereunder – on the basis of the enforcement inscription by a notary. So, the notarial form has many advantages, being a reliable guarantee of remedy for individuals.

The expert community, in general, takes a positive view of the practice of empowering notaries. So, one of the directions of expanding the competence of notaries is the regulation of relations in real estate transactions.

Real estate is the traditional line of notary’s responsibility for countries of the continental legal framework. And in Russia until 1998, all real estate transactions were subject to mandatory notarization. However, the notarial form was subsequently canceled, and simple written form of contracts, designed to simplify and speed up the turnover of real estate, obtained a wide circulation.

At present, the law provides for an exhaustive list of circumstances when notarization of a real estate transaction is required:

  • if more than one person are the owners;
  • if one of the owners is under age or under guardianship;
  • when executing an annuity agreement;
  • when executing the property division agreement between the spouses;
  • transactions on the alienation of shares.

In other cases, you can manage with agreement in simple written form and self-registration of rights in the Federal Service for State Registration, Cadastral Records and Cartography (Rosreestr). However, experts warn that this may be dangerous in case of dishonesty of participants in the transaction. The law allows the notary to request information on the owner of the property from the USRN, as well as copies of relevant documents. It should be noted that the notary is fully responsible for his actions.

Such changes resulted in serious problems related to the violation of the rights of owners, above all – socially unprotected citizens. The number of crimes in the real estate market has increased, transactions concluded in simple written form were often challenged, and entries in the state register were canceled.

In recent years, the problem of regulation of real estate turnover is under the scrutiny of the legislator, who uses the stepwise return of a notary to this area as one of the measures to restore order, and it has already proved its effectiveness. After successful “testing” of a mandatory notarial form in the corporate sphere (its need was established for transactions with participatory interests in the authorized capital of LLC 1), the legislator introduced a similar measure to control the most vulnerable segments of residential real estate turnover:

  • transactions on the alienation of part interest in common property 2,
  • transactions on the alienation of real estate owned by a minor or a partially disabled person 3.

We can see the result now: in less than two years since the amendments came into force, the number of cases of the so-called apartment raiding has considerably decreased.

From February 1, 2019, the duties of notaries include the registration of rights in the Federal Service for State Registration, Cadastral Records and Cartography (Rosreestr). After certification of the real estate transaction, the notary is obliged to independently and immediately transfer information to the Federal Service for State Registration, Cadastral Records and Cartography (Rosreestr). Transmission may be effected via electronic means of communication. The law establishes 1 day as the deadline for sending the application and the set of documents attached thereto. That is, the information must be received in Federal Service for State Registration, Cadastral Records and Cartography (Rosreestr) during the current working day and until its end. The submission of the set of documents on certified transactions to the Federal Service for State Registration, Cadastral Records and Cartography ceased to be a separate notarial act on February 1, 2019 and presently it is a part of the comprehensive service of notaries’ employees. This means that registration of title is free. It should be noted that earlier such a procedure could be carried out at the request of the persons making the transaction for a fee.

It should also be noted that the notarization of real estate transactions will help to ensure the accuracy of information in the USRN. Thus, in European countries, notarization is mandatory for all real estate transactions. For example, the principle of reliability of entries in the registry is applied in Germany and France and such entries are indisputable.

However, the problem of fraud in the real estate market remains acute, and the main tool for criminals is still the contract in simple written form. An important component of the notary’s work, in addition to a thorough check of the submitted documents and information on the real estate item, is face-to-face communication with the parties to the contract, during which the compliance of the intention of the participants in the transaction with their real intention is established. Consequently, the risks of challenging a transaction are minimized in the case where the seller, for example, allegedly did not understand what he was signing. If a notary is involved in a transaction, he draws up the contract and explains in detail the meaning of each item to the parties. Thus, the unscrupulous party does not have a chance to “palm off” a document containing a text with the wrong legal meaning to the second party, which was initially discussed, that commonly happens when making deals in simple written form.

Notary has already done a lot to improve the usability and availability of notarial services for all categories of the population and continues to work in this regard.

Firstly, the current tariffs for notarial services are such that, overwhelmingly, applying to a notary is cheaper than to any agent or private lawyer who draws up the agreement in simple written form and submits documents for registration.

Secondly, notary work opportunities are currently actively developing in a single window system, in which clients receive all necessary services in the notary office: a legal due diligence of documents and information, a well-written contract, its certification by a notary and the subsequent submission of application for registration of ownership.

From February 1, 2019, notaries are obliged to send a certified contract under which the right to real estate subject to state registration arises, to Federal Service for State Registration, Cadastral Records and Cartography (Rosreestr) (Article 55 of the framework legislation on notaries as amended by Federal Law of August 3, 2018 No. 338-FZ; hereinafter – Law No. 338-FZ). Documents are submitted by notaries in electronic form, which guarantees the shortest possible registration time – within one working day (clause 9, part 1, Article 16 of Law No. 218-FZ). No extra charge for speed up is required.

If there is no information on registered rights to real estate item, the rights to which arose before January 31, 1998, the notary establishes the appurtenance of real estate, its characteristics, encumbrances, rights of third parties from documents confirming ownership of the property. For example, in cases of the acquisition of ownership of an apartment in order of privatization before January 31, 1998, the right of ownership is established under a privatization agreement. The presence of co-owners of real estate is determined in the same order.

The notary establishes the rights of third parties with respect to the real estate item according to information from the USRN, as well as from the documents on the basis of which the right arose, from representations on the circumstances of the relevant party to the contract. The USRN information is also used to determine whether there are restrictions on the rights and encumbrances of the real estate item, existing assertions of right and claims alleged in a judicial procedure in relation to the real estate item. For example, the Civil Code of the Russian Federation establishes the right to enter into the state register a note on the objection of a person, the corresponding right of which was registered earlier, or a note on the existence of a legal dispute regarding a registered right. This note prevents any movement of property and, accordingly, is a ban on any administrative transaction for the period of its validity.

If the rights of third parties with respect to residential real estate are not subject to state registration, then these rights are determined by the notary under documents confirming the ownership of the property, documents of authorities registering citizens at the place of residence, management companies, documents of local governments concerning persons registered at the place of residence or place of stay and representations on the circumstances of the relevant party to the contract.

Thus, notarization of real estate transactions is a confirmation of the emergence of subjective rights to real estate. As noted in legal literature, notarization of the transaction facilitates the proving of the right of the interested party, since the content of the transaction, the time and place of its execution, the intentions of the transaction subject and other circumstances officially recorded by the notary are presumed to be obvious and reliable.

  1. Clause 11 of Art. 21 of the Federal Law of February 8, 1998 No. 14-FZ “On Limited Liability Companies”.
  2. Part 1 of Art. 42 of the Federal Law of July 13, 2015 No. 218-FZ “On State Registration of Real Estate”.
  3. Part 2 of Art. 54 of the Federal Law of July 13, 2015 No. 218-FZ “On State Registration of Real Estate”.
Roman Moskovskikh


Tax and Legal Practice

Korpus Prava (Russia)

Other Articles on Topics
See Also Articles from the Issue
Complicated Issues in Simple Terms

Often we do not fully understand the whole complexity of tax and accounting legislation until we face it in practice. One of such examples is the creation of reserves for vacation pay for tax purposes.

June 11, 2019

Decline of Tax Tourism

The tax control bodies acquire more and more tools to identify and control creative taxpayers. For example, one of the most effective tools is the international automatic exchange of tax information.

June 11, 2019

Pressing Issues of CFC Profit Calculation

This article describes some of the most frequent and pressing issues raised by a taxpaying controlling person, when calculating the profits of a controlled foreign company.

June 11, 2019

International Commercial Arbitration as a Method to Resolve Cross-Border Disputes

International commercial arbitration is an arbitration court, appealing whereto is one of the alternative methods to resolve cross-border disputes. Currently, ICA is a widely applied instrument.

June 11, 2019

Risk-Based Approach – Your the Necessary Tool to Comply with AML/CTF Regulations

On 26 June 2015, Directive EU 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (Directive EU 2015/849) entered into force.

June 11, 2019

Amnesty 3-0: Who Is Winning?

The third stage of capital amnesty starts in Russia. To be precise, this is not even the third stage, but the fourth, since the first amnesty, announced in 2015, was extended for six months from the initially declared period.

June 11, 2019