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Some issues relevant for preemption rights

Radenka Cvetić

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Abstract

Before 1998 it was duty of the courts to control proprio motu whether preemption rights were respected in the course of real estate transfers. After 1998 there is no such a rule. However, Real Estate Act can be interpreted as if there is still mandatory protection of preemption rights. This is the reason why the author opens the question whether protection of preemption rights should be left to courts acting proprio motu, or to parties. If preemption rights are guaranteed by law in order to protect public interest, protective mechanism should involve both state authorities and interested parties. This is the rationale of previous provisions of Real Estate Act which explicitly provided for official protection of preemption rights. This rationale could still serve as justification for our courts to proprio motu demand for evidence to prove that preemption rights of interested persons were not violated in the process of verifying a contract. A valid real estate contract is a condition for exercise of the preemption right. Therefore, the author finds that there should be adequate rules which would prevent fraudulent behaviour and circumvention of preemption rights, and which would precisely define a legal effect of request for redress in case of its violation. Legislative acts provide for the right of which may be exercised by interested parties, which is not a good approach. Interested party is certainly interested in transaction of the real estate. In order to fully exercise preemption rights, an interested party should be entitled to invalidate a transfer of real estate. Lawyers are undoubtedly familiar with the term annulment which implies restitution, meaning that this is a fiction that there is no sale contract. This linguistic and legal ambiguity may be corrected with additional provision which would require the seller to sell the thing under same conditions to the person who enjoys the preemption right. Such a provision would confirm the nature of such request.

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Before 1998 it was duty of the courts to control proprio motu whether preemption rights were respected in the course of real estate transfers. After 1998 there is no such a rule. However, Real Estate Act can be interpreted as if there is still mandatory protection of preemption rights. This is the reason why the author opens the question whether protection of preemption rights should be left to courts acting proprio motu, or to parties. If preemption rights are guaranteed by law in order to protect public interest, protective mechanism should involve both state authorities and interested parties. This is the rationale of previous provisions of Real Estate Act which explicitly provided for official protection of preemption rights. This rationale could still serve as justification for our courts to proprio motu demand for evidence to prove that preemption rights of interested persons were not violated in the process of verifying a contract. A valid real estate contract is a condition for exercise of the preemption right. Therefore, the author finds that there should be adequate rules which would prevent fraudulent behaviour and circumvention of preemption rights, and which would precisely define a legal effect of request for redress in case of its violation. Legislative acts provide for the right of which may be exercised by interested parties, which is not a good approach. Interested party is certainly interested in transaction of the real estate. In order to fully exercise preemption rights, an interested party should be entitled to invalidate a transfer of real estate. Lawyers are undoubtedly familiar with the term annulment which implies restitution, meaning that this is a fiction that there is no sale contract. This linguistic and legal ambiguity may be corrected with additional provision which would require the seller to sell the thing under same conditions to the person who enjoys the preemption right. Such a provision would confirm the nature of such request.

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Available abstract

Before 1998 it was duty of the courts to control proprio motu whether preemption rights were respected in the course of real estate transfers. After 1998 there is no such a rule. However, Real Estate Act can be interpreted as if there is still mandatory protection of preemption rights. This is the reason why the author opens the question whether protection of preemption rights should be left to courts acting proprio motu, or to parties. If preemption rights are guaranteed by law in order to protect public interest, protective mechanism should involve both state authorities and interested parties. This is the rationale of previous provisions of Real Estate Act which explicitly provided for official protection of preemption rights. This rationale could still serve as justification for our courts to proprio motu demand for evidence to prove that preemption rights of interested persons were not violated in the process of verifying a contract. A valid real estate contract is a condition for exercise of the preemption right. Therefore, the author finds that there should be adequate rules which would prevent fraudulent behaviour and circumvention of preemption rights, and which would precisely define a legal effect of request for redress in case of its violation. Legislative acts provide for the right of which may be exercised by interested parties, which is not a good approach. Interested party is certainly interested in transaction of the real estate. In order to fully exercise preemption rights, an interested party should be entitled to invalidate a transfer of real estate. Lawyers are undoubtedly familiar with the term annulment which implies restitution, meaning that this is a fiction that there is no sale contract. This linguistic and legal ambiguity may be corrected with additional provision which would require the seller to sell the thing under same conditions to the person who enjoys the preemption right. Such a provision would confirm the nature of such request.

Key concepts: Preemption, Redress, Real estate, Law and economics, Duty, Legislature, Business, Order (exchange)

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