Jaba Ebanoyidze: Private Recorders Cannot Compete with Notaries

A draft bill On State Registration of Real Estate Rights and Their Encumbrance” has been presented in the Ministry of Justice. Jaba Ebanoyidze, Georgian expert and the author of the concept of the Ukrainian registration system reform, talked to the ICR reporter about the way the reform should look in general and where to start.

The issue on which organization should deal with the real estate registration, whether it should be private registers, notaries or banks, is being actively discussed in Ukraine nowadays.

According to the world practice, registration of real estate should be conducted by self-regulating spheres, private actuaries or notaries in particular.

Politicians change rapidly, especially in the former Soviet Union and Eastern Europe, the registration system is highly dependent on a new government. In Ukraine the authority has changed several times, and notaries have remained the same. The new government affects registers, they are influenced by the government. As a result, corruption appears. It should not be like that.

If we allow notaries to register real estate now, it will be very good. Firstly, it will be done by stable, highly skilled, experienced notaries. To pass them this function is very easy. Such resource already exists. There are more than 7 thousand notaries in Ukraine. Only passing the law is needed to launch this system the next day.

It would also be good to introduce the institution of private register, but considering that you have so many notaries it shouldn’t be done. Private registers won’t be able to compete with notaries. The conceptual choice is between private registers or notaries. Private registers will make money only on registration while notaries will earn by conducting other operations. Notaries will swallow them next month.

Which organizations register real estate in Georgia?

In our country a person chooses who will register his/her property: a notary or public services.

Some officials are considering the possibility of transferring the function of real estate registration to banks.

I think this approach is wrong. If we say that Ukraine introduces the institution of private register, it should be done professionally, with a good base. Liability is imposed only on the bank. It is wrong. A register is a profession that needs to be regulated, thus private registers should be introduced. If banks are given this right, realtors, lawyers and auditors might claim the same function. Why do we provide banks with such service exclusively?

Do banks register real estate around the world?

In some countries banks register pledge on real estate. For instance, when a person can use a car to get a loan. And no one requires me to register the car in my name and then the pledge. But when it comes to real estate, the rules are rather different. First you need to make the initial registration, only then make transactions or use it as a deposit for a mortgage loan. I cannot even imagine how banks are going to make the initial registration.

Also, in some countries banks were given the registration functions for their clients. When I take out a mortgage, the bank registers my dwelling in an electronic database. But it applies only to mortgages.

Another option is for the bank to hire a professional private register whom it trusts.

Is it necessary to create special services to control the registers?

For sure. It is important to use regulatory services for liberal professions. There are three regulatory services in the world. The first one is the full deregulation, when the public authority has no control over it. For example: you are looking for a good plumber. You start asking your acquaintances who they might recommend and then you hire the plumber. He is not affected by any of the Ministries or Associations. Licenses to plumbers are not issued, but houses are not destroyed, the plumbing works. The state should always look if there are no serious grounds for regulation, then deregulation should be introduced. Let this sphere develop itself with the help of self-regulation. They will learn on their own, because the market requires that, and they don’t need any orders or regulations. If they work well, they are hired. If they work badly, they are not.

The second one is when the state performs the regulation, for example, health care. Strict regulation is necessary here because a person’s life is at stake. Here we need a relevant qualification, license, certification, only then you will be able to work. Someone can’t come and say, “I have a scalpel in my hands, so I’m a surgeon.”

How long does it take for private registers to start working in Ukraine?

It will take a lot of time, at least a year.

The draft bill On State Registration of Real Estate Rights and Their Encumbrance” has been presented in the Ministry of Justice recently. What do you think about its conception?

It seems that a number of different concepts has been mixed up in the draft bill. On the one hand, the concept of decentralization is laid. On the other hand, they want to introduce private actuaries in the form of banks, but it is all defective. It is obvious that the Ministry of Justice is getting rid of its registration function. It is its conception, giving it away to anyone interested.

The draft bill has some points that contradict each other. It is better not to adopt this bill. It will make things even worse. If the banks begin to perform the function of registration, in one year they might lose the trust of the society.