Land Administration in Estonia: A Synthesis of Old Institutions and Modern Technology

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Editor's Note: Estonia has made remarkable progress in creating efficient and transparent public service delivery systems based on modern technology in a short period after separation from the USSR. It is much ahead of most European countries in digitalization of land administration system and has entirely dispensed with paper records. Estonia is one of the very few countries in the world using blockchain technology to ensure security and integrity of public records. This article on Land Administration in Estonia has been written by a person who himself has contributed a lot in building this system. Mr. Viljar Peep is retired civil servant with long experience of handling crucial assignments in th government of Estonia.

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The Background: Back to Normality

Estonia is a country in Northern Europe. We are linguistically close to Finland, but our legal system has been affected by German-Roman law since the Middle Ages. Before the Soviet occupation in 1940, independent family farmers were the biggest social class. Thus, Estonia was a country of small landowners. Approximately half of the territory was woodland and half of it was state-owned – these proportions have been preserved until today.

During Soviet occupation, all the land and most of the buildings were nationalized. The socialist experiment meant that there was no private property. People could only have the right to use their houses, apartments and garden plots of restricted size – without owning the land. There was a broad consensus in Estonian society in the re-independence efforts to choose the restitution model. So, in 1991, we restored our statehood – many countries had never recognised the Soviet occupation de jure. 

         The restitution was also reflected in the ownership matters. The nationalised land was returned to the rightful owners or (in most cases) to their successors. For instance, I got my grandfather’s farmland back. As we can imagine, it is easy to scramble eggs, but the reversal is quite difficult especially after 51 years of foreign occupation, socialism, urbanisation, and forceful Russification (1940-1991). Wherever restoration was not possible, the lost real estate was compensated by giving privatisation vouchers. Enterprises and Soviet-time apartment houses were privatised. The restoration of land and privatisation reforms helped us to go back towards a normal free society.

Basic Reforms in Land Administration

In 1993, the Estonian Parliament adopted laws, which formed the legal basis for real estate transactions and their registration: the  Law of Property Act as part of the Estonian Civil Code and the Land Register Act. We chose again the civil law system based on the German-Roman law with the title registration model in a very clear format. These choices had no opposition. It wasn’t simply a return to our historical legal traditions but we believed that this would be the best option after a half-century of injustice. The land owners, buyers and creditors could have full trust in the land register, without legal risks. We also thought that this would be attractive for investors who were greatly needed after the collapse of the socialist economy. A bigger country may tolerate bigger legal risks in its legal system as the market is attractive because of its size. Being a small country we can't afford the same - investments in our economy must be as risk-free as possible.

The civil law system and title registration - used by Germany and other Central-European countries - were familiar to us as our historical heritage from the time before the Soviet occupation. It was also familiar to international investors. It seemed to offer higher legal certainty than other possible alternatives. Retrospectively, we can say that these expectations were justified – we made probably the quickest transition among the peer countries.

Compulsory Registration

All real estates must be registered in the Land Register. The public land belonging to the Republic doesn’t have to be registered - unless it is sold or encumbered. The number of real estates (or synonymously immovables or titles) in the Estonian Land Register is almost as big as the number of all citizens. The number of households living in their own houses or flats (apartments) is significantly bigger than the number of rented (leased) flats and houses. Of course, real estate can also be owned by legal persons and foreign nationals - there are only a few restrictions for them.

The Land Register

Workflow of Land Register in Estonia

The Estonian Land Register (kinnistusraamat) is a judicial register kept by the court registrars (assistant judges) according to the following principles, which are quite common for Central-European countries:

1)   Public Reliability and Constitutive Effect: Rights to real estate and its restrictions arise, alter and cease through registration and not through contracts (deeds). No one may be excused for ignorance of information in the land register.

2)     The Principle of Consent: to make any change in the register, all persons whose registered real rights are affected have to give their consent. Consent can be replaced by a court decision. For example, if a mortgage holder does not allow the deletion of a paid-off mortgage, it can be done based on a court ruling.

3)   The Principle of Time Ranking: changes in the register shall be made in the order of arrival of applications unless all concerned persons agree on a different order. If real estate rights affect each other, the ranking matters. For example, the value of a later mortgage is equal to the value of the real estate without the value of all previous mortgages.

Types of Titles

The following types of titles are existing in Estonia:

1)  Plots of Land (53%), including buildings on them. An interesting detail: most of the plots are in the countryside (such as farms, manors and forests). According to an old tradition they have their own names - besides their owners’ names. Immovables in the urban areas have only addresses.

2) Apartments (46%). Apartment ownership includes an apartment itself and a proportional legal share of common rooms and land under and around the apartment house.

3)  Rights of Superficies (0.7%) - transferable and inheritable rights for a specified and registered term (maximum 99 years) to own a construction or an apartment, which is located on land belonging to another person.

Registration of Restricted Real Rights

The Land Register is the register of real estates and their ownership. It is also the register of the following restricted real rights imposed on real estates:

1) Mortgage - Estonian mortgages are abstract (non-accessory) and termless in the Register. The mortgage registration does not prove the real size or even existence of a real claim. This allows the parties to renew their loan contracts without changing the mortgage registration (its timely ranking) - if they do not exceed the registered size. Third parties shall take into account the maximum size of the mortgage entered in the Land Register. A mortgage may cover more than one real estate, belonging to the same owner;

2)  Real Servitudes -between servient and dominant real estates, such as the use of passage over another person’s land. It is the registered right belonging to a specific (neighbouring) landowner, it is not everyone’s right to use public roads or freedom of roam;

3)    Usufruct -giving the right to use the real estate and earn on it;

4)Personal Right of Use -allowing the previous owner to live in the dwelling as maximum for the rest of his or her life, or for a shorter period as agreed. 

5)   Right of Pre-emption - the entitled person can replace the buyer;

6) Real Encumbrance-backing the periodical payments or other tangible or labour obligations;

7)  Right of Superficies-giving the ownership rights over constructions or apartments without land.

Registration of Notations

In addition to the rights described above, the register also contains specific legal instruments called Notations:

1)  Preliminary Notation to secure a claim for the acquisition or deletion of a real right, including for preserving the favourable ranking for future or conditional claim – e.g. a future mortgage can have an already preserved first ranking;

2)  Objection for securing a demand for the deletion of an incorrect entry in the register. An objection does not lock up the register, but the next acquirer can't rely on the register in good faith. The next acquirer is informed through the registered objection that the ownership of the seller is contested before a court. So, he or she takes the risk that the possible acquisition could be reversed;

3) Prohibition in case of legal dispute, official investigation, insolvency or enforcement. In a case of dispute, the person who requested the registration of prohibition takes the risk that if he or she loses the dispute he or she has to compensate for the damage caused by locking up the register;

4)   Informative Notations prescribed by law. Contracts between a real estate owner and a third person or between owners are not binding for the next owners. However, some of such contracts can be made publicly visible and legally binding if there is a notation entered into the register, referring to a contract – e.g. to a lease contract between an owner and a tenant or to a contract between apartment owners on the car parking arrangements.

Enforcement of Mortgage Rights

In most cases, the real estate is purchased by the means of crediting. Real estate credit is backed by mortgages (hypotheques). Almost all mortgage registrations contain a reference to a notarised agreement which provides an obligation for the owner to submit to immediate enforcement for the satisfaction of a claim secured by a mortgage. It means that in case of a default on repayment, a creditor can initiate extra-judicial enforcement of mortgage rights without going to court. The owner (debtor) may go to court if he or she has objections against the enforcement procedures. This model reduces the risks of creditors significantly. They recover their mortgage-backed money quickly through enforcement procedures, if debtors fail in their duties. In the case of the owner's insolvency, mortgage-backed claims are privileged claims. It has definitely helped the Estonian construction and real estate market to bloom.

The Land Cadastre

Besides the judicial Land Register (kinnistusraamat) as the register of legal relations, there is also the Land Cadastre (maakataster) as the geodetic-cartographic register, kept by a special agency - the Land Board. Also, all the public land belonging to the Republic has to be registered in the cadastre. The Board is responsible for the land reform implementation, land surveying, land mapping, land evaluation and all geospatial information systems.

The Land Register and the Land Cadastre are like Siamese twins, being interlinked or mutually referring to each other. For data users, there is clickable access from the Land Register into the Land Cadastre and vice versa. Every real estate unit in the Land Register has one or several corresponding cadastral units in the Cadastre. Cadastral units are surveyed, evaluated (for taxation) and border-marked.

Record of Public Law Restrictions

Some public law restrictions, set up for instance by the legislation on the protection of the environment and cultural heritage, are not entered into the Land Register. These restrictions are mostly made publicly visible and described in the Land Cadastre. For example, a coastal building exclusion zone around a river or other water body in a plot will be shown in the Land Cadastre.

Legal Professions: Notaries and Bailiffs

Notary

A notary? Why do we need it? The role of notaries in civil law countries is very different from that in other countries. In civil law countries, the profession of notary is a hybrid of a public official (and as such they have access to relevant databases for identity and authorisation checks)  and an advocate (a solicitor), giving legal advice and providing legal services.

What makes a notary different from an advocate or a solicitor? For an advocate, it is impossible to represent parties with conflicting interests at the same time. It would be an extremely serious professional violation. For a notary, this is the essence of his or her work - to protect the interests of all the parties. While an advocate's fee is agreed upon, a notary's fee is fixed by law.

Selling or buying real estate is a big deal for most of us, having an impact for decades. For very many of us, it’s a deal for a lifetime. Certainly, it would require good professional assistance to avoid expensive mistakes and to choose the most suitable legal solution. And very often, the parties are not equal in their ability to get legal assistance. Normally, property developers and banks would have better legal assistance in comparison to private individuals. It is in the public interest to ensure legal security and prevent legal disputes in the most important and sensitive legal areas - such as real estate transactions, marital property contracts, succession law matters and certain company law transactions. Therefore, these contracts have to be notarised in Estonia.

Here is a quote from the Estonian Notarisation Act, which seems to have the highest importance:

“A notary shall ascertain the intentions of parties and the facts which are essential for performance of a legally correct transaction. The notary shall also explain to parties the meaning and legal consequences of the transaction and the different possibilities for entry into the transaction. The notary shall enter the declarations of intent of the parties in a notarial instrument clearly and unambiguously. At the same time, the notary shall ensure that errors and doubts are precluded and the rights of inexperienced or incompetent parties are not damaged.” (§ 18 (1)).

So, the notarisation procedure means that a notary has pre-checked all important facts (e.g. identity, authorisation, possible restrictions and other obstacles), determined their true will, advised the parties, and drafted the legal instrument.

He or she is somehow similar to a translator - first translating the true intentions of the parties into legal language and then back - explaining in plain language what and why was written down. His or her special statutory role is to ensure that the weaker party is not harmed.

After the instrument is ready, the notary has to send it or some data to relevant registers and authorities. He or she is also a legal representative before relevant registers and authorities, entitled to challenge their decisions ex officio. After a notarisation of a real estate transaction, the notary applies for the registration and sends the data and documents to the Land Register. He or she sends the price data to the Land Board for the land evaluation (land taxation zones are based on this information). If a dwelling has got a new owner, the notary helps the parties to change addresses in the Population Register.

  A notary's deposit account is often used for receiving payments from the purchaser. A notary shall send a registration application to the Land Register only after all the agreed money has been received from the purchaser in the deposit account of the notary. We can conclude that the legal risks in the areas of notarisation are minimised and the qualified legal service is provided to all concerned parties.

Bailiffs

In addition to the notaries, there is another similar independent legal profession - enforcement agents (sometimes translated as court bailiffs). Since their income comes from the fee charged for successful enforcement of claims, they are well motivated. Among other things, their task is to organise the auctions of immovables.

The notaries and enforcement agents have their own professional bodies, responsible for supervision, training and professional information systems. That brings us to the next topic - digital services.

Digital Services and Information Systems in Estonia

Estonia is a highly developed digital society. More than 99% of banking transactions are made electronically. This is also valid for the public sector service providers. For example, 97% of private individuals prefer to declare their annual income on the Internet.

E-identity for all Citizens

Estonians have had the mandatory e-identity since 2001. An e-identity is equal to holding a national identity card and a digital signature is equal to a handwritten signature. Due to this, a vast majority of clients of service providers are able to use their online services. There are no special professional e-identity tools for public officials. They use the same digital tools as used by other Estonian citizens: notaries for signing their instruments, judges and registrars for signing their decisions, and even the Head of State for signing bills into laws.

Cross-Linking of Databases

Another important feature of the governance in Estaonia is the cross-linking of public sector databases. Estonian registers refer to each other avoiding double-collection of the same data. Therefore, the same unique identifiers have to be used in all registers for all kinds of registration objects - including geospatial units, land parcels and also citizens and residents. In Estonia, a personal identification number is like a numeric name for secure identification and smooth data processing. It means that we can securely distinguish namesakes in the registers - including the real estate owners and other persons in the Land Register.

Digitalization of Land Administration

The Land Register in Estonia is a fully digital information system. All the registration applications are submitted over the web. Decisions are made by court registrars (assistant judges) digitally. To ensure data security, blockchain technology is used for the registration.

The Business Register (the register of companies and other legal entities) is also kept by court registrars. The Land Register and the Business Register are mutually related through a specific legal entity - the apartment associations. As soon as an apartment house, divided into separated apartment ownerships, is registered in the Land Register, it automatically triggers the creation of a new apartment association in the Business Register.

Accessibility of Information on Land Register

  There is a special IT agency under the Ministry of Justice, which manages and develops the software of the Land Register and other legal registers and provides online information services. Contents of the Land Register are publicly available for inquiries in human and machine readable open formats and also for a bulk download. Registrars work in Estonian language, but the information system is bilingual and language-neutral i.e. the Register is available for applicants and data users both in Estonian and English. There is also an AI-backed courtesy translation of free-text documents (such as motivated registration rejections).

The information on Land Register is available for the general public, with the following privacy-friendly filters:

1) There is a small fee for information services (however, the public sector entities don’t pay for their mandatory inquiries and everyone can ask for one's own information free of charge);

2)  Information requesters have to be identified (it is easy due to the use of e-identity). There is a special platform the Data Tracker where Everyone can see who, when and why was watching his or her personal data in the public sector registers (including the Land Register). Of course, there are some exceptions - e.g. a criminal investigator’s inquiry may not be visible to a suspect;

3)   The Land Register’s entries and notations are publicly accessible, but their source documents (e.g. sales and loan contracts) are not. A legitimate interest is required to be shown for accessing the source documents. If one is asking for access to the non-public documents of the Land Registers (the source documents like sales and loan contracts), the legitimate interest is checked by a notary. But one has to take into account that only the registrations have the constitutive effect: real rights arise, alter and cease through registration and not through contracts.

     The court registrars - keepers of the Land Register - provide no information services. All these services and client support are provided by the IT agency (online) and by notaries (online and in-person). It means that if one cannot use digital services, he or she has to visit a notary to access the Land Register either for submitting registration applications or making information requests.

     Certified copies of the Land Register can be issued by the IT agency (machine-stamped digital extracts) or by a notary (digital or paper copies). As the public sector bodies (including notaries themselves) and bigger private service providers (such as banks) have direct access to the Land Register in real-time, the need for certified copies is tiny, for use outside Estonia only.

The Land Board also offers a wide variety of digital services, including 3D maps and even historical maps interconnected to present cadastral units.

E-notary: A Common Working Platform for Notaries

Notaries have a common professional working platform - the e-notary. It also has online self-service access for its identified clients. One can select a notary and reserve an appointment, overview his or her own data and documents before and after notarisation.

The notarisation procedure can be made in-person, online (an AI-backed biometric verification can be used) or in a hybrid mode. The parties of a notarisation procedure may participate from the notary’s office, from their own offices or homes, or any other place on Earth - provided that one has a good Internet connection and a valid e-identity tool.

E-notary information system is connected to other relevant public sector registers also. It means that, before a notarisation, necessary checks are made (manually or automatically) directly from the relevant databases (identity, legal capacity, authorisation, marital property regime, possible bans and restrictions etc.). It also means that after the notarisation, relevant data and documents are sent digitally directly from one database (e-Notary) to other databases (the Land Register, the Land Cadastre, the Population Register etc.).

THE FINAL WORDS

A rigid title registration model and wide use of notaries may seem archaic, obsolete, expensive, slow, and inconvenient. However, the Estonian example proves that traditional institutions and modern digital tools can be combined to achieve high legal security, reliability, risk prevention and cheap, quick, and convenient services.

I am happy and humbled for getting the opportunity to take part in building this system as the head of the division responsible for judicial registers and notariat at the Estonian Ministry of Justice (1995-2008) and then the Deputy Secretary General for judicial policy in the same Ministry (2018-2023).

Tallin, the capital city of Estonia.Photo: Getty Images