How to Check if a Property Is Debt-Free? 5 Top Tips
Before purchasing a property (see: plots for sale ), it's good to know whether its legal status is clear, and in particular, whether the building is debt-free. Such verification increases the company's financial security and the chances of success for the business project. Learn how to check a property's debt.
1. Analyze the electronic land and mortgage register of the property
A good place to start analyzing a property's legal status is by reviewing the Electronic Land and Mortgage Register (EKW). This IT system contains the most important data about the building, divided into four sections:
- I – designation of the property, including its address, location, compliance with the land register;
- II – ownership – details of the current owner, co-owners or perpetual usufructuary.
- III - limited property rights (e.g. easements), restrictions on the disposal of property (e.g. prohibition on the sale of real estate), other rights and claims (e.g. claims for the transfer of ownership);
- IV – mortgage – entries regarding contractual and compulsory mortgages.
How can I check a property's debt in the IT system? Electronic Land and Mortgage Registers are provided by the Ministry of Justice, and access to the system is free. To find a specific property, simply enter the property's land and mortgage register number, e.g., LD1M 00001234, in the fields provided, select the check digit (0-9), and click the "search register" button.
When analyzing the EKW, it is worth paying special attention to sections III and IV, which reflect the legal situation of the real estate, and in particular to encumbrances and enforcement proceedings.
You may also be interested in: Real estate: limited property rights and limited use areas
2. Obtain certificates of the financial status of the property
Official documents from the seller confirming the absence of debts and other encumbrances will also be useful for verifying the property's financial condition. These may include certificates of:
- no arrears in rent and service charges - you can ask the manager, the board of the housing community or the housing cooperative administration for this;
- whether you are in arrears with property tax or not – you can ask the tax authority, e.g. the city mayor, about it.
These documents enable the assessment of investment risk and the chances of success of a business project.
3. Determine whether there are any enforcement proceedings pending against the property
How else can you check if a property is in debt? Information about bailiff auctions is posted on the noticeboard of the District Court for the auction location or on the website of the National Council of Bailiffs. Anyone can read it to determine whether the property is the subject of legal proceedings.
4. Verify the seller's details
An important step in purchasing real estate is verifying the seller's details. It's worth comparing them with the entries in the Electronic Land and Mortgage Register (section II). This will ensure the seller has the authority to sign a contract with you.
5. Get help from a lawyer
For safety reasons, before signing a sales contract, it's a good idea to consult a lawyer, such as a notary or attorney. This is especially recommended in complex transactions, such as those involving multiple sellers. A specialist will clarify complex issues and verify the property's legal status. Such professional support will protect your interests as an investor and minimize the risk of complications.
How to check the debt on a property and why verification of the legal status is important
Analyzing the financial condition of a plot of land is essential for maintaining a company's liquidity and achieving its projected profits. A property free of encumbrances has greater market potential and allows for the implementation of planned investments. Remember that problems and seller debts can jeopardize the project's success and damage the company's reputation.
What else is worth knowing:
Orange Nieruchomości is a reliable business partner, and its offer of plots for sale includes carefully selected proposals that meet high standards of quality and investment security.