Ilyashev & Partners defends client in mortgage dispute against financial institution in the Supreme Court

Ilyashev & Partners successfully represented a client in a dispute with a financial institution regarding the invalidation of agreements on the apartment alienation, declaration of property rights and establishment of a mortgage on the apartment.

In 2018, an individual purchased an apartment with an area of over 300 sq m. In 2021, the financial institution filed a claim to invalidate the agreements, including the one that the client concluded in 2018, recognize the mortgagee’s ownership and rights.

For the protection of the client’s interests, the team researched the apartment history and found out that the first owner of the property entered into a loan agreement with a bank in 2008 to acquire title to the apartment in a newly constructed building. To secure the fulfilment of obligations under the loan agreement, he entered into a number of pledge agreements with the bank, including those regarding title to the future apartment. The bank and the first owner also agreed that they would subsequently enter into a mortgage agreement for the disputed apartment. Following the registration of the title, the mortgage agreement for the apartment was never finalized. Subsequently, in 2010, the apartment was alienated to a third party, who sold it to the firm’s client in 2018.

It was also established that in 2013 the bank received a court judgement to recover the debt from the first owner of the apartment under the loan agreement. Subsequently, the bank also filed a claim to foreclose and declare the title of the disputed apartment, but later withdrew the claim.

In 2020, the financial institution acquired the rights of claim under the loan agreement and security (pledge) agreements. It later filed a claim, inter alia, to acquire the mortgagee’s title to the apartment and for its further foreclosure.

Ilyashev & Partners’ attorneys proved in the first-instance court that the bank, which provided the loan to the first owner of the apartment, had been aware of the re-registration of title to the real estate since 2013. Therefore, the financial institution, as the bank’s successor in title, missed the limitation period. Thus, the court of first instance dismissed the financial institution’s claim.

Disagreeing with the first-instance court decision, the claimant filed an appeal with the Kyiv Court of Appeal, which satisfied the financial institution’s claims.

In order to prevent a violation of the client’s rights, the attorneys filed a cassation appeal with the Supreme Court. In the Supreme Court, the team proved that the Court of Appeal had erroneously overturned the lawful and reasoned judgement of the first instance court. The team of real estate and construction practice, in particular, pointed out that the Court of Appeal erroneously failed to take into account that the change of the creditor in the case does not change the procedure for calculating and running the limitation period, and also committed a number of other violations during the hearing of the case.

On 11 September 2024, the Supreme Court accepted the firm’s legal position and cancelled the Court of Appeal decision to invalidate the purchase and sale agreement with simultaneous declaration of title to the apartment and establishment of a mortgage, thereby transferring ownership of the apartment to the client. The Supreme Court’s decision is final and not appealable.

The case was handled by Dmytro Hrybov, counsel, head of real estate and construction, and Dmytro Hruba, attorney at law.

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