Everything happens in life. It’s good if surprises are pleasant. It is much worse when the surprises are unpleasant or very unpleasant. The situation becomes extremely worrying when what happened can directly affect property, namely residential real estate. Sometimes it is not important why there is a risk of being left without a house or an apartment, it is much more important to take some steps to protect the only property you own.
There are rare cases when, as an option to protect real estate from unexpected confiscation, lawyers recommend filing a claim with the court on far-fetched and not very good grounds and imposing a seizure on real estate in such a case as security for the claim. To what extent this option is really an effective tool for protecting one’s property and what pitfalls it hides, comments the lawyer association “Repeshko and Partners”.
According to the civil procedural legislation, there are 11 types of claims security. We are interested in a maximum of three if we are considering the problem of protecting our property through filing a lawsuit. It:
- seizure of property and (or) funds that belong to or are to be transferred or paid to the defendant and are in his or other persons’ possession;
- prohibition to perform certain actions;
- prohibiting other persons from taking actions regarding the subject of the dispute or making payments, or transferring property to the defendant or fulfilling other obligations in relation to him;
According to the statistical data known to us, the court is most often referred to the court with statements to secure a claim in cases of debt collection under a credit agreement, under a loan agreement, and about the division of jointly acquired property during marriage. So let’s not worsen the statistics and use the standard ways, because something exotic entering the court raises many questions, and we need not questions, but actions.
If you have a loan, or several loans, and there is a risk that tomorrow you will be filed with a lawsuit by the bank, and further according to the procedure, the property will be seized at the request of the bank, a court decision to satisfy the bank’s claim and collect the amount of the debt with all sanctions, and then the sale property by the executor to repay the debt and transfer funds to the bank, then there is an option how to act. On behalf of your wife or husband, a lawsuit may be filed in court for the division of real estate as such, which was acquired during the marriage, your godfather may file a lawsuit to recover from you on a promissory note a certain amount of money that you lent to the godfather, or from the woman/man with whom you live together, a statement that the property was purchased with joint funds during such residence.
The extent to which this or that option of a lawsuit is possible depends on your specific situation. It is necessary to warn at this stage – a receipt given to the best man stating that you have borrowed a certain amount from him may encourage the best man to actually receive this amount from you. However, a situation may arise when the best man dies in the process, then his heirs will decide to definitely get the debt from you by receipt at any cost. Or if you admit according to the statement of the woman/man with whom you live together that you really purchased the property jointly and the court awards the plaintiff a share in the real estate, such a share will go to the plaintiff and you will lose it forever if, after the crisis situation has passed, the husband /woman will not re-registrate this share for you at a notary already in a contract of sale or donation. This is the first and very important pitfall.
However, it all depends on whether you are going to or whether you will be able to, or whether it will be necessary to bring such a case to a decision. If the option of filing a lawsuit is acceptable to you from the point of view of defense, a statement to secure the claim is usually filed simultaneously with the lawsuit statement.
According to the general rules, an application for securing a claim is submitted in the following cases:
1) before filing a statement of claim – according to the rules of jurisdiction established by the Civil Code of Ukraine for the relevant claim, or to the court based on the location of the subject of the dispute – if the court to whose jurisdiction the case belongs cannot be determined;
2) simultaneously with the presentation of the claim – to the court to which the claim is submitted, according to the rules of jurisdiction established by this Code;
3) after the opening of proceedings in the case – to the court in which the case is pending.
As we can see, it is possible to submit an application for securing a claim to the court before filing a statement of claim, but in the case of submitting an application for securing a claim before filing a claim, the applicant must file a claim within ten days, unless other terms are established by law. It should be noted that judges are not very fond of this option and may well reject it, since when the application for security is accompanied by a lawsuit, at least from the lawsuit it is known in detail what the dispute is, the relevant evidence is attached, etc. Therefore, if you have chosen this means of protection, we advise you to submit both a statement of claim and an application for providing evidence together.
The application for securing the claim is submitted in writing, signed by the applicant and must contain:
1) name of the court to which the application is submitted;
2) full name (for legal entities) or first name (surname, first name and patronymic) (for individuals) of the applicant, his location (for legal entities) or place of residence or stay (for individuals), postal code , identification code of the legal entity in the Unified State Register of Enterprises and Organizations of Ukraine, registration number of the taxpayer’s registration card (for individuals) if available or passport number and series (for individuals – citizens of Ukraine), contact numbers, email address mail (if available), information about the presence or absence of an electronic account;
3) the subject of the claim and justification of the need to secure the claim;
4) a measure to ensure the claim to be applied, with justification of its necessity;
5) the price of the claim for which the applicant requests to secure;
6) the applicant’s proposals regarding counter-security;
7) other information required to secure the claim.
Also, a court fee is paid for an application to secure a claim, which as of 2024 is UAH 605.60.
Here we come to the second pitfall – the applicant’s proposal for a counter-commitment. Now the courts are very actively using this tool, considering it to be a lever that will help prevent unjustified claims. It even got to the point that the court demanded a counter-obligation from the woman following the wife’s lawsuit against the husband for the division of the car that was really jointly acquired during the marriage, which the husband took and hid.
The law states that the court may require the person who applied for security of the claim to provide compensation for the defendant’s losses that may be caused by the security of the claim (counter-security). However, whether the court will require it or not depends on each specific case and each specific judge. However, nothing prevents in the application for the security of the claim to offer some kind of symbolic counter-obligation, which the applicant will be willing to pay to the court account.
There are cases when the court is obliged to apply counter-security if:
1) the plaintiff does not have a place of residence (residence) or location on the territory of Ukraine registered in accordance with the procedure established by law and does not have property located on the territory of Ukraine in an amount sufficient to compensate the defendant for possible losses that may be caused by securing the claim, in case of refusal to lawsuits; or
2) the court is provided with evidence that the claimant’s property status or his actions regarding the alienation of property or other actions may complicate or make impossible the execution of the court’s decision to compensate the defendant for damages that may be caused by securing the claim, in case the claim is rejected.
As a rule, counter-security is carried out by depositing funds in the court’s deposit account in the amount determined by the court. If the claimant, for good reasons, is not able to deposit the corresponding amount, counter-security can also be provided by:
1) provision of a bank guarantee, surety or other financial security for the amount determined by the court and from a person approved by the court, about whose financial capacity the court has no doubts;
2) taking other actions determined by the court to eliminate potential losses and other risks of the defendant related to securing the claim.
The amount of counter-security is determined by the court taking into account the circumstances of the case. At the same time, the measures of counter-enforcement of the claim must be commensurate with the measures of securing the claim applied by the court and the amount of damages that the defendant may suffer in connection with the enforcement of the claim.
If the person, according to whose statement the measures for securing the claim were applied, does not fulfill the requirements of the court regarding the counter-security within the term determined by the court, the court cancels the decision on the security of the claim and on the counter-security.
An application for securing a claim is considered by the court no later than two days after its receipt without notifying the parties to the case. Depending on the type of security, the court is asked to seize real estate, prohibit any registration actions related to real estate, etc. The court, when considering an application for security of a claim, may summon the person who submitted an application for security of a claim to provide explanations or additional evidence confirming the need for security of a claim, or to clarify issues related to counter-security. In exceptional cases, when the explanations and evidence provided by the applicant are not sufficient for the consideration of the application for securing the claim, the court may appoint its consideration in a court session with the summons of the parties.
As we can see, the most important thing in this story is to approach the preparation of documents in a reasonable manner and explain in detail all the circumstances, indicate all the necessary references, provide as much evidence as possible, so that the court does not doubt the fictitiousness of the submitted documents. The decision to secure the claim becomes legally binding and enforceable from the moment it is signed, but from this day it can be challenged within 15 days by filing an appeal.
Can the court refuse to enforce the claim? Yes, of course, and it can depend on many nuances, from whether the court fee has been paid, whether the requirement for counter-security has been fulfilled, to how well-founded the statement of claim is as a whole and the statement of security for the claim separately. In the case of a court’s refusal to secure a claim, it is necessary to look at the reasons for the refusal, and depending on this, either correct the deficiencies and re-submit an application for securing the claim, which is not prohibited, or appeal the refusal decision to the appeals court. But it should be noted that this is time that sometimes does not exist. In some cases, it may be easier to file a claim on behalf of another person or for other reasons and ask for security under a new claim.
If earlier the court itself sent decrees on the seizure of property for execution, then recently there is not a single practice when courts do send such decrees for execution, but registrars send them back to the court, noting that for registration actions to encumber property one needs to pay 0.05 subsistence minimum for able-bodied persons, which for 2024 is UAH 151.40. Therefore, it is not necessary to sit with the feeling that you have done everything you could, having submitted a statement on securing a claim. There is a third pitfall in this. Therefore, we recommend that you obtain a decision to secure the claim in person and personally take it to the state registrar to secure the encumbrance.
In general, we recommend that, in the event of a legal dispute, you inquire in court as often as possible about what is happening with the case. Currently, the Diya application is very helpful in this, which pulls up all court documents for the RNOCPP, but sometimes it is delayed by a day or two, and in some cases, every working hour counts for the case.
In any case, it should be noted that litigation is time and money. Therefore, taking into account the mentioned pitfalls and this circumstance, weigh all the pros and cons before starting a lawsuit.
The way recommended by us can be considered as an option in which the owner of the property blackmails the bank, pointing out the delay of all processes and the risk that part of the property will be transferred to another owner, or buys time to, for example, find funds and settle with the bank on the loan by concluding an agreement. It should be noted that banks agree to an agreement with the debtor in many cases, realizing that it is more profitable to receive some amount from the bank now than to go to court for several years, and then go through the enforcement procedure. In our practice, there was a case when the apartment, which was under mortgage and the debt for payments for it, respectively, in the amount of almost 60 thousand dollars, was written off by the bank for 25 thousand dollars, the loan was closed, the apartment remained in ownership.
