I. About This Article
Property registration based on a gift agreement is important when real estate is transferred from one person to another free of charge and ownership must be registered with the Public Registry.
Gift agreements are often used to transfer property between family members, relatives or close persons. However, in the case of real estate, agreement between the parties alone is not sufficient. Ownership arises through registration with the Public Registry.
The role of the Public Registry in this process is especially important. According to the practice of the Supreme Court of Georgia, the Public Registry is not merely an institution for recording rights. It is also the legal basis for creating rights subject to registration, because a right over immovable property arises from the moment of registration.
In practice, problems in property registration based on a gift agreement often arise when the agreement is not properly drafted, signatures are not correctly certified, the property identification data does not match the registry record or the parties do not assess tax consequences in advance.
This article will help you understand what documents are required for property registration based on a gift agreement, where to apply, what timeframes and fees apply, when the Public Registry may request additional documents and what the parties should consider before signing the agreement.
II. What Is a Gift Agreement?
A gift is a legal relationship between two parties – the donor and the donee – where the donor transfers property to the donee free of charge and the donee agrees to receive that property.
A gift is a gratuitous transaction. This means that the donee does not pay a price to the donor and does not assume a counter-performance obligation in exchange for receiving the property.
This is the key difference between a gift and a sale and purchase agreement. In a sale and purchase transaction, property is transferred in exchange for payment of a price, while in a gift transaction property is transferred free of charge.
For more information about paid transfer of property, see our blog: Sale and Purchase Agreement – What Businesses Should Know About Defective Goods, Payment of Price and Withdrawal from Contract.
III. When Does Ownership of Real Estate Arise in Case of a Gift?
A gift agreement over immovable property is considered concluded from the moment the ownership right defined by the agreement is registered with the Public Registry.
This means that transfer of ownership over real estate is not completed merely by signing the agreement. Registration of ownership with the Public Registry is required.
The Supreme Court of Georgia treats the Public Registry as an important institution for the security of civil circulation. Data registered with the Public Registry benefits from a presumption of accuracy until such data is declared invalid, void or ineffective in accordance with the procedure established by law.
Therefore, ownership registration based on a gift agreement is a necessary legal stage for the creation of ownership rights over real estate.
IV. In What Form May a Gift Agreement Be Concluded?
A gift agreement may be concluded in notarized form or in simple written form.
If a gift agreement is concluded in simple written form, the signatures of the parties must be certified by an authorized person of the House of Justice or the National Agency of Public Registry.
In the case of a gift of real estate, it is important that the agreement correctly indicates the identification data of the property, data of the parties, the subject matter of the gift and the parties’ will to transfer and receive ownership free of charge.
If the gift agreement contains unclear wording, incorrect cadastral data or imprecise formulation of the parties’ will, the Public Registry may suspend the registration proceedings or request an additional document.
V. Who May Request Property Registration Based on a Gift Agreement?
An interested person may apply to the Public Registry for registration of ownership based on a gift agreement.
Such interested person may be the donor or the donee. In practice, the donee usually has the main interest in registration, because ownership must be registered in the donee’s name.
To request registration, a properly certified gift agreement and other registration documentation are required.
The parties should determine in advance who will manage the registration process, who will pay the service fee and within what timeframe registration should be completed.
VI. Where Should Property Registration Be Carried Out?
For registration of creation, amendment or termination of ownership based on a gift agreement, the interested person should apply to a territorial office of the National Agency of Public Registry, the House of Justice, a notary or another authorized person.
The application is completed in the relevant electronic program directly by the operator receiving the documents.
In practice, before registration, it is advisable for the parties to check the property extract from the Public Registry, cadastral data, legal restrictions, mortgages, seizures or other entries that may affect ownership registration.
VII. What Documents Are Required for Property Registration Based on a Gift Agreement?
As a rule, the following documents are required for registration of ownership based on a gift agreement:
an application completed in the relevant electronic program; a copy of the identity document of the interested person; a properly certified gift agreement; and proof of payment of the service fee.
If property registration is connected with an amendment to the gift agreement or cancellation of the gift, the relevant agreement or document confirming cancellation of the gift is also required.
The registration document must give the right to request property registration and must contain the data necessary for identification of the real estate and the parties.
VIII. What Are the Timeframes and Fees for Property Registration?
Registration of ownership based on a gift agreement is usually completed within 4 business days.
The standard service fee is GEL 75.
Expedited services are also available. The fee for service on the day of submission of the application is GEL 300, while the fee for service within one business day is GEL 220.
Calculation of the registration period begins on the day following submission or registration of the application and ends upon expiry of the last day of the period. If the service must be provided on the day of submission of the application, the period ends at the end of the same day.
If the last day of the period falls on a holiday or non-working day, the next business day is considered the last day.
IX. What Happens If Property Registration Is Carried Out Through a Representative?
If an interested person wishes to carry out registration through a representative, a document confirming representation authority must also be submitted.
This may be a properly certified power of attorney or another document confirming representation authority.
A copy of the representative’s identity document is also required.
Registration through a representative is practical where one of the parties is not present in Georgia, cannot visit the Public Registry or wants the procedure to be managed with the assistance of a lawyer.
X. What Additional Documents May the Public Registry Request?
In a specific case, the National Agency of Public Registry may request any additional document or information necessary for registration of ownership.
According to the practice of the Supreme Court of Georgia, the registering authority is entitled to request an additional document or information related to the registration proceedings where this is necessary for making a decision on the matter requested in the application.
If the application is not accompanied by the necessary document or information required by law, the registering authority may adopt a decision suspending the registration proceedings.
If the requested document or information is not submitted within the suspension period, the registration proceedings may be terminated.
For this reason, it is important to check the accuracy of documents in advance before registering property based on a gift agreement.
XI. When May a Right Registered Based on a Gift Agreement Be Amended or Terminated?
Ownership registered based on a gift agreement may be amended or terminated if there is a relevant legal basis.
For example, the parties may enter into an amendment to the gift agreement or an agreement cancelling the gift, provided that there is a legal basis for doing so.
A gift may be cancelled where the donee seriously insults the donor or shows gross ingratitude toward the donor or the donor’s close relative. In such a case, if the gift is cancelled, the donated property may be reclaimed by the donor.
A gift may be cancelled within one year after the donor becomes aware of the circumstance giving the donor the right to cancel the gift.
The issue of reclaiming the gifted item may also arise if, after the gift, the donor falls into a difficult financial situation and cannot support the donor or dependants, but only if the item actually exists and its return would not place the donee in a difficult situation.
XII. What Tax Issues Should the Donee Consider?
Real estate received as a gift may have tax consequences.
Under the provided material, the donee is taxed at 20% of the value of the real estate received as a gift, except where the donee is a first or second line heir of the donor, such as a child, spouse, parent, sister or brother.
If the donee is a third or fourth line heir of the donor – for example, a grandparent, uncle or aunt – taxation applies if the value of the real estate received as a gift is GEL 150,000 or more.
Tax consequences may depend on the specific circumstances. Therefore, before signing a gift agreement, it is advisable to separately assess tax issues.
XIII. What Should the Parties Consider Before Signing a Gift Agreement?
Before signing a gift agreement, the parties should check the legal status of the property.
It is important to determine whether the property is owned by the donor and whether it is subject to a mortgage, seizure, right of use, dispute or another registered restriction.
The parties should also consider that the donor is not entitled to gift property if, by doing so, the donor deprives himself or herself, or dependants, of means of subsistence.
A gift agreement also cannot be concluded on behalf of a person under guardianship or custody.
If a gift is used not for real gratuitous transfer, but to conceal another transaction, such as a sale, debt or security relationship, risks related to validity or sham transaction may arise.
For more information about this issue, see our blog: Unlawful Transaction – When Can a Contract Be Declared Void?
XIV. How TB Legal Can Help
Within our contract law services, TB Legal assists individuals and businesses with preparation of gift agreements, review of Public Registry records, preparation of documents required for ownership registration, management of registration through representation and assessment of legal or tax risks related to gifts.
Our approach is based not only on knowledge of the technical registration procedure, but also on prior assessment of the legal status of the property, the parties’ purpose, the content of the agreement, Public Registry requirements and possible dispute risks.
If you plan to gift real estate, register property received as a gift or have already received a request from the Public Registry for an additional document, it is important to obtain legal advice before the registration process is completed.
XV. Conclusion
Property registration based on a gift agreement may be a short and practical procedure if the agreement is properly prepared and all registration documents are fully submitted.
However, in the case of a gift of real estate, creation of ownership rights is connected with registration with the Public Registry. Registration is what grants the donee ownership over the real estate.
The parties should check in advance the legal status of the property, the form of the gift agreement, tax consequences and whether there is any circumstance that may delay registration with the Public Registry.
Contact TB Legal if you need preparation of a gift agreement or registration of ownership based on a gift agreement. We will help you prepare the documentation and manage the process properly.
XVI. Sources Used
This article is based on the following sources:
- Provisions of the Civil Code of Georgia regulating gift agreements.
- Guidance documents of the National Agency of Public Registry.
- Law of Georgia on Public Registry.
- Supreme Court of Georgia, case No. BS-825(K-22), 11 September 2024, Tbilisi.
- TB Legal’s practical experience in real estate, Public Registry and contract law matters.
Disclaimer
This article has been prepared for general informational purposes only and does not constitute individual legal advice or a legal opinion. The issues discussed in this article may be assessed differently depending on the legal status of the specific property, the form of the agreement, the status of the parties, registration requirements, Public Registry requirements, tax consequences and relevant documentation.
Before making a decision in a specific matter, it is recommended to obtain individual legal advice from a qualified lawyer.
