A popular instrument for securing the ranking in the land register in the course of an intended but not yet completed sale or pledge of a property is the entry of the ranking in the land register. Once this has been done, no one can claim that they are unaware of the circumstances revealed by the ranking order.

The classic ranking order is granted in such a way that the court issues a ranking order in a single copy. Whoever holds this order in their hands is protected – e.g. in the event of a planned sale of the property – against dispositions by the (current) property owner.

Section 57a of the Land Register Act (GBG), which was introduced with the 2012 Land Register Amendment, also makes it possible to note a specific person as the beneficiary. This is referred to as a name ranking order. As the entitled person is then already entered in the land register, it is no longer necessary to submit the ranking order to take advantage of the ranking order.

In addition to the owner, the person in whose favor the subordination is to be noted is also entitled to submit an application (§ 57a Para. 2 GBG). The latter naturally requires a declaration of consent from the owner, a declaration of subordination. A professional party representative (notary, lawyer) can also have an annotation of the order of priority issued in his name as trustee, whereby the capacity as trustee must be expressly stated both in the application and in the annotation (trustee order of priority). Such a ranking order can be used more easily because no proof of the transfer of the ranking order is required for the registration of the noted right for a client of the party representative.

The aim of the 2012 amendment to the Land Register and also of Section 57a GBG was to push back the paper-based settlement and the obligation to resubmit the subordination decision in the event of utilization in paper form.

However, the legislator was only partially successful in two respects:

First of all, pursuant to § 54 GBG, only one copy of the resolution approving the request for subordination is to be issued, which is provided with the confirmation of the executed annotation. § Section 57a GBG refers to the fact that Sections 53, 55, 56 and 57 GBG apply. However, § 57a GBG is silent on § 54 GBG.

Now one could assume on the one hand that § 57 GBG does not cite § 54 GBG because it is not to be applied with a proviso but in full, or on the other hand assume that it is not to be applied at all, which is why the ranking order is to be prepared and served in accordance with the general rules.

This ambiguity led to practice developing away from the original idea pursued in the 2012 Land Register Amendment. Particularly in the banking sector, the recipient of the single copy of the resolution was included in declarations of subordination. In turn, some land registry courts took this as an opportunity to also produce ranking orders by name and trustee in paper form and send them to the specified recipient.

Thus, despite the original intention to reduce the number of paper-based settlements, ranking orders are still being produced which have no function whatsoever in the case of registered and trustee ranking orders because it is not necessary to submit the ranking order in order to take advantage of the ranking order in the case of registered and trustee ranking orders.

For a long time, there were also inconsistent answers to the question of how a registered or trustee ranking order can be deleted before its term expires, despite the statutory provision in Section 57a GBG. However, this statutory provision is admittedly limited to a reference to Section 57 GBG, which is to be applied with the proviso that the copy of the order does not have to be submitted.

According to the Supreme Court (5 Ob 217/15w of 25.01.2016), this provision also applies to the deletion of the annotation of a ranking order, which is why this does not require “one” copy of the ranking order to be submitted.

Nevertheless, according to Section 31 para. 1 GBG, the incorporation can only be carried out on the basis of public deeds or private deeds on which the signatures of the parties have been certified by a court or notary. The declaration of consent required for the deletion of a registered or trustee ranking order pursuant to § 57a GBG, which must be submitted with the application of the owner or the entitled party (depending on whether the application was submitted by the owner with the consent of the entitled party, by the entitled party with the consent of the owner or jointly), is one of the documents specified in §§ 27, 31 GBG. The signature must therefore be certified by a court or notary. The application itself is also one of the documents listed in § 27 GBG and therefore requires certification by a court or notary.

However, as the Supreme Court also recognizes, lawyers and notaries do not have the option of submitting a conventional, notarized and signed application electronically. The trustee must therefore declare his consent in a separate document.

According to the Supreme Court, this is the only way to ensure that no security gaps arise. Moreover, this solution should not stand in the way of the objectives of the Land Register Amendment. The intention was only to reduce paper-based processing and not to make things easier for legal practitioners by dispensing with the basis for registration.

Even if the order of precedence is deleted prematurely, the paper form is therefore retained for the time being.