RECOGNITION OF INVALIDITY OF THE DONATION AGREEMENT CONCLUDED FOR THE PURPOSE OF AVOIDING THE APPLICATION FOR RECOVERY OF PROPERTY

 In practice, there are many cases when the debtor, in order to avoid foreclosure on his real estate, reissues it to relatives by concluding a gift agreement with them. Under such an agreement, the real estate is transferred to the ownership of another person free of charge, and therefore this method of re-registration is as simple and budget-friendly as possible.

 However, today the Supreme Court has already formed a position on recognizing such agreements as fictitious. Creditors, such as banks, are more likely to initiate litigation. The courts satisfy the claims of creditors for the recognition of a fictitious gift agreement concluded between the debtor and his relatives in order to avoid foreclosure on real estate.

What do the courts pay attention to, and under what conditions do they satisfy such claims?

 The law defines the concept and conditions of a fictitious transaction. Its main features are:

• misleading (before or at the time of the agreement) another participant or a third party regarding the actual circumstances of the transaction or the actual intentions of the participants;
• conscious intention not to fulfill the obligations of the contract;
• concealment of the true intentions of the participants in the transaction.

 The conclusion of an agreement, the content of which contradicts the requirements of the law, as it is not aimed at the actual occurrence of the legal consequences caused by it, is a violation and is the basis for declaring it invalid. However, it is extremely difficult to prove the authenticity of the intentions of the parties to the donation agreement in such cases, as in most cases the participants are close relatives.

Therefore, in such cases, even if the true intentions are not proven, the courts pay attention to the following conditions:

When concluding a contract of gift, the party donating the property was aware of the existence of a court decision to recover the debt, ie the presence of a significant property obligation to the creditor, and therefore could foresee negative consequences for themselves in case of execution of such judgment and appeal foreclosure on this real estate;

Actions for the donation of real estate committed in a short period of time after the court decision on debt collection;

As a result of concluding such an agreement, the debtor has no other immovable property in his property, which can be recovered;

The disputed agreement is concluded between close relatives, after the property obligation of the donor, who continues to actually own and use the donated real estate, is registered there, and the gifted did not provide evidence of residence and use, custody of the donated real estate.

 Under such conditions, the courts conclude that in reality such transactions are aimed at fictitious transfer of ownership of real estate to close relatives, in order to hide such property from execution in the future at his expense by a court decision to recover money. The courts consider the actions of a person who enters into a fictitious transaction in order to avoid foreclosure as an abuse of property rights, as the owner uses the power to dispose of property to the detriment of the property interests of the creditor. The position of the courts in this regard is that the gift agreement cannot be used to avoid payment of the debt. The actions of the debtor (donor) and persons who have entered into such a gift agreement in this case are unfair and are an abuse of rights against the creditor, as they enter into a gift agreement that violates the property interests of the creditor and aims to prevent foreclosure on the debtor's property.