This study was conducted to analyze the legal challenges arising from the exercise of rescission rights in real estate transactions, particularly in light of Note 1 of Article 1 of the Law on the Requirement to Register Real Estate Transactions. The central question is whether the doctrine of ‘waste in law’ (talaf-e ḥokmi), can provide a coherent solution, consistent with fundamental principles of private law, to resolve the conflict between a rescission right holder's claims and the rights of bona fide third party? This conflict becomes particularly acute when the subject matter of transaction has been officially transferred to a third party after the right of rescission has accrued. In addressing this legal dilemma, the legislator , drawing upon the legal-jurisprudential foundations of ‘waste in law’, has established a dual mechanism whereby, in certain cases, either restitution in kind (recovery of the asset itself) or a claim for its current fair market value may be pursued. However, the interpretation and implementation of this remedy face significant challenges, including conflicts with fundamental principles such as relativity of contracts, legal autonomy of transactions, and legal certainty derived from official registration.
The findings of this study reveal that in certain circumstances, the holder of the right of rescission may reclaim the actual property from a third party without having officially and explicitly exercised such right; a situation that conflicts with principles of ownership stability, protection of bona fide third party, and public trust in the official registration system. This study, employing an analytical-descriptive methodology and drawing upon jurisprudential, legal, and comparative foundations, ultimately proposes three remedial mechanisms: First, mandating actual and formal exercise of rescission by the transferee as a prerequisite for recovery; Second, compensating bona fide third parties in cases where the property is restored; and Third, enhancing informational transparency and implementing warning systems in the transaction registration process. These reforms can safeguard the rights of the rescission holder while ensuring a balanced protection of interests and legal security for all other stakeholders.