From the perspective of foreign firms and individuals, acquiring real-estate investments in Spain may be an interesting economic proposition given the circumstances, large number of available properties, and affordable prices.<\/p>\n
However, before acquiring real estate in Spain, it is useful to understand the unique Spanish Registration System. \u00a0The Spanish Registration System (\u201cLand Registry\u201d) is mixed<\/strong>, unlike those in most of Spain\u2019s neighboring countries. \u00a0The Land Registry combines elements of the two most prevalent registry systems: \u00a0the German and French Systems. \u00a0As a result, the Land Registry in Spain\u00a0provides an important protection of rights for property registered<\/strong>, which allows an owner of property in Spain to assume an advantageous position.\u00a0 For this reason, we highlight the Land Registry as an added incentive to foreign investment in Spain.<\/p>\n The Mortgage Act (\u201cLey Hipotecaria\u201d) (LH), approved by Decree on February 8, 1946, and its accompanying Regulations (\u201cRH\u201d) primarily regulate the Land Registry.\u00a0\u00a0The Land Registry is the legal institution that publicizes ownership and other property rights<\/strong>\u00a0for real property and protects such assets and rights through registration. \u00a0Article 2 of the LH outlines certain relevant property concepts:<\/p>\n Article 7 of the RH permits the registration of other titles over other rights or acts with actual nature or significance not yet established. \u00a0Merely possessing property, however, does not lead to a right to register it. \u00a0(Article 5 LH).<\/p>\n Those persons who are legitimately entitled to register property, according to Article 6 LH, include: \u00a0a person who acquires the right, a person who transfers the right, and a person who has an interest in the registration of the right.\u00a0 Representatives of these individuals can also make registrations.<\/p>\n The registrar, after receiving an application for registration, must verify whether the title meets the legal requirements, approving or rejecting the registration.\u00a0 This decision-making process may or may not give rise to entry of the property into the Registry.<\/p>\n These basic questions lead us to discussion about the more specific, protective features of the Land Registry.<\/p>\n First, registration is generally declarative (i.e. the legal transaction in question exists independently from the question of registration of property).\u00a0 The Land Registry operates, then, only as an advertising medium and a protection\u00a0erga<\/i>\u00a0omnes\u00a0<\/i>(toward everyone). \u00a0If a person seeks protection from third-party claims, he or she should pursue registration.\u00a0 In most cases, registration is voluntary and not by force (rogatory principle).<\/p>\n However, this voluntary nature of registering property in the Land Registry does not apply in all cases. \u00a0In some special cases, there are certain titles that if not registered may not be recognized.\u00a0 The registration is constitutive. \u00a0Among these special cases, the most important one is the mortgage (Articles 1875 CC\u00a0 and 145 LH). \u00a0If a mortgage exists but does not appear in the Registry, there is no legal remedy between the parties or for third parties. \u00a0It is, therefore, of vital importance to comply with the formality of publicly establishing the mortgage deed and then recording the writing in the Registry to establish validity. \u00a0Additionally, any agreement that affects the mortgage requires registration. \u00a0Other real rights such as a pledge without displacement or surface rights also require constitutive registration.<\/p>\n Once the registration is correctly complete according to certain principles, the registration produces certain favorable effects for the beneficiary of the registration.\u00a0 These principles include\u00a0:<\/p>\n Other principles:<\/p>\n The\u00a0principle of legitimacy\u00a0<\/b>also applies.\u00a0 The real registered rights are presumed to exist and belong to the titleholder whose name appears in the relevant entry. \u00a0Furthermore, whoever has the registered right is presumed to hold possession of the same for the entire term of the entry (adding that of the previous titleholders). \u00a0Both of these presumptions are rebuttable.<\/p>\n Similarly, the\u00a0principle<\/b>\u00a0of public<\/b>–<\/b>faith registration<\/b>\u00a0is significant. \u00a0This principle provides that the third party who purchases (1) in good faith (third-party mortgage) (2) for valuable consideration (3) the property of a person apparently entitled to convey title and (4) inscribes his or her right in the Land Registry receives protection of theiuris et de iure<\/i>\u00a0(non-rebuttable presumption). \u00a0The purchase will remain in the terms that appear in the Registry, which gives the purchaser an unassailable position before everyone else.<\/p>\n A determining factor for registration protection is the existence of the purchaser in good faith.\u00a0 The meaning of good faith in this context refers to the belief that the person who gave the right to the property was the owner and could convey it.\u00a0 Contrastingly, lack of good faith or bad-faith circumstances invalidate the title of the transferor.\u00a0 Thus, for practical purposes, it gives a significant benefit to the third party.<\/p>\n For example, consider the situation where a person acquires the property of another who appears to be the owner of it in the Land Registry, and the person acquiring the property is unaware that the contents of the Register do not conform to reality (always presume lack of knowledge).\u00a0 If the acquisition is burdensome and the purchaser registers the transaction in the Land Registry, the purchaser will continue to own the property even after a judicial declaration that whoever sold it had no ownership right, for reasons not stated in the Register.<\/p>\n On the other hand, considering the\u00a0principle of legitimacy,<\/b>\u00a0for practical purposes significant benefits are also reported \u2013 especially on procedural aspects (i.e. when acting in a judicial process).\u00a0 Where the presumption of being the holder of the right exists, the burden of proof disappears. \u00a0Then, the property owner must simply submit a registration certificate. \u00a0In addition, the owner acquires the standing to bring claims and raise defenses to defend his or her rights simply by appearing as owner in the record. \u00a0The owner, therefore, has standing to bring claims and raise defenses on issues of repossession, actions to quiet title, and other special actions. \u00a0Exceptions may apply under liens, executive judgments, and means for collection when attempting to execute property where the defendant is a person other than the registered owner of the property.<\/p>\n In this way, the benefits associated with registering real-property rights stand out to a potential foreign investor. \u00a0These potential dealings with the Spanish Land Registry underscore how important it is to know the specifics to receive the maximum protection and security for the investments. \u00a0Otherwise, if the foreign investor follows other steps, he or she may encounter a situation of uncertainty and insecurity that may lead to a significant lack of protection against third parties of rights in question. \u00a0Article 32 LH states that property rights not duly registered do not harm others\u00a0(unenforceability<\/b>\u00a0principle),<\/b>\u00a0so third parties can attack the position of the owner \u2013 even on the existence of the right as in the case of a mortgage.<\/p>\n For all of these reasons, we recommend that when purchasing property in Spain all foreign investors seek proper counsel competent to handle these real-estate matters.\u00a0 Proper counsel can ensure effective registration of the property with the Land Registry as well as help shield investors with the appropriate legal protections to avoid unexpected situations.<\/p>\n Gonzalo Hurtado & Marina Bugallal<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":" From the perspective of foreign firms and individuals, acquiring real-estate investments in Spain may be an interesting economic proposition given the circumstances, large number of available properties, and affordable prices.<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1064],"tags":[],"class_list":["post-2899","post","type-post","status-publish","format-standard","hentry","category-pubications"],"yoast_head":"\n\n
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