Hidden charges and overriding interests

1. Are there any such hidden charges in your system? If so, please list them, and explain how a buyer can discover them. Explain if there is any simple way that the property can be freed from them.

Spanish land registration system present these main features:

• Registration is not constitutive, is not part sof the transmission process (exceptions: mortgage, superficies right)
• Registration is not compulsory.
• But, registration provides strong effects and benefits.
  • It applies the curtain principle. Integrity. No registered Ownership or other limited property rights can not prevail over the registered title. For a buyer is enough to check land registry since what is not in the registry wont affect is right.
  • It also applies the insurance principle. The land registry is liable for its mistakes.
  • It provides positive effect. A buyer who acquires ownership from a registered seller will be always protected unless it is proof  a breach of  his good faith. Bona fides  effect.

Land registry publicity vests the property right  with the erga omnes effect.

The System is based in trust on the registry information which is backed by the State guarantee and the law.

However, there are a few property limitations that persist in our system, and which could be considered as hidden charges, for the only reason that it is not compulsory their registration: The publicity of the own legal acts is enough to guarantee their acknowledgement. That means, in fact, these burdens can be easily known by consulting the Spanish Law, and are not real hidden charges.

Authors traditionally distinguish between public limitations on the property, which are not considered as external limits to the constitutional right of property, but characters that delimit its content (the property definition in art. 33 CE mentions this kind of limitations –the social function of these rights shall determine the limits of their content, in accordance with the Law); and limits, that are external burdens to the property established by administrative and civil Laws.

This fact sheet will try to identify the most relevants situations through the different questions posed in the following chapters.

A)    Cases where the effects of the land registry do not apply, and are suspended  during a period of time.

1. A buyer who acquires from a first registration title owner, will not be protected by the positive effect, since the first registration process of a title includes registrar edicts and publications together with a two years vacatio effect, enabling third parties during two years from  the registration date to contest the title before the courts  (article 205 and 207 Ley Hipotecaria – Mortgage Act 12/Feb/1861  www.mjusticia.gob.es/cs/Satellite/es/1215198252168/DetalleInformacion.html
2. Same limitation of bona fides effect occurs when the acquisition is from a registered owner whose title comes from a succession where no forced heirs where called. In order to enable the clawback effect, the new owner wont be protected during  two years starting from the date of the death of the deceased. (article 28 Ley Hipotecaria)

B)    Public domain  (Land or immovable assets owned by State and devoted to public use or a public service) According to law, these assets are not needed of publicity and so , until recent times, they were not suitable for registration. No private ownership can be acquired over public domain, nor even if it is registered as a consequence of an illegal occupation and even registration of a private title on those assets. (unfortunately this can happens in those cases where boundaries of public domain are not clearly and publicly fixed:

1º Ley de Costas states that all land included in the line drawn by the maximum equinoctial tide  is  public maritime domain.

2º Cattle tracks.- ( vias pecuarias)

3º Public  mounts and forests. ( monte vecinal).

C)    Hidden  limited property rights.-

1º Statutory easements (Servidumbres legales).- Servitutes existing by disposition of law. Although they don’t need to be registered, the law describes the factual situation between two properties that entail the existence of the easement. They are regulated by the Civil code , articles 549 and  followings, and they are:

• Easement relating to waters ( articles 552 to 563)
• Right of way  ( arts.  564 to 570)
• Party wall easements ( art. 571 to 579)
• Easement of light and view ( art. 580 to 585)
• Easement for the drainage of buildings ( arts 586  to 593)

2º Leases:

Although the lease is not a proper property right, five year  or more long leases can be registered.  However, as registration is not compulsory, leases could be not, and often they are not, registered. In order to protect the tenant position, law confers him several rights against third party, even in the case the lease is not registered:

• Lease of a house, flat or apartment will prevail during, at least, five years, even if it is not registered, so a new owner must respect the not registered lease for the remaining time since his acquisition.
• Tenant are granted by law with a pre emption right. In case of disposition of a leased property, seller must give notice to the tenant to enable his right.
• An owner who acquired his right due to a pre emption right as former tenant, can not dispose his ownership in the two years following his acquisition.

The relevant regulations: Urban leases act 24- December. 1994

Rural leases act.

Five year or more leases can be registered in the land registry but the often are not. There is not a registry of leases. It must be checked the absence of occupancy directly in the property.

3º Statutory pre emption righs.-

The public interests also impose some legal restrictions to the acquisition of the property, which consists in a pre-emption right to acquire the property. That is the case of the Mountains, 10/2006 Law (art. 25) -Autonomic Communities and Public Administrations have a priority acquisition right in case of transmission of public mountains or properties nearby public mountains-; National Parks, 5/2007 Law -Public Administration has a priority acquisition right in case of transmission of any right in lands included in National Park Areas (art. 13)-; Natural Special Protection Areas, 16/2007 Law: -Autonomic Communities have a priority right in case of transmission of any right in lands included in those areas. A previous notification is required (art. 39)-; and several Autonomic Urban Laws, in case of acquisition of lands or flats included in priority rights zones.

Also, in the former cases of Public Administration pre-emption rights, the above mentioned Laws establish the obligation of make certain notifications as a previous requirement to the access to the Land Registry. So that even if the burden is not published in the Register because it emerges directly from the Law, a compulsory requirement to the registration of the deed is demanded, and purchaser is aware and save of any other limitations on his new acquired property. That is, the purchase deed will not be registered in the Land Register if the previous notification has not been made.

In case of located lands or flats, the tenant has also a priority acquisition right, and the previous notification is compulsory to the registration of the deed, in the same way it was formerly said (Urban Leases 24/1994 Law, Land Leases 49/2003 Law).

Art. 1.523 of the Civil Code, establishes prior acquisition rights of the owner of  the adjacent land. Art. 1.522 establishes prior acquisition rights in case of community of property, but in this case, previous notification to the possible prior acquisition is compulsory.

Other limitations are the following:

• In some Foral Rights –that is, the Law that traditionally rules some Spanish regions, such as Aragón, Navarra or País Vasco-, there are some family acquisition rights that are prevalent. That is the case of the retractos gentilicios, which try to preserve the land property in the family. The family member has a pre-emption right to the property, but always with the previous obligation of paying the price of the purchase.

It is important to mention that all these public and private prior rights, cannot be exercised in any time. Spanish Laws establishes a time for their exercise, so that when this time is passed, the prior right cannot be used, and land property turns free.

Nonetheless, Spanish legislator is trying to strengthen the publicity of legal restrictions to the property, so that legal dispositions ordering the registration of these limitations are increasing. I.e, the last reform of our Urban Law (Real Decreto Ley 8/2011, July 8th), establishes the obligation of the Administration to communicate the Land Registry the public rights of way, public servitudes, and other special public restrictions. This new legal disposition also compels Municipalities to publish in the Land Registry when a land or building is involved in a legal procedure for urban order restore, so that every person interested in land property may be able to know if there is an administrative limitation on it.

2. Do any of these, or any other similar matters, have priority over a mortgage, where the lender was acting in good faith and was unaware of them? Explain if there is any simple way that the property can be freed from them.

The only matters that have priority over a mortgage, are the payment of the Land Tax (Impuesto sobre Bienes Inmuebles,( art. 194 Ley Hipotecaria), the costs of the property in condominium (art. 9.1.e Ley de Propiedad Horizontal 49/1960), and The Minimun Interprofessinal Salary, is the amount established in art. 32.4 Estatuto de los Trabajadores.:

1º Tacit legal mortgage.- ( Hipoteca legal tácita). There is a yearterm local tax for immovable assets imposed to the owner. The asset itself is burden with a mortgage established by law and no needed of registration, to cover current year and the previous one tax amount. This mortgage has priority over  any other, and the obligation passes to the new owner who will suffer the mortgage on the property. If the previous owner has not paid the local Tax of Land Property (Impuesto sobre Bienes Inmuebles), the land or construction is charged by this payment, but only to a certain amount (the last year tax and the current year tax). However, the accreditation of this payment is compulsory when entitling the purchase, or in other case, the Notary must alert the new owner.

2º Condominium expenses.-In case of a building, if the  property is  divided in different  flats, apartments or venues , a condominium ( see specific fact sheet) is created by disposition of law, and all flat owners must contribute to the maintenance costs of the building. Credit deriving from failing in the payment of the condominium expenses in the current year and the immediate year before are preferent,  has priority to anyother,  and is attached to the flat’s ownership, who ever the owner is. The debt passes automatically to the new owner when ownership is transferred. The costs of the property in condominium, in case of purchase of flats are established in art. 9.1.e) Ley de Propiedad Horizontal 49/1960.

To prevent this situation, law establish an obligation for the seller to obtain a certificate from the administrator of the building expressing the account’s state of a certain flat before selling it. The failure in this obligation does not block the registration of new ownership. The buyer can also waive his right of  getting this information.

3º Privileged Salaries. A credit against the owner derived from salaries owed to his employees has also preference over a mortgage to certain amount. The Minimun Interprofessinal Salary, is the amount established in art. 32.4 Estatuto de los Trabajadores. The debt that has priority over a mortgage is limited by Law (the costs of the former and the current year, in the two first cases, and thirty days of salary in amount not superior to the minimum legal salary. In case of judicial claim of salary, an amount equal to thirty days of remuneration not superior to the minimum legal salary has priority over a mortgage, but this limitation do not affect third bona parties if the judicial procedure was not registered before the purchase and they were not notified in the judicial procedure (art. 32.4 Estatuto de los Trabajadores).

However, it is almost impossible to be unaware of them, due to the legal system formerly explained: Before entitling, the former owner/seller must prove its  payment. In case of laboral claim, third bona fide parties are protected by the Land Register, if the judicial procedure was not registered before the purchase and they were not notified in the judicial procedure.

In adittion, mortgagees usually establish as a condition to lend the money, the anticipate expiration of the mortgage in this cases, as well as the obligation of the owner to pay these taxes and costs during the mortgage. Mortgagees also must be required in the judicial procedure started to claim these quantities; otherwise, priority becomes inefficient.