Legal effects of Registration

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A) Internal effects: effects to the right itself and the entitlement

a) Registration and the process of transfer/acquisition of property rights

Introduction: The role of registration in the transactional process.

 

According to Spanish legal system any transaction, even over real state, can be performed in a free form between parties. From a strict civil law point of view; the transaction is valid even if it is made orally between parties, or in a private document or without compliance with fiscal obligations. From that perspective no one, neither the notary, nor the registry will be needed.

 

However, the Spanish law establishes certain obligations for the parties if they want the sale to take effect against third parties. That is, if the buyer wants to be recognized by anyone else as the owner and the seller wants to get reed from any obligations of the property, such as taxes or any other liability, several rules have to be followed. At this point the registry takes an extremely strong importance.

 

Registration is considered in general as voluntary and declarative. However, due to its strong effects that we will explain after, the registration is extremely encouraged by law. The registry provides the owner with certain presumptions (entitlement and possession) and protects him from based on any contracts or proceeding not registered in which he has not been party.

 

In addition, registration is constitutive for mortgages. The mortgage does not exist until it causes an entry in the Property registry which determines its rank among the several real rights that may charge the same property.

 

Taking this information into account some authors consider registration in Spain quasy-.constitutive as most of the marketable properties ( in terms of money value) is registered.

 

To understand the Spanish land registry system, we have to summarize some basic organizational principles:

 

There is only one kind of registry and therefore, one single registry system for the whole national territory. The registry is organized under the title system which implies that what is registered is the ownership or the right contained on the public or authentic document, not the document or deed itself, which is not archived neither copied in the Land Registry. The title system is as well reinforced with several principles which give the rights published and the information given strong effects.

 

Legal assessment principle: Before registration, the registrar checks compliance with legislation in force is conducted by the registrar by means of Thorough Assessment of:

 

–          The legality of external formal aspects (formalities of the deeds/documents)

–          Capacity and Ability of the parties involved.

–          Validity of Acts and Contracts.

–          Registry related Impediments and Obstacles.

 

The legal assessment of the registrar is considered unrestricted when dealing with Notary and Private documents (foreign or national) but it has nevertheless certain limitations with regard to Judiciary and Administrative documents.

 

Principle of legality: Under article 30 Mortgage Law, “Registration will not include void acts or contracts, in accordance with the provisions of the laws”.

 

Accuracy: The Registrars, in the name of the State guarantee the accuracy of the register and undertakes to compensate those whose rights are adversely affected by an administrative error. Claims for compensation are very rare due to the previous legal control.

 

Chain of title Principle: In two aspects:

 

–          Formal: Each entry rests on the previous one and is foundation for the upcoming.

–          Material: Reflects the chain of material transmissions (conveyance).

 

Priority Principle: The first Deed/Document to enter the LR has exclusive and preferred access to any subsequently submitted one.

 

In addition, the Spanish registry gives a huge amount of information. The Land registry is the central point of information for urbanism process over registered, claims over the property coming from judicial or administrative procedures, and it develops a crucial role as central point of interconnection with other public administrations such as tax collector (registries control the tax payment prior to the registration and in some cases are even entitled to collect taxes) and with cadastre (a tax focus land data-base).

 

Data protection regulation must also be considered. The data protection regulation is very relevant as implies not direct access to the data but necessary control of the legitimate interest and is very restrictive with mass publicity requests.

Registration effects:

According to Spanish civil law, the registered owner is always recognized as the true owner against third parties, with no exception. That means that if “A” wants to buy a house, he just needs to ask to the registrar who the owner is? If the registrar says, “B” is the owner, and “A” buys from “B”, no one (any “C” person) can claim any right against “A”, once “A” has registered his right. The same happens with any charges or encumbrances over the property. The only encumbrances and charges that the new owner is obliged to recognize are the registered ones. That is, if the registered property bought by “A” has no charges according to the registry, no claim over the property, attachment or charge will affect the new owner. The Spanish law considers the claimant responsible for registering his claims against a certain property in the Land registry so that anyone who wants to buy the property can take them into account. These requirements are even stricter for mortgages, which are not valid even between parties if they are not registered, they just do not exist until they are registered in the Land registry.

 

In other words, for any transfer of ownership of a plot of land to produce effect against third parties in good faith, it has to be registered. This implies that when a public document is presented for registration, the registrar has the task to ensure that only legally valid changes are registered. To this end, the registrar will indicate what documentation is required and once presented for registration a legal assessment takes place before the entry is done. Similarly, any interest which affects or limits the ownership rights of the registered owner, such as a mortgage, can also be noted on the register.

 

There are legal rules which regulate the rights and powers of each of these interests in relation to each other and in relation to third parties. For the owner who registered his right the most important principle is the chain title principle. This means that no transfer can be done without the consent of the registered owner or a judicial statement set in a procedure in which the owner has been party. For the third parties who trust in the information published the main principle is the bona fides one, which in this case implies that any party who conveys in accordance with the registry publicity formally issued will be always protected, that means, that the third party will always be kept in his acquisition and no other real right, encumbrance or charge which is not registered can be allege against that third party.

 

b) Effects to legitimize the owner

The owner who has registered his right has full protection according against any attack to it. This protection means that the owner according to the Land Registry.

 

–          Will be considered the true owner of the property, until and unless court rules otherwise.

–          Be protected from the seller’s creditors. Be protected from hidden burdens that might affect the property.

–          Get judicial protection for his right in case others challenge it or disturb his possession.

–          Nobody can acquire any effective rights whatsoever over the property without his consent. Nobody can registrar its ownership of the same property without the consent of the registrar owner or a judicial settlement obtained in a judgment in which the registrar owner has been heard.

 

We have to remind that this protection will work for any physical or juridical person who has any right over any real state set in Spain because according to international law, although the buyer or seller, the creditor or the debtor is a foreign person, the law applicable when it comes to business over real state in Spain is always the Spanish law.

 

This right of the registered owner profit form the following principles:

 

Principle of Register Legitimacy: The Registry is presumed to be accurate and true. Therefore, the registered right holder is entitled to act as such according to the LR

 

The register owner is profits from the following Iuris Tantum Presumption over:

 

–          Existence of a Right

–          The Cause of Acquisition

–          Entitlement

–          Exercise of the Right

–          Extension of the Right

–          Location and boundaries of the properties, only in the case that the graphic representation and the coordinated of the plot have been specifically registered.

 

Article 38 of our Mortgage Law states: For all legal effects, it will be assumed that all real property rights in the registry belong to their holder in accordance with the corresponding entry. Likewise, it will be taken for granted that those in favour of whom the ownership of properties or real rights are registered will also possess these properties or rights.

Therefore no action opposed to the ownership of properties or real rights registered on behalf of a specific entity or person will be exercised, without an annulment or cancelation claim regarding the corresponding registration. The annulment claim will be based on the provision s of the Mortgage law when prejudicing third parties.”

 

Principle of judicial supervision: Under article 31, “The annulment of registrations provided by the aforementioned Article will not be against the right previously acquired by a protected third party in accordance with Article 34”.

 

Chain of title principle: According to article 20 of the Mortgage Law. “In order to register deed that convey acknowledge transfer modify or stinguish ownership or other real rights, the right of the person who grants or on behalf of whom the aforementioned acts are granted has to be written down.

If the rights appears in favour of a different person form the one who grants the transfer, Registrars will reject the required registration. “

Considering the principle of validity accuracy and chain of title, for the registered owner this implies that the information published in the registry according property and burdens over any certain immovable is assumed to be true so that it can only be contradicted by a judicial decision taken by court in a process in which the owner of the rights has been heard, no matter when the entry has been done, the value of the right or any other circumstances.

 

B) External effects: effects to third parties

 

Third parties are subject to principles of opposability- and presumption iure et the iure for third parties in good faith.

 

–          Principle of opposability: According to article 32 of the Mortgage Law:”Ownership deeds or other real property rights which are not duly registered in the in the Spanish Property Registry will not be prejudicial to the rights of third parties.”

–          Iure of the iure presumption principle for third parties in good faith; Indefeasibility principle. Bona fides effect

 

According to article 34 of Mortgage Law; A third party can be transferred rights in good faith for consideration. If the registration allows for this transfer, the acquisition will be maintained once the right has been registered, despite further annulment by virtue of reasons which are not reflected in the Registry.

 

Good faith of third parties is always taken for granted, while it is not proven that third parties are aware of Registry inaccuracies.

Those who acquire gratuitous deeds will benefit from the Registry protection that the transferor had.”

 

Charter of rights of the register user:

 

–          To be serviced by the Registrar in a properly equipped LR Office, compliant with all the requirements to ensure full security and preservation of Registry Books and documents.

–          To obtain Oral Advice personally from the Registrar in charge of the LR Office.

–          To obtain a written/printed report from the Registrar.

–          To obtain a Certification or a LR Extract (nota simple) in less than four days.

–          To obtain information regarding any property located in Spanish Territory.

–          For the Registrar to provide the Notary with adequate information regarding the registered status of a property.

–          To obtain a Proof of Receipt attesting to the submission of a document.

–          For the Registrar to write down on the Diary Book the Submission by the Notary of any documents

–          For the Registrar to assess under his responsibility, the documents submitted for registration in accordance with applicable legislation.

–          To obtain, in case registration is denied or suspended, a written report.

–          To obtain registration of rights applied for in no more than 15 workings days.

–          To not suffer delay in registration or devolution of documents, solely on the grounds of non payment of duties.

–          To appeal against the Registrars decision in case of refusal to register a certain act or contract.

–          For the registered rights, safeguarded by the Courts, not to be nullified or modified by the Registrar.

–          To obtain a detailed invoice of incurred duties.

 

C) Different kinds of registration and its effects:

a) Class of title

There are several, but limited, cases where positive effects of registration are limited because of the entitlement:

–          in relation to inheritance: the effects of registration are suspended for a period of two years from the date of death of the deceased, except in the case of those entries made on behalf of legal or compulsory heirs. The reason for such suspension of effects is the possibility of appearance of wills that were unknown at the time the acceptance and partition of inheritance was formalized, since Spanish law supports the holographic will, and codicils and testamentary memories in a non-attorney form are allowed by some territorial laws;

–          if assets are awarded to pay debts, those creditors whose credit has been notary or judicially recognized, can get its notation within 180 working days from the day the property has been awarded, although the property may be owned by third party at the time;

–          in case of land consolidation, registration will not have effects against thirds for ninety calendar days since the date of the entry, due to the special nature of the consolidation process, as a real subrogation. In case that certain rights cannot be transferred to the new organization of the property, or in case of error in the award of rights over the new pieces of land, some holders may have to be compensated, and such right to compensation, or the transfer of burdens, may be thwarted if a third party protected by public faith appears;

 

On the other hand, there are also some cases that may affect registered rights, even protected by the positive effect of registration:

–          adverse possession may affect thirds acquiring from those entitled by registry, but only if:

–          the adverse possession has already been accomplished, or it is within one year; and

–          the acquirer knew or could have known the adverse possession by third; or

–          the acquirer expressly or tacitly consents the possession of the third during the year following his/her acquisition;

–          Indeed, as far the acquirer knows / consents it, it’s reasonable that adverse possession produces effects against him / her, according with bona fides principle.

–          There are some cases of singularly privileged credits, enjoying a benefit condition over the debtor’s assets, even if they have changed ownership at the time of the claim. As legal privileges, arising from situations that, in principle, won’t be recorded in the Land Registry, they’ll produce the effect of invalidating temporally the positive effect of registration. In such cases you may even talk about tacit legal mortgages:

–          in favour of government by taxes levied on properties, for the previous year and losing party of the current annuity, even these taxes were not paid by the previous proprietor. However, the administration would rather go to the enforcement procedure and get a lien annotation on the debtor’s assets;

–          credits for the wages of the last 30 days of work: up to twice the minimum wage, they take precedence even over mortgage loans. Up to three times the minimum wage, they take precedence over other credits, but those secured by real rights. However, such claims will usually result in lien notations judicially agreed, and only in the event of enforcement, of the lien or of other privilege on the property, judges would decide on the precedence among creditors;

–          credits for unpaid insurance premium of the last two years take precedence over the property secured;

–          credits for condo expenses: current proprietor is responsible for the amounts attributable to the unexpired portion of the annuity in which he / her acquired, owed by the previous proprietor by reason of the maintenance of the common expenses of the condominium. And the property is subject to payment of such expenses, with precedence over mortgage loans and lien notations.

Indeed, and it’s been already said, it’s quite strange to find any of these cases in the land registry’s everyday work. Usually, both public administration and particulars, these last applying to court, will obtain a lien notation. The warrant ordering the lien notation should set the privileged nature of the credit, and, therefore, its ability to affect the rights acquired by third parties during the period that reaches the privilege, but this happens rarely. So, it would be while enforcing the security that the precedence among creditors, and other right holders, will be fixed by corresponding authority. And, to the extent that is not credited to the registrar that the credit is privileged, the invalidation of the effects of the registered right will not occur.

b) Type of entry

In case of destruction of the Land Registry’s records, a period of reconstruction is opened, for one year that may be extended for another year. While this period is pending, both positive and negative effects of the registration are suspended. The reason is that the outdated reconstruction system, established by law in 1873 and only modified in 1937, is based on the voluntary contribution of copies of registered deeds, which are entered by the order of their presentation, without prejudging the preferences among them. In the event that such a destruction happens today, to the extent that there’s a digital copy of the image of every single land book, it won’t be necessary to apply this procedure;

 

To some extent, you may consider that notations have limited effects, since they’re always temporary. Actually, during their term, that is extendible, they’ll have full effects, positive and negative.

c) First registration limitations

Nowadays, first registration can be done through any of the following:

– Notarial record attesting the domain of the promoter;

– Administrative records for urban land subdivision or land consolidation;

– Administrative records of expropriation or public domain delimitation;

– Declaratory judgment at trial;

– Double transmission notarially documented;

– Administrative certification of the public domain.

 

Only in the event of first registration due to a declaratory judgement there won’t be a two years suspension of the positive effects of registration against third parties after its date. That is, every other case will produce such a suspension.

 

d) Type of information: physical data/ legal data, associated data…     

Mentions of rights subject to registration but not registered, included in the registration of other rights (as if on the occasion of the constitution of a mortgage it’s said that the property is subject to an easement that is not constituted in the same act or has been already registered) have no effect against third parties. In fact such mentions should not be done, and if already practiced, they should be cancelled;

Traditionally it has been accepted that the registration in the Spanish Land Registry produces no effect, neither positive nor negative, regarding the physical data of the property. Nevertheless, nowadays some effects may be produced. If the graphic coordination with the cadastre can be achieved, and the graphical representation of the property is registered, the effects of abovementioned Article 38 would be extended to the location and geographical delimitation of such property, as a iuris tantum or reduttable presumption.

 

None associated data are supposed to be added to the information provided by Land Registry in Spain. Only if officially credited, the urban planning, environmental or administrative qualification of the property would be registered as a marginal note, and so, such information is to be understood as a warning. Only legal data regarding rights over the property would produce full effects, both positive and negative.