11 de Junio del 2015
COMMENTS ON CENTRAL AMERICAN MORTGAGE
Central American Mortgage (“Hipoteca Centroamericana” - (HC) in born as an initiative driven by the Real Estate Registration Council of Central America, Panama and Dominican Republic (“Consejo Registral Inmobiliario de Centroamérica, Panamá y República Dominicana” - CRICAP), as a guarantee document effective in any country that is signatory to the respective treaty. It constitutes an encumbrance in favor of the creditor to guarantee compliance with a specific obligation that is established within a preferential right over any other future obligation, except those constitutionally established by the Party States, which can be pursued without prejudice for whoever owns the real estate. It must be filed in the Real Estate Registry corresponding to each country, with the appearance of the mortgage guarantor or the contracting parties.
HC seeks to promote the development of financial markets at a regional level. One of the determining policies for the development of this type of markets, is based on a right to ownership well defined and safeguarded; the burden of which is responsibility of the Real Estate Registries. If a modern, integrated, transparent, reliable and regulated regional registry system exists, that provides legal certainty, security and clarity in the rights of ownership, credit risks are reduced in financial operations, since the guarantees that support them are legally registered.
HC promotes supply and demand of financial services in the region: on the part of suppliers it encourages competition between regional financial institutions (low interest, grace periods, etc.) and on the part of consumers it expands options to guarantee the financial services that they intend to access.
HC’s legal framework is the Treaty for the Creation and Implementation of the Central American Mortgage, signed between the Republics of Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, Panama and Dominican Republic; at present, it has only been ratified by the Republics of Guatemala and El Salvador. From its text we can establish some of the characteristics of the HC:
First, it must be granted through public deed before a Notary. Because the notarial function extends at a regional level; the Party States are bound to reinforce control over such function, since the articles of incorporation of HC will not be subject to authentication of the signature of the authorizing Notary.
In addition, since there is no single currency in circulation in the Party States, the mechanism of conversion of the value of the guarantee must be established in the text of the HC; there must also be, in case of conflict, an agreement of the parties to submit to the jurisdiction and legal procedures of the Party Estate where the real estate is located.
Also, autonomy of the parties to determine the applicable law to the contract is limited, since the legislation that applies to the HC contract will be the conditions established in the treaty itself.
The property registry part earns special importance, since within the requirements for presentation of the HC for registry, is the need for a real estate registration report or survey issued by the registration office of the State in which the real estate is located and this contributes to the certainty needed to determine the characteristics of the mortgaged property.
Although countries in the Central American region, Panama and Dominican Republic, have indicated their intention of promoting and applying the HC, to date only two countries have ratified the treaty (Guatemala and El Salvador), therefore it has not yet gone into effect because the ratification of a third country is needed.
It is quite a challenge for the Party States to assume the commitment of strengthening the registration institutions; the ideal development of HC will depend on efficient operation of the local property and real estate registries. Efficient, modern registries, with speedy procedures and uniform criteria that adhere to the law, will be the means for the financial markets to obtain information on the legality of titles that support property rights and, thereby, risk-free guarantees.
Finally, strengthening of the local legal and judicial systems will be indispensable to inject agility in the solution of conflicts and the execution of guarantees. With the above it will be possible to attain the expansion of financial institutions in the credit markets at a regional level. The approval of secondary laws that complement the contents of the treaty will also be a condition that will enable the full application of the figure of the HC, regulating situations not contemplated in same.
Martha de Jesús López, Attorney
Specialized in Registration Law - Guandique Segovia Quintanilla - LatamLex
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