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The “New” Property rights in Cuba: a disclaimer.
By José Manuel Pallì, Esq.
Many moons ago, I was invited
to participate in a venture to promote the use of title insurance –a financial
product or service almost no other country in the world had ever found any use
for –internationally, in Mexico and beyond. I made a good living off that
venture for a long time, but one of the most frustrating things I had to endure
was my inability to explain to my mostly American title insurance clients who
bought real estate in Mexico, their American lawyers, and even American
pundits, the nuances that made acquiring property rights in Mexico so different
from, but still so similar to what we were used to hereabout (and even safer,
from a legal certainty standpoint). And that frustration arose, mainly, from my
audience’s insistence in assimilating Mexican legal concepts (grounded in Civil
Law) to our own Common Law rooted ones –which led them, for example, to call
the rights a foreign purchaser acquires as a trust beneficiary in a Mexican
bank trust (a Fideicomiso) leasehold
rights. This fable persists to this day, together with the one that tells about
Mexico lacking a proper recording system –when what they have is, conceptually
at least, far better than ours.
So it came as no surprise
that so many of us, Americans and Cuban-Americans alike, seem to be baffled by
what the new Cuban law in effect since November 10 (Decreto Ley 288) means. Despite
the well established fact that the Cuban Revolution was, in great measure, a
revolution conceived and made by lawyers, we in Miami long ago decided there is
no Law in Cuba (en Cuba no hay Derecho),
a prejudice that is likely to make the generalized confusion worst than that
affecting our perception of Mexican real property law. And it is a prejudice
that, together with its corollary –there are no “real” lawyers in Cuba- dilutes
even further our ability to properly understand these recent changes to Cuban
law, which are the result of internal pressures subtly channeled through my
colleagues in the legal profession in Cuba.
The first caveat when it
comes to assessing the significance of the recent adjustments to Cuban Housing
laws –and that is all that Decreto Ley
288 does- is that they are far from heralding the advent of our kind of private
property rights for Cubans in the island.
Cuban property rights remain
socialist to the core, whether we are discussing housing units or other assets.
Cuban law has for years strictly defined its citizens’ constitutionally
guaranteed rights to housing as propiedad
personal over one “permanently occupied” place of abode, a definition that
remains intact under the new rules and which falls short from granting Cubans
in the island what we call private property rights.
Cuban substantive property law remains unaltered. Decreto
Ley 288 modifies a few articles in Chapter Five of the Cuban Housing Law (Ley General de la Vivienda) -which sets
the rules whereby the rights Cubans have over their housing units are governed-
but neither Cuba’s Constitution’s treatment of property rights nor its Civil
Code’s provisions on that subject have been even air-brushed.
Nor is a wider opening to
foreign real estate investment in Cuba foretold by these recent changes. Some
“cubanologists” think such an opening could happen soon. But when it does
happen, it is likely to be on Cuba’s terms, as was the case in China, where
foreign purchasers of real estate seem to be trampling over each other to take
advantage of the investing opportunities despite the fact that Chinese property
rights law and most other institutions do not rate up to what we may consider “investment
grade”. The conversion of some recreational or vacation homes –apparently
exempted from the “permanently occupied” requirement that characterizes the
socialist propiedad personal over
housing- into bed and breakfast operations may now be facilitated. But the
right to own one vacation home is a right Cubans in the island already had, and
such conversions were already viable under the cautious process of opening to
private entrepreneurship Cuba has been engaged in for years, in many cases
financed by relatives abroad.
Mortgaging your real property
to milk your equity and spend it on consumer goods remains an unmitigated sin
for Cubans, who are still subject to an old maxim laid down by one of the
authors of Cuba’s first housing law, “Housing is to live in, not to live from”
(La vivienda es para vivir en ella, no
para vivir de ella).
Consequently, it is kind of
early to predict the development of any meaningful real estate market in Cuba
as a result of these adjustments to the Cuban Housing Law. Which is not to say
that the changes made are inconsequential for Cubans in the island.
Over the past few days, more
than one journalist has asked me when exactly did Cuba ban the sale and
purchase of real property. It turns out Cuba never did so as specifically as my
friends in the media would like to report. Castro did curtail Cubans’ rights to
sell or convey their housing unit by limiting them to a single possible buyer
under the law, which gave the Cuban State a right of first refusal (at prices
presumably set by the oh so quaint “Ministry of Pricing”, the façade of which,
close to Santo Domingo square in Havana, is one of my favorite picture spots),
and you needed an administrative authorization from your neighborhood’s
Municipal Housing Bureau for all exchanges or permutas- but the Cuban Constitution -in article 21- and the
Housing Law both allowed Cubans to dispose of (disponer) or sell (vender)
their housing units, even if under the aforementioned constraints.
Now, Cubans will be able to
sell their housing units to another natural person (which rules out
corporations, the “most favored persons” under “our” rule of law) or exchange
them for profit, without the need to seek permission from the authorities. The
only administrative requirements under the new rules are: you need to document
the conveyance before a Civil Law Notary, and the notary must have proof that
the title to the housing rights you are conveying has been recorded at the Registro de la Propiedad before he / she
authorizes the conveyance document. These two requirements make a lot of sense,
since Cuba has been trying to rebuild the excellent recording system it had
back in 1959 – which was far better than anything we have ever had in the US,
where we are still looking for lost mortgage notes, or even the ones Mexico has-
and Civil Law notaries (the real notaries, not our fifty robo-signatures a
minute variety) are far more useful –for fraud prevention, among other things-
than the overrated annual World Bank Doing Business Reports would ever
acknowledge.
Cubans will now have to pay
transfer and inheritance taxes, previously exempted, when a housing unit
changes hands.
The payments made in these
newly authorized transactions have to go through one of three banks (Banco Metropolitano S.A., Banco Popular de
Ahorro y Banco de Crédito y Comercio) authorized to date by Cuba’s Central
Bank (Banco Central de Cuba) and this
has raised the alarm of some, Yoani Sanchez’ -the bright and insightful
blogger, one of the keenest observers of Cuban daily life- included. Before the
Central Bank issues the certified check (cheque
de gerencia) the procedure calls for, the payor –the buyer of the housing
unit or the party to the exchange or permuta
who has to add money to his part of the bargain- must first open a bank
account, vouching for the legality of the funds so deposited (licitud, is the word used in Central
Bank Resolution 85/2011, which seems to point to the origin of the funds) and
to be used in the purchase or exchange, mirroring our Patriot Act. Cuba’s
legislators often play tit for tat with ours.
There are still some vital
things Cubans will not be able to accomplish under the new rules. For instance,
you still cannot inherit housing rights from your relatives in Cuba if you have
left the island for good. The new rules apply to Cuban residents only, whether
national or foreign. On the other hand,
a foreigner residing in the island can now openly purchase a house (if he
intends to “permanently occupy it” while in Cuba) from a Cuban individual,
which may prove a bonanza for those Cubans who plan to join us in Miami any
time soon: they are now able, because of the recent changes, to sell the house
they own –or the object of their housing rights, to be more precise- before
they leave.
Overall, these are
significant changes that should improve the average Cuban’s life standard, and they
should be encouraged, not down played by those this side of the Florida strait
who sadly see every little conquest by the Cuban people under its present
rulers as a setback to their dreams of a “free Cuba”.
But the socialist model is
still pretty much the rule of law in Cuba.
We may even benefit from
looking at these changes as part of an ongoing evolution of property rights now
playing on screens worldwide, including our own multiplexes. Maybe we should go back to our own business
and keep watching over our own vaunted property rights, imperiled, as ever, by
the often greedy and overreaching institutions we have. The latest bright idea from
our financial brain trusts –now apparently discarded- of charging us for the
use of our own money through a bank issued debit card should confirm our need
to be watchful. I am certain after this last round of playing “Simple Dimon
Says”, and after shelling out the money awarded to plaintiffs in the class
action suits over “debit re-sequencing” (yet another fancy name for “stealing
from their customers”) the true leaders of the “free World” will reward
themselves for their business acumen by adding a million or two to their year
end bonuses. Because these guys do know how to take care of their property
rights… Maybe we should send them all
packing to Cuba if what we want to see there is “change we can believe
in”.
José Manuel Pallì
jpalli@wwti.net
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