The ‘Law of Cuba’ was put into effect in the 19th century so that the children of Spaniards who emigrated to the colonies would have time to return when their parents died and thus be able to claim their share of the inheritance. Since then, many things have changed: neither Spanish colonies, nor such long distances for the emigrated heir to return to the country… But one thing remained unchanged until now: the obstacles that this article, 28 of the Mortgage Law, placed on the transmission and sale of inherited properties.
This article establishes a period of two years in which the sale of a house belonging to the deceased without forced heirs has no effect in the Land Registry. When the originator of the inheritance died without children (forced heirs), the property passed to the indirect heirs. However, they did not have full rights to the property during that 24-month period, being at the expense of the appearance of a son of the deceased. When this happens, the inheritance changes hands in favor of the son.
Or it happened, because the cases in which article 28 is activated have been very rare for years. The way in which inheritances are currently regulated and the changes in society make it almost impossible for cases of this type to happen. “It is very difficult for it to happen. And the only assumptions for it to happen are that a child appears or that the inheritance is wrongly awarded, with a will that is not governed by law,” says Víctor Ortiz, partner and co-founder of Heritae.
I want to pay off part of my mortgage, do I reduce the installments or the term?
The Government has taken action on the matter and from September 3, when the article is eliminated, real estate operations of goods originating from inheritances will be expedited. Thus, the heir to a home will be the direct owner, regardless of the degree of kinship that he has with the deceased.
“It is a law that harms many more people than it benefits. And today the necessary measures have been taken so that this situation does not exist and cases of this type are less frequent,” Ortiz values. Santiago Fierro, a partner at Cremades & Calvo-Sotelo, specifies that one of them is the Registry of Last Wills: “The solidity it has achieved over the last 75 years makes the cases of unknown notarial wills absolutely exceptional.”
Likewise, the experts consulted that the arrival of telematic communication between notaries is another factor that has made situations that activate the ‘Cuban Law’ very unlikely in recent years. The only assumptions for cases to occur are the appearance of an unexpected child or an erroneous inheritance award, with a will that is not governed by law.
The only form of will that is not validated before a notary is the holographic will, handwritten by the deceased. This is where article 28 can make an appearance, about to disappear from the legal system. But there are few people who resort to this type of testament. In addition, to this must be added that the deceased has no recognized forced heirs (ancestors, direct descendants or spouse), a very unusual double coincidence, experts explain.
Obstacles in financing
The repeal of this hundred-year-old precept eliminates the obstacles in successions between siblings, nephews and other relatives, sometimes forced to renounce their inheritance rights. Fierro explains that sometimes, in order to meet the expenses and taxes that are levied on any mortis causa succession, the heirs or heirs had no other option than to dispose of the inherited property to keep the remainder once the taxes were paid. “And there were even situations that led the heir to renounce his possible rights due to the impossibility of personally meeting the expenses,” says the lawyer for Cremades & Calvo-Sotelo.
The two-year term set by law generated insecurity in the transmission of inherited homes affected by article 28. “Given this insecurity, although exceptional and low risk, many operations stopped being carried out,” adds Fierro. For his part, Ortiz points out that dragging this uncertainty for two years has effects on the sale of these homes: the buyer prefers to buy an apartment that does not have article 28, to avoid the appearance of a forced heir who in that period of time ruins with the acquisition of the property. “It is more difficult to sell and also the inheritances of collaterals (brothers, uncles, nephews) are not as subsidized and you have to pay more taxes,” highlights the co-founder of Heritae.
In addition to delaying the transfer of real estate, Article 28 has negative financial consequences. Banks consider it risky to grant a mortgage on a home in this situation. The uncertainty that heirs claiming the property or its distribution may appear on the scene would affect both buyers and financial institutions. And in extreme cases, the buyer can face the mortgage and be left without that home.
To obtain financing from the banks, home buyers under the Cuban Law had to leave the amount of the loan as collateral until the 2-year term expired, or sign a surety bond, exemplifies Fierro. “Once a client of ours has sold a house with article 28, we included a clause and we gave the buyer the guarantee that if an heir appeared and article 28 was executed, we would return the money for the sale and the expenses of the taxes”. In these cases, the injured parties are the heirs who sell the property. “They even lost money, around 10%,” says Ortiz in reference to some inheritances that he has managed under these circumstances.
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