Bye to Article 28 of the Ley Hipotecaria (in Spanish mortgage law), WHAT DOES IT MEAN?

From today, Friday, 3rd September 2021, Article 28 of the Mortgage Law, by which the non-forced heirs (siblings, cousins, nephews, …) could not sell the properties without waiting two years, in case another heir appeared, which has always been considered very unfair, due to the costs that inheritances already have.

On 3 June 2021, Law 8/21 was published in the BOE (Official State Gazette), which comes into force today, 3 September, and which implies the suppression of article 28 of the Mortgage Law. This article is an exception to the principle of public faith in the registry, and states: “Registrations of properties or rights in rem acquired by inheritance or legacy shall not be effective as regards third parties until two years have elapsed from the date of the death of the deceased. With the exception of registrations by title of testate or intestate inheritance, improvement or legacy in favour of forced heirs”.

In other words, if a property inherited by a non-forced heir is sold within two years of the death of the deceased, this sale will be registered in the Land Registry with a limitation, indicating that it is affected by Article 28 of the Mortgage Law, unless the purchaser is one of the heirs of the property, so that until 24 months have elapsed since the death, the purchaser will not have full ownership of the property.

This article is drafted with the purpose of protecting the true heir of a property during this two-year period, but the reality is that this has created problems for the sale of properties in the hands of non-forced heirs (for example, stepchildren, siblings, nephews, nieces, nephews or persons not related to the deceased), The effectiveness of the Land Registry was suspended against third parties acquiring the property and against mortgage creditors, so that if within this period it was declared that the transferor was not the true owner because other previously unknown forced heirs (children, illegitimate children) appeared, the purchase or mortgage would be rendered ineffective.

The main mortgage creditors, on the basis of this, do not want real estate affected by this article as collateral, so that the buyers cannot mortgage the property and therefore have alternatives for financing it, and for this reason, these operations ended up being unsuccessful or were finally postponed until 24 months had elapsed from the date of death of the deceased or rejected by the buyers in anticipation of not being able to be mortgaged.

This limitation to registration does not make sense when the sale and purchase transaction is carried out in favour of a forced heir, since these are the heirs chosen by the testator or those who are called by law with full rights.

In Spain, the forced heirs are the descendants, ascendants (in the event that the above do not exist) and the spouse, although there are exceptions in territories with foral or special laws, as is the case in Catalonia where the spouse is not a forced heir or in Galicia where the ascendants are not.

All of the above made it clear that with the Law in force, in the event that the heirs urgently needed to dispose of the property, they would be faced with a rather problematic situation.

What happens to previous operations?

The publication of Law 8/21 indicates the deletion of Article 28 from three months after publication in the BOE, so it is clear that it comes into force in September, but makes no reference to whether it applies to inheritances occurring prior to this date of entry into force, which suggests that it will cease to apply also to previous inheritances.

Likewise, in those cases in which the limitation has already been recorded in the Land Registry or in operations that are currently in progress and registered before the entry into force of the Law, it will be possible to request its cancellation with a simple request to the corresponding Land Registry, since it is not a burden on the property.

This modification will help the real estate market to benefit by increasing the number of sales and purchases of this type of property, which had to wait for so long, uncomfortable and costly in many cases for the heirs who were “obliged to bear the costs of maintaining the property for those two years until they could carry out the sale and purchase without limitations”.