NEWSLETTERS

Simplesmente Simplex

Within the government programme “Simplex” which is intended to simplify some of the present bureaucratic legal and administrative processes, a Law Decree was approved and passed on the 30th April 2008 that will alter some of the basic points of the transmission of rights in Portugal.

Under the terms of ARTICLE 875º of the Civil Code, the transmission of real assets is made via a public deed. Any transmission made other than by deed would make the act void under the Civil Code.

ARTICLE 875º (Form) The contract of purchase and sale of real estate assets is only valid if made by public deed.

On the other hand, we must bear in mind that Land Registration is not mandatory nowadays as opposed to commercial registration, which must be made within a certain period of time following the act - failure to respect implies the payment of a fine.

Land registration is ruled by the principle of the succession in title (trato sucessivo). The succession in title is the sequential line of owners in time, of the previous owners and so forth as well as how the succession in title occurred for that asset (purchase and sale, gifting, inheritance, etc).

The Simplex alterations
The new Law alters the format of transmission of real estate, as well as any rights or charges upon the property, thus ceasing to be obligatory the celebration of a public deed.

The new system enables the transmission of assets without the previous “dual” legal control made by the Notary, followed by the Registrar. Following the passage of this law, only the Registrar of the Land Office Registration office need to verify the legality of the act of transmission upon the submission of the due land registration documents which will become mandatory.

It is now a matter of choice whether to make a public deed involving the transmission of real estate assets (with or without mortgage and or other forms of financing), or the free transmission of same (gifting).

In substitution of the public deed, the citizen can choose to use the services of a lawyer, notaries, solicitors and even Chambers of Commerce and Industry, all of whom will be able to authenticate the private documents necessary for the transmission of the property.

Additionally, as part of the options available for the transmission of assets, will be the so called “Single Counter” (Balcão Único) which will be within the Land Office Registry itself, where all acts of purchase and sale can be executed.

It will be the responsibility of the same entities above referred (lawyer, notaries and solicitors etc), to ensure the competent (obligatory) registration of the act in which they have intervened which will be obligatory as it is now for a commercial registration.

The obligation of registration is welcomed and should have been in place a long time ago in my perspective, so that it is possible to obtain an updated consultation of the registration of properties in general as normal nowadays with Finance Department registration.

Another novelty is the end of the territorial competence of the Land Office Registration. For some time now, since the commercial registration was fully computerised, each Registration Office can access the central database including all registered companies, and can thus receive any request for commercial registration regardless of the location of the head office of the company.

Nowadays, the Land Office Registration still maintain the principle of competence based upon the location of the property but with the computer system of the property registration, it will become possible, within this Simplex method, to end the necessity of going physically and any Registrar shall be able to receive any request for details of the registration of a property no matter where it is located.

A further alteration is the obligation imposed on the Registrar to correct any problems in the registration requests presented which caused in the past often frequent visits to the Registry with no positive result. The new legislation accepts any imperfection in the request of registration inserting instead a dead line to perfect and execute same or provide supporting documents at a later stage.

Opinion
If many alterations were in the sense of deleting some bureaucratic difficulties in the land registration, on the other hand it is of some considerable concern the availability of a choice between the public deed and private document when property is being transmitted (either purchase and sale or gifting).

If in the case of many commercial registration acts, where the obligation to use a public deed has lapsed for some time and has been the cause for many problems, it will not be extraordinary to foresee that the possibility of transmitting property by a private document could also raise many problems and difficulties!

Without the notary control, it will be up to the parties, or whoever represents them, to verify the legality of the documents; - if they are registerable, if there are still registered debts, the vendor’s legitimacy, seizures, mortgages, etc, etc. The legality control will be only made by the Land Office Registrar, who can in the end refuse and deny the registration because of some discrepancy in the documentation or even because of the lack of documents (cancellation of mortgage certificate for example).

The price of the property will still be paid with the signature of the sale and purchase contract (and not the actual registration effect) which then opens the doors to litigation if the registration is actually refused by the Land Office Registration.

On the other hand, to consider that the “middle” registration on behalf of heirs (probate) as unnecessary in the event of inheritance provoking therefore the breach of the succession in title, makes it all more difficult the verification of possibly wrong transmission and the reconstitution of the chain of transmission until that specific one.

We still don’t know in fact how this legislation will be written, but foreign experiences have shown that it is not exactly the best of choices to delete the “formalization” of the transmission act of real estate assets.

The problems that have been learned by the experience of other countries are that the transmission title (the contract of purchase and sale for example) will be in the possession of the buyer, and not deposited in a notary – the security and the public faith are devastated by this.

Being private documents, made and executed by the parties (the lawyers, solicitors and other entities will intervene merely to authenticate the private document) will be surely full of errors and imperfections. The production of effects from these contracts will be then dependent on the corrections of such errors, which can be sometimes, resolved via a Judicial Court with all the delays that can entail.