Simplification of formalities – Sale and purchase process

The process of transferring ownership of a real estate property can be done by sale, donation, inheritance, adjudication, among others. One of the most recurrent problems in Ecuador when making a transfer of ownership of real estate, especially when it is a purchase and sale, is the excessive delay and complexity of procedures that the citizen must face, due to the number of steps and processes that are required and generate unnecessary wear and tear for the parties involved.

For the purposes of this analysis, we focus on the purchase and sale, which begins with an agreement between the parties on essential elements: identification of what is to be purchased, price and form of payment. In some cases, a promise of sale is signed, the buyer pays a down payment and a term is established for the final sale. In the event of default by either party, termination of the contract is permitted with the acknowledgment of a fine.

For the final sale and purchase, the process involves the drafting of the minutes by a lawyer, including the essential elements of the contract, the preparation of enabling documents. All this prior to the entry to the corresponding Municipality unit for the generation of transfer values, which include municipal taxes and others from the Provincial Council. With this, the deed is signed and closed before a notary public, and finally, it is registered in the corresponding registry.

Each part of the process involves difficulties. For example, in the preparation of documents prior to initiating the purchase and sale process, it is required to obtain the certificate of mortgages and encumbrances issued by the land registry for each canton. Difficulties arise here, since few cantons in the country have achieved modernization and efficiency in the issuance of these certificates.

Unfortunately, the general rule is that it takes between five and seven days to obtain these certificates, generating excessive delays from the outset when there is a possibility that the certificates may be substituted in declaratory forms. This means that it is presumed that the parties – expecting that the certificates will be subject to online queries following the open government initiative – are initiating a bona fide transfer of ownership process, the completion of which will be subject to verification in the registry system.

The main problem lies in the fact that the entities involved in the sale and purchase process: land registry, land registry and tax authorities, do not have interconnected systems. Each one handles its own language and they do not have synergies to validate the data contained in each case. This means that the cadastre may have certain information about a property in the canton, which does not match the historical information of the property in the land registry; and the tax or financial department may compute the values to be paid for the transfer of ownership under its own system.

The main recommendation is that these systems be connected and that information can be validated between them. It may sound complicated, but blockchain would provide solutions that activate one process after another, thus giving end users a faster result in terms of time and accurate information.

Another substantial element to generate greater speed and simplification of procedures is the elimination of sub-procedures.

What does this mean? Requesting a series of so-called “enabling” documents, when the same law on efficiency of procedures requires that entities that have access to a document base do not have to request them from citizens. To initiate the domain transfer process, both the notary’s offices and the different property registries in Ecuador request documents that are available online or in their direct access databases.

One of the first elements that we must promote is the elimination of unnecessary paperwork, including for environmental reasons, ideally by eliminating requirements that are within the reach of public institutions. Another way to simplify procedures, in this case the transfer of ownership, is to centralize controls in the processes, avoiding unnecessary trips to different offices.

How to avoid excessive controls in the process and eliminate dependencies that complicate the process? The answer may seem simpler than the application itself, but it depends on the will of the public administration. That is, if it is required to enter domain transfer procedures, specifically the purchase and sale:

1) to approach to “seal” the minutes at the notary’s office where the purchase-sale will take place; 2) go to the municipal office in charge of the cadastral revision; 3) return to the corresponding notary office for the execution of the purchase and sale contract, and, 4) with all the documents and payments -including the payment to the provincial prefecture, which if you cannot do it online you have to go to a third office- you proceed to enter the land registry for the registration of the deed of sale.

This generates wear and tear on citizens and on the public apparatus. A single window could be created to process everything related to the sale and purchase process, centralizing in a back-office all the necessary documents to perfect the domain transfer process, hoping that in the near future the whole process could be carried out digitally.

While the digital divide and the evolution of processes available to citizens is narrowing, we can make efforts to simplify existing processes. The National Government, for example, could promote the generation of a system that serves municipalities with the purpose of implementing interconnected systems of cadastre, tax-financial directorates, and property registries for all the cantons of the country, without restricting the needs of each city, but generating greater transparency in the management of domain transfer processes. These should already be digitized, with shared and accurate information.

It is time to take a step forward and understand that the use of technology, together with the correct distribution of resources, such as centralizing in a single window and strengthening the back-office system of processes, will allow them to be faster and with a much smaller margin of error. This type of simplification will ultimately generate fewer obstacles for real estate developers and buyers, will stimulate the economy, will reduce expenses in the public apparatus, and will generate greater transparency in all processes.

Unfortunately, the immediate consequence of the complexity of procedures is that countries and cities become less competitive, as is our case. One of the most affected economic sectors is the construction industry, and therefore negatively affects the sub-sectors that depend on it, which are also a source of employment generation. The corrective actions are of urgent attention.

Santiago Alban