Construction of buildings under the horizontal property regime – Hereby we transcribe the note published in the APPCU En Obra magazine (No. 178, June 2019) where we systematize the benefits of the mechanism provided for in Law No. 16,760, which facilitate access to credit and the marketing of horizontal property units, providing greater legal certainty to developers, purchasers and private banks.
Horizontal Property Regime
The horizontal property regime is regulate by a wide range of legal regulations, whose main basis is Law No. 10,751 dated June 25, 1946, which systematizes said institute, regulating apartment buildings as well as the relationships between their co-owners.
In principle, in order to enter the “PH” regime and for there to be legally independent units of the parent registry, the existence of, among others, the final municipal authorization of the building is necessary, which can take years to obtain once its construction is finish or, even, be impossible to achieve for different technical reasons (irregularities that prevent compliance with municipal regulations on the matter).
The absence of said authorization is what generally prevents the final deed of the units (deed of sale), generating a situation of lack of protection of the interests of the promissory purchasers, a depreciation of the value of the goods in question, an obstacle to obtaining financing and ultimately for marketing.
Our system foresees exceptions to the general regime, as is the case of the regulations that will be list below, establishing new ways that dispense with municipal authorization as a substantial element for the birth of horizontal property.
With the purpose of promoting construction, Chapter III of Decree-Law No. 14,261 incorporated into our legal system a special mechanism by which, through financing from the Mortgage Bank of Uruguay (BHU) and complying with a series of requirements, It provides treatment under the horizontal property regime to those buildings that are materially non-existent -or under construction-.
This peculiarity allow something that was not possible until then: that each and every one of the units of a building to be built or under construction under the refer modality, could be mortgage in favor of the BHU, as a guarantee of the loans that it grant for the construction. of buildings under the horizontal property regime, even when they did not physically exist (hence these projects are popularly call in the “well”) nor did they possess, obviously, final municipal authorization.
Private Bank Financing
Faced with a critical situation at the BHU – which since its restructuring has not granted loans to real estate developers or construction companies – and the growing demand for housing, in the second half of the 1990s our legislators devised a new procedure for incorporating buildings into the horizontal property in advance, thus allowing the legal existence of units that, in turn, facilitated economic operations as a whole, allowing safe and efficient access to credit for all the actors involved (developers, promising buyers and creditors) .
Law No. 16,760 of July 16, 1996 and its Regulatory Decree No. 524/996 of December 31, 1996, then, replicated what is regulate by Chapter III of Decree-Law No. 14,261, but this time allowing incorporation into the regime to through the financing of non-state or private financial intermediation entities.
Requirements Mortgage loan
The requirements to incorporate buildings to be built and/or under construction to the horizontal property regime provide for in Law No. 16,760, are the following:
- approval by the respective Municipality of the construction permit and the project plan for the horizontal division of the building, according to which the constructions must be carry out and the separate domain of the units be attribute;
- registration of the aforementioned project plan in the National Land Registry Office;
- registration of units -individual properties- and provisional fiscal valuation of the same -for the purposes of paying taxes-;
- granting of the co-ownership regulations, which will be register in the Property Registry, corresponding Real Estate Section, according to the place of location of the property; Y
- granting of a mortgage loan, that is, granting of credit by a private bank for the construction of the building complex and granting of the respective mortgage deed, which will be registered in the aforementioned public registry. The mortgage lien may be divide and individual for each unit of the building, in such a way that they can be cancel or modify independently of the rest, thus helping to market the properties.
Importance of Law No. 16,760. Benefits for the system
Compliance with the foregoing requirements gives birth to horizontal property, which, from the point of view of bank financing, is essential for the purpose of forming a sufficient real guarantee to respond for the credit granted to the developer of the real estate project.
In turn, the financial intermediation institutions act in fact as “auditors” of the works, guaranteeing a follow-up of the construction process, which benefits the purchasers who ultimately seek the completion of the building and receive their units in full. time and form.
All this without being necessary to obtain the final municipal authorization – an essential requirement to do so under the horizontal property regime of the mother law 10,751 -, which also allows the units to be register, saving years of waiting for the purchasers, providing greater security in the legal traffic of goods.
In short, Law No. 16,760, in line with other regulations such as Law No. 18,795 (law on access to social interest housing, with a chapter III aimed at early incorporation into the horizontal property regime), makes a regime more flexible originally rigid, helping in the movement of the economy of the construction industry, generating benefits and providing the necessary guarantees to those who participate in real estate projects in Uruguay.