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Palli column headBy José Manuel Pallí, esq.

I am swamped by questions about buying real property in Cuba and how to go about it. I get them from France, from Canada, from Spain and from many other far-off places, but also from Hialeah and even Oklahoma, after Cuba and the United States announced their intent to normalize relations on Dec. 17, 2014. What follows is a short answer to that line of questioning, anchored in three basic principles.

First: Only individuals residing in the island can buy real property, meaning those who live in Cuba (either natives or foreigners with visas allowing them to work or invest in Cuba).

Second: Even residents in Cuba are limited to one piece of real property in their name (Cubans can also own a vacation home, but I do not know anyone who does) and must live in it.

Even after I explain this, many people (some of my loved ones even) who have no intention to move to Cuba — at least for as long as Trump remains just a candidate —insist that there must be a way to get around it, driven by “first mover fever”, and forgetting Mark 10:31 — “But many that are last will be first, and (the) first will be last”.

Testaferro

The prescription of choice for this anxiety is to use a testaferro or straw man (or woman). Since you cannot buy the property in your name because you do not live in Cuba, you buy under someone else’s name (a relative, a friend, a lover) that does. Under Cuban law, which, in my humble opinion, shuns this approach but “seems” to tolerate it to some extent, the owner of the property is the one whose name is used for the purchase, and you, who paid for it, have no rights over it. You, the “capitalist” — another species that “seems” to be barely tolerated in Cuba today — gets some sense of protection from documents signed by your relative, friend or lover acknowledging you as the “true” owner.

The problem haunting these eager purchasers anxious to hop into the Cuban real estate elevator while it is still in the ground floor is none other than an old, universal axiom of international private law (what we in the United States call conflict of laws) holding that the laws applicable to an immovable asset such as real property are the laws of the jurisdiction the asset cannot move away from, which are the laws of Cuba in our case.

Of course, you can say many things about Cuba and its laws, and some even claim there is no law in Cuba, but this is just a slogan, as silly as most slogans are. There is a legal system in Cuba, whether we like it or not, and it is enforced. And Cuban law, as things stand today, is as much of an obstacle for those who seek my counsel as it is for the many Tropical Trumps in South Florida who dream of an overbuilt Malecón, marketed our way.

Every society can choose its own rules and its own social relations and conditions, including those that set property relations. In Cuba, those property relations are, since the early 1960s, completely foreign to those that rule U.S. society. Which leads us to the third basic principle: Property rights over real estate in Cuba have little in common with our concept of real property rights.

Cheito’s rights

If you give your cousin Cheo the money to buy a house in Cuba “for you”, the rights Cheito will hold over the property once his title to it is recorded are not identical to those you have and exercise over your house in the United States (or in France, or Spain).

Cheo will “own” the premises, but not the land under it, since all he will be entitled to is likely to be deemed a superficie right. Even if perpetual, it means the Cuban state keeps title to the land. This sounds terrible until you realize it is not exactly an “only-in-Cuba thing”: the state of Israel owns 90% of the land within its borders.

In Cuba’s evolving socialist Marxist-Leninist socio economic model, Cheo — which may be good for you, the capitalist — will not be able to mortgage the house to buy himself the latest gadgets, a luxury car, or a trip to Europe, as we merrily do in our narcissist capitalist socio economic model.

So, make sure you properly understand the nature and the extent of the rights you pretend to buy (directly or indirectly, through Cheo), because otherwise your disappointment could be huge.

You may argue that in a worst-case scenario (President Donald) you could move to Cuba. But even if you do that, the property you bought under Cheo’s name would still belong to your cousin, at least under present Cuban law. In my very humble opinion, no Cuban court is likely to take the property away from Cheo and give it to you, and it might even take it away from both of you (that is, from Cheo) as complicit in a simulated and fraudulent transaction.

Can we talk of a U.S.-style real estate market where the laws establish all these limitations, rigidly restrict real estate financing, and call for all things to be used according to the purpose assigned to them (a house is to live in, “not to live off”)?

Given the nature of real estate, savvy investors (specially those who buy abroad) always plan, before they invest in land, for an exit strategy, and identify a buyer when the time comes to sell or liquidate the investment. In that sense, the possibilities in Cuba’s “real estate market” are still very limited.

For many years, the exit strategy argument was my best pitch to sell title insurance in foreign countries: If you pay for a title insurance policy when you buy or invest, that policy may prove to be your best sales tool when time comes to sell or liquidate your investment, specially if your buyer turns out to be an American who understands (or thinks he understands) the value of title insurance, a financial product fiercely protected by its lobby in the United States, just as a nature lovers protect an endangered species.

But even I, after acknowledging it may be premature to talk about a “Cuban real estate market”, would love to have a house in Cuba. So I can perfectly understand the anxiety and urgency of those who, after visiting Cuba and experiencing its beauty and the warmth of its people, what to buy a little piece of it right away.

I was recently an unwitting part of a sales pitch made to a group of realtors from Florida’s West Coast about their urgent need to visit Cuba now, before it changes and is filled with McDonalds, Starbucks and the like. Beyond the silliness of such an argument, there are many other and better reasons to visit Cuba and none of them are urgent, unless the urgency is related to the pockets of travel agents, another endangered species that, to my surprise, seem not to be extinct yet, I myself closed my little speech by saying that I dream of a house in the land I was born, and that my dream was the result of visiting the island after more than 40 years from the time I left it, meeting its people, and shedding a number of prejudices and misconceptions accumulated over those 40 years of absence.

But if and when I fulfill my dream, I will do it after first having acquired a full and unprejudiced understanding of the Cuban legal system as it applies to my dream. And you should do the same.

José Manuel Pallí is president of Miami-based World Wide Title. He can be reached a jpalli@wwti.net.

 

 

 

 

 

 

 

 

 




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