Sunday, December 16, 2012

Cuba's 'new' real property rights — one year later

Cuba's 'new' real property rights — one year later
By José Manuel Pallí, Esq.

A year ago, the buzz in Miami about the incipient real estate market in
Cuba was almost deafening. My phone rang and rang, and I had to recharge
its battery every three hours or so. But once again, we have to concede
that Cuba moves at a pace that neither Americans, nor even
Cuban-Americans seem to be able to grasp.

Sure, there are some who have gone ahead and 'invested' — through straw
friends or relatives living in Cuba — in Cuban real estate, bent on
benefiting from being among the "first movers." But all indications are
that such 'investments' have only had a negligible impact in Cuba, if
any (which is not to say they might not still have a significant, and
likely negative, impact on the pockets of those intrepid 'investors' who
dared to make their moves while skirting present Cuban laws).

The two derechos reales, or real property rights, which currently — and
under the limits Cuban laws place on private property rights — could
come closer to fulfill the expectations of a sensible real estate
investor or developer, the derecho de superficie and the derecho de
usufructo, still lack, in my humble opinion, the level of clarity or
transparency required to answer the questions of a prudent investor. And
this should not be an issue framed by ideology: As soon as I perceive a
sufficient degree of legal certainty with regard to these two rights,
even if limited by Cuban "socialism," I will gladly report it here. But
I do not see that yet.

It is not as if the "liberalization" process begun late last year has
stalled. Cuban banks will have authorized around 100,000 loans to
individual Cuban citizens by the end of the year, many of them for
improvement of housing units and for the purchase of building materials.
But the average amount of these loans is under $300, roughly 15 times
the average monthly salary.

The number of real property (or housing) titles recorded at the Registro
de la Propiedad has also increased substantially, with people realizing
the importance of being able to show — and prove — their rights.

Over the past four years, Cuba has 'granted' its farmers over 1.5
million hectares under usufruct rights, and a recent piece of
legislation (Decreto Ley 300/12), effective Dec. 9, 2012, gives those
who have benefited from this distribution of idle lands more leeway in
what they are allowed to do with them. The families involved can now
build their housing premises on the land they have received; their
usufruct rights over that land can be renewed every 10 years (the
maximum length of usufruct rights remains at 10 years for individuals or
natural persons, but it is now 25 years for cooperatives and other
personas jurídicas or entities).

But at this slow pace, it is Myanmar (Burma, as I still prefer to call
it), and not Cuba, that is staking a claim to become the newest
attraction for serious real estate investors. A recent visit by
President Barack Obama reinforces that perception — and should invite us
to wonder why a presidential trip to Cuba remain inconceivable when a
visit to a still authoritarian regime that is slowly emerging from
behind its bamboo curtain is kosher. But I am digressing, and probably
inviting the usual shower of claptrap that passes for an explanation of
this absurdity.

And I am not suggesting that we Cubans should seek any guidance in
Burma's transition. Looking for a game plan for post-Castro Cuba in the
experiences of people who hardly resemble the Cuban people (be they
Hungarians, Estonians, or now Burmese) has long been a staple of that
uniquely Miamian science known as 'Cubanology.' I have always thought
that perhaps the only people whose 'transition' from an authoritarian
system into a democratic one merits a closer look by all Cubans is the
Spanish people, whose idiosyncrasy, for better of for worse, truly
matches ours. And I still do.

But when it comes to nurturing and developing a healthy real estate
market, the hyper-leveraged Spanish model and the Spanish people's most
recent experiences with it would probably scare most Cubans used to
taking their housing for granted and understanding the right to housing
as protected under existing international human rights law (see Article
25(a) of the 1948 Universal Declaration of Human Rights and the first
paragraph of Article 11 of the 1966 International Covenant on Economic,
Social and Cultural Rights). What with people jumping from balconies to
avoid eviction, while foreigners are being offered legal residence in
Spain if they buy a little piece of the huge unsold real estate
inventory widely scattered over the landscape of Spain's financial crisis.

And the rain in Spain falls mainly from clouds that originally gathered
over our own American plains. So when we talk about the Spanish model
for a real estate market, we are talking about our U.S. model. For
Miamians, the model is one where real estate prices are set by wealthy
Brazilians, desperate Venezuelans and cash-rich Canadians (and now even
Chinese), with no regard whatsoever for the true buying power of our
local workers' salaries. We seem to be, yet again, at the stage in the
cycle where the usual suspects among our real estate tycoons shed their
last vulture feathers and are reborn like the Phoenix. I can almost hear
the trumping sound made by a scrum of semiliterate businessmen with egos
as tall as the Petronas Tower and laughable political ambitions
(although one lesson apparently learned from "the crisis" is to stay
away from christening buildings after themselves).

My hunch is Cubans will not buy into this model, whether it comes from
Spain or from the United States. It makes little sense to pay close to
$1,000 a month to a landlord for renting an apartment that does not look
much better than their present housing units in Centro Habana, as a
series in a Miami newspaper showed not long ago.

And that very human need for housing is what Cubans should be focusing
on — not on 18-hole golf courses, shopping malls, or hotels with marinas
— as far as their "real estate market" is concerned. It is hard to see
how the changes made to Cuban housing laws over a year ago have made a
dent in Cuba's chronic housing shortage. And for that failure, the blame
lies squarely with the Cuban government, which has been slow to open its
housing market to foreign capital, while tentatively opening up to
touristic developments and similar ventures.

José Manuel Pallí is a Cuban-born member of the Florida Bar, originally
trained as a lawyer in Argentina. He is president of Miami-based World
Wide Title and can be reached at

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