Property Tax Registration in Puerto Rico

Posted by Santiago Lampón on February 01, 2011

Today I received a phone call from a client involved in a transaction I handled as a notary some years ago. It is the one type of phone call I receive on the same subject t least once a month, which is why I have decided to write this post.

In Puerto Rico, when a closing is performed there is one particular form which is completed and filed with the agency which handles the records for property taxes in Puerto Rico. The acronym for this agency is "CRIM" which translates into: "Agency for the Collection of Municipal Taxes" or as its true name in Spanish which is "Centro para la Recaudacion de Impuestos Municipales."

In this phone call, the client was complaining that the CRIM had not changed the name in its records to the current owners of the property. Bear in mind that his transaction took place a couple of years ago which, under normal circumstances and perhaps almost anywhere in the World, should be enough time to allow for the agency to update the records. Well, not with CRIM in Puerto Rico.

I explained this cruel truth to the client and, of course, provided an immediate solution which he instantly welcomed. Nevertheless, I am pressed to write this post as a cruel (there is that word again) reality check on the system we have to deal with everyday.

It has nothing to do with the staff. If anything, blame it on the system.

Honestly friends, I have no idea why the CRIM cannot get it right. That is just the way it is and it has nothing to do with the personnel and everything to do wih the system.

Whenever you close on a property in Puerto Rico, there is a "change of name" form which is completed and filed, usually by the closing notary. This form is then filed with the CRIM and it is stamped with the date and time of the filing. Once we perform the filing, we give an original to the client and we keep an original in our closing file. Moreover, we also scan this copy and e-mail it to the parties and the brokers involved, plus we keep a copy in our computer files for future reference. This way we have multiple copies of the filing, and I am about to explain why this is important.

Like my client today, about two years after the closing, someone will most likely receive an invoice from the CRIM reflecting that the wrong name is on the record. That someone is going to call the notary and complaint about the CRIM not doing its work or, as it has happened before (not today), perhaps blaming the notary. In our firm, we would immediately pull the file, find the timely filed form and send it to the client.

With the copy of the stamped form, the client would then show to CRIM that they are at fault for not handling the application on a timely fashion, and would then correct the records--though not immediately I may add.

There is always a solution, even if you lost your original stamped form.

If you do not have the form from your closing or cannot track it down, there is yet another solution to the problem.

First, you need a copy of the deed which documents or evidences the transaction which resulted in the change of name. If you do not have a copy with you, follow this link to learn what you need to do to obtain it.  Though I would like you to read the complete article, the instructions are about 2/3 into the article.

Second, you obtain the change of name form, you complete it and then you visit a notary.  Sorry, but the form is only available in Spanish.  

Third, the notary prepares a sworn statement which basically states that you purchased the property in such and such date, through such and such notary and deed, and that the change of name form was lost or misplaced. Therein you request, under oath, that your property be registered to your name backdating the application to the date of your closing.

These three steps should do it and, perhaps, this time around your name will be properly recorded. Nevertheless, like I mentioned before, make copies and copies and copies of these new documents, make sure they are clearly stamped by the CRIM, and place them in your safety deposit box (if needed) for future reference.

As a final note: sometimes the buyer wants to file this form but, in my experience, I prefer to do it in-house and then provide the client with a stamped copy of the document.

The Notary in Puerto Rico - a Very Unique Role

Posted by Santiago Lampón on January 28, 2011

I regularly perform closings involving parties who are not accustomed to Puerto Rico’s system of law. Whenever one of the parties to a closing first learns that only lawyers can be notaries and only notaries can perform closings, the confusion and the wondering become apparent and also becomes important to me as a notary for the parties.

Puerto Rico is a part of the United States but has a different history all together.

Accordingly, here is my attempt at tackling this confusing subject in a very simple way. If I am not, you can always write to me with your questions and I will gladly provide you with a response.

The United States is my basis of comparison, since Puerto Rico is a part of the United States but has a different history all together.

One can trace the background of the United States to the forefathers and the status of a former English colony, while Puerto Rico is a former Spanish colony which in itself marks the essence of our differences. Just as English continues to be the main language in the US as a whole, in Puerto Rico it is Spanish; and just as a common law system of law which emanated from England prevails in most of the US, a civil code based system which emanated from Spain prevails in Puerto Rico.

The only state which closely resembles the distinctions between the United States and Puerto Rico is the State of Louisiana, which used to be a French territory.

In a civil code based system still effective in Spain and across Latin-America, as a notary I hold a franchise which authorizes me to act, pursuant to the authority levied under this franchise, as a representative of the Government of Puerto Rico. While in the states the notary usually limits his or her role as an “authenticator” of signatures, in countries like Spain and Puerto Rico, the notary has a farther expanding role in connection to the parties, the transaction and, most importantly, the law. This last requirement mandates that only lawyers can perform as notaries in Puerto Rico.

My role as a notary demands that I prepare the closing documents in accordance with various stringent and specific requirements as to the form of the documents. Moreover, I am also obligated to review the documents as to its contents in connection to the law applicable to the transaction the parties will execute before me. If the transaction cannot be performed in agreement with the applicable law, the notary must counsel both parties on this regards and must refuse to authorize the transaction. Alternatively, the notary counsels both parties on this regards and secures that the transaction is executed in accordance to the law.

Once the transaction is closed, the notary bears an additional responsibility which is not part of the notary process in the United States. In Puerto Rico and for transactions involving real estate properties, the notary is responsible for the recordation of the transaction at the Property Registry. Through his actions and his signature, the notary is assuring the parties that, absent unknown circumstances, the transaction will be recorded at the Property Registry.

As a final note, an essential element of my franchise as a notary is that I have all my transactions reviewed by an “inspector” appointed by the Supreme Court of Puerto Rico. The inspector makes sure that, as a notary, I am executing my duties in compliance with applicable law. I have been a notary since 1993 and my documents are regularly reviewed for compliance; a review I gladly welcome and understand is yet another level of security for all the parties that have executed transactions before me.

Property Registry in Puerto Rico - The Role of the Notary

Posted by Santiago Lampón on January 25, 2011

I continuously receive inquiries about the role of the notary in Puerto Rico in connection to real estate transactions and the filing of the documents with Puerto Rico Property Registry.

Though the Property Registry is one entity in Puerto Rico operating under the Puerto Rico Attorney General’s Office, there are various offices located within the judicial districts throughout Puerto Rico.  I have worked with many of these offices, but San Juan, Carolina, Guaynabo and Fajardo are the most I have dealt with in my many years as a notary.

At the Property Registry for any given district, a property is assigned a lot number, much like assigning a file number to a matter or item.  It is important to understand that records for properties within the Registry cannot be located by the name of the owner, the date a transaction was executed or the like.  The Registry used to maintain records by names of property owners, but such records are no longer active.  Old records of property owners are available, but they are mostly useless.  I have successfully located names and properties, but only for very old transactions and records.

The Registry has been undergoing a computer optimization process, but it is not complete.  When it is completed, name searches should be effectively performed.

Once the correct lot number is known for a given property, the Registry works perfectly.  Within this record (i.e. the lot or property number), you will find the ownership track for the property, sometimes way back when Puerto Rico was a Spanish Colony.  The key to this rich history of ownership is the lot number.

This is the area where the notary and the Puerto Rico system of recording transactions become quite valuable; mostly because the notary works hand-in-hand with the Property Registry. 

Contrary to notaries in the United States, notaries in Puerto Rico are a key element of the Property Registry System.  Only a notary knows how to prepare documents in the correct format and with the correct content for the Registry to accept them.  Moreover, the notary will bear the burden to handle issues which may be raised by a Registrar, and also the responsibility to take the necessary steps to secure the proper registration of the transactions executed before him or her.

When a closing is performed, the deed created by the notary has to comply with strict format and content requirements.  The notary, as a licensed professional, is also bound by law to handle, store and safeguard the documents in accordance with specific requirements to secure the preservation of these documents and their long lasting storage for purposes of Puerto Rico’s historical records.  In sum, a notary possesses the equivalent of a government franchise.

Once the deal is closed, the notary becomes the Government’s custodial of the deed executed by the parties, and he or she bears some specific duties with regards to this document.  As an example, at the end of each calendar year, the notary has to book bind all deeds executed before him/her for the given year.  The book bounded deeds will subsequently be transferred to an archive for historical reference.  This action assures that all deeds executed before notaries in Puerto Rico are safely stored.

Here is where you need to follow me very closely.  I do not want you to become confused or lose track of where I am going with this.

Since the original deed is book bounded and filed for historical purposes, what the notary presents to the Registry is a “certified copy” of the deed, never the original deed.  Somewhere in the future, when the Registrar records the transaction for the given lot number, the certified copy of the deed is returned to the notary duly recorded who, in turn, delivers the registered copy of the deed to the client.   This document, the certified copy with all the markings resulting from the registration, is the clients’ “title document.”

There are two essential pieces of information a property owner in Puerto Rico needs to know about real estate transactions in Puerto Rico.

At this point, I want to give you two key pieces of information you truly want to understand and hold close to your heart if you are really interested in protecting any interests as a property owner in Puerto Rico.  As a matter of fact and in opinion, these two pieces of information is all a property owner needs to know to be able to track down any transaction he or she has been involved with regardless of the Registry, computer records or absence thereof, or whatever other consideration with regards to how real estate transactions in Puerto Rico work.

Important Data #1:  Each deed executed by a given notary is assigned a given and exclusive number for that year.  It is quite simple.  The first deed for a given year is “deed number 1” with the second deed identified as “deed number 2” and so it goes until December 31st for that year comes around.  The next calendar year, starting on January 1st the slate is cleaned and the first executed deed is assigned the number 1 and so it goes round and round again.  Hence, it follows, that for any given year, any given notary has only one “deed number 1” and only one “deed number 2”, etc.

To be more specific, if you close a deal with me acting as a notary on January 1 of the year 2011, your deed will be “Deed Number 1 of the year 2011, executed before notary Santiago F. Lampón González”.  Now assume someone else closes a deal before me on January 5, 2011 and I participated in no deeds between these two dates.  Hence, it follows, that this person’s deed would be “Deed Number 2 of the year 2011 executed before notary Santiago F. Lampón González.”

 This takes us to our next important data.

Important Data #2:  The only information you need to track down any real estate transaction executed before a notary in Puerto Rico (in order of importance) is: (1) the name of the notary; (2) the year the transaction was executed; and (3) the number assigned to the deed for the given year. 

Let me explain why this is so.

First of all and as stated before, every notary in Puerto Rico has to comply with specific legal requirements under the franchise or license awarded by the Government of Puerto Rico.  The requirement includes the eventual transfer of all the deeds to the General Archives of Puerto Rico.

Each collection of deeds for any given year, has an index of deeds which includes the date it was executed, the subject of the deed (a purchase and sales, a donation or whatever), and the name of the parties who executed the deed.  Accordingly, if you remember or know the name of the notary who executed your deed, it does not matter if you have any other information, his or her deeds would be traceable and, once located, and a search through the indexes will certainly reflect your deed.  From this point on, number (2) and (3) just make it a lot easier to find your deed.

There is so much more information I could share with you on being a notary and handling transactions, a job I certainly love to do.  Yet, I am going to stop here and try not to overwhelm you, for now, with too much information.

 If you have questions, write to me and I will gladly give you an answer.

Probate in Puerto Rico - When is it needed

Posted by Santiago Lampón on January 18, 2011

In my practice and within our firm, we have a high number of clients who do not reside in Puerto Rico but own property within our island.  Most of this clients have second homes and a significant number of them own businesses as well, while their main place of residence is somewhere in the United States with some clients residing in Canada and countries in Europe and South America.

This mix of local and international residents, gives us the opportunity and the challenge of dealing with probate issues resulting from the ownership of assets in Puerto Rico while the main place of residency is outside of Puerto Rico.

The key element on deciding if probate is required in Puerto Rico is the presence or absence of a will authorized under Puerto Rico Law.  If the deceased issued a will under Puerto Rico Law, a probate is not required, though there are some steps still needed to complete the registration of the assets to the name of the heirs.  In the absence of a will, the probate process is mandated.

A probate in Puerto Rico has two essential steps when real properties are not involved.  An additional step is added if real property is present.  If there is a probate decree issued outside of Puerto Rico or the deceased authorized a will outside of Puerto Rico, either could be validated in Puerto Rico following a process different to the one I describe in this article and which I discuss in another article posted within this blog.

The first step requires filing of a petition before the Court of First Instance in Puerto Rico.  The petition must include the name of all the heirs, certified copies of their birth certificates and a certified copy of the death certificate.  The petition can be filed by one of the heirs under oath.  All the heirs need not appear as petitioners or signatories.

Once filed in complete form as verified by the Clerk, the Court will review all the documents and decide if the declaration or decree can be issued without the need for a hearing.  If a hearing is required, the Court will issue certain notices and the process will be scheduled for trial.  Otherwise, the Court will issue a resolution declaring that the individuals identified in the petition are the declared heirs of the deceased individual.

This takes us to step two, which requires that a “estate tax return” be completed for filing with the Puerto Rico Treasury Department called in Puerto Rico “Departamento de Hacienda.”  Through this form, a list of all the assets and their values are presented to the Department.  In due course, which takes anywhere from 3 to 6 weeks, the Department will issue either a tax bill or a tax waiver for the estate.  Without the tax waiver, the last step of the probate process cannot be executed.

Once you have the waiver, I urge you to request from Hacienda various certified copies of the tax waiver document, at least one for each account or real property you have listed in the return.  You also need to obtain an equal number of certified copies of the resolution or decree issued by the Court.  Banks and other entities will not process any request without certified copies of these documents.  

Note that I am referring to the copies as “certified copies.”  Simple photocopies will not be enough for the banks or the Property Registry.

If there are not real properties involved, at this point you would be basically done.  With the certified copies of the resolution from the Court and the Tax Waiver from Hacienda, you should be able to register the assets to the names of the heirs. 

Whenever real estate property is involved, there are two documents you will need to procure and one document your lawyer will need to prepare to properly record the properties to the name of the heirs.  These documents are required by the Puerto Rico Property Registry.

First things first, which are the property taxes for which you need a certification that all payments are up to date.  The office who manages property taxes in Puerto Rico is known as “CRIM” which translates into the Center for the Collection of Municipal Taxes.   

The next thing the Property Registrar needs to verify is that no alimonies were owed by the deceased.  In Puerto Rico we have an agency for this as well which is called ASUME.  I am not even going to bother you with a translation for this.  It is too long and too confusing.

In the presence of debts with either agency, the Registrar will demand that all amounts owed be paid in full prior to recording the properties to the name of the heirs.

Once these two items have been cleared, your lawyer will prepare a document called in Spanish “Instancia” which is a special communication to the Property Registrar about an event or transaction which warrants action from the registry.  Through the “instancia” the lawyer explains to the Registrar the process followed to complete the probate, and with it presents all the documents required to evidence the full compliance with the various legal requirements for the properties to be recorded to the name of the heirs.  The “instancia” follows a very specific format and contains detailed information required by the Registrar to successfully record the properties into the names of the heirs. 

As a final note, the minute or “instancia” will required that certain “filing rights” be paid for.  The amounts to be paid relate directly to the value of the properties as reported in the Tax Waiver document.

Validating a Probate Decree in Puerto Rico

Posted by Santiago Lampón on January 11, 2011

In our practice, we currently deal with clients who inherited assets from individuals who were not residents of Puerto Rico but who own assets, particularly real estate properties in Puerto Rico.  On a regular basis, we have to describe the process to the client or prospective client, which is why I decided to write this article and make the information accessible for everyone to read.

A probate decree would be issued by a court of law to establish the identity of the heirs with rights to a given estate.  For the decree to be valid for use in Puerto Rico, it has to be examined and verified by the Puerto Rico Court.  This process is called an “exequatur”.

Each state or country has the right to establish its own system of laws, and each state has the right to assure that these laws are followed.  An “exequatur” is the process followed in Puerto Rico to assure that a decree issued outside of Puerto Rico is consonant with our laws.   If you search around the World, you will find that this process is common to many countries and that the term is “exequatur” is a common named used to identify this type of process.

In Puerto Rico, inheritance laws are quite peculiar and distinct from what I normally see in my practice from other states.  For this reason, our process for exequatur is quite precise and requires an in-depth analysis of the decree issued outside of Puerto Rico prior to filing the petition in a Puerto Rico Court.  If the Court in Puerto Rico finds that the decree issued outside of Puerto Rico does not comply with our laws, the Court will call for a hearing and due-process will be had to handle or manage the identified differences.

The Exequatur demands that a certified copy of the decree issued outside of Puerto Rico be filed with the petition.  We also have the client file the petition under oath, or what is normally referred to in Federal Court or across the United Stated as a “verified complaint.”   We use a different term in Puerto Rico, which is better translated into English as “sworn complaint.”

The Court may decide that a hearing is required.  Normally, we can anticipate the various issues the Court may raise during the course of examining the petition and which would create the need of a hearing, and are usually able to solve these issues prior to filing the complaint or petition.  Another step we take to facilitate the process is that we provide advance notice to all the individuals concerned with the petition and who may benefit or prejudice thereto, and provide the Court with evidence of such notices.

As an end note, it is also very important to consider that “preparation” is a great tool for individuals who reside outside of Puerto Rico but have assets within our island.   We recommend that you research and learn about our laws and, accordingly, plan and manage your estate accordingly.

Subject to the need of a hearing, the preparation and presentation of all documents and the issues which may be of interest to the Court, an exequatur may be completed within three to 12 months.

Good Standing Certificate in Puerto Rico

Posted by Santiago Lampón on January 04, 2011

During the course of my real estate practice, I have to frequently register in Puerto Rico corporations or limited liability companies created outside of Puerto Rico.

Any entity which is not created in Puerto Rico is considered as a “foreign entity” regardless of its origin. Please do not confuse the use of the word “foreign” when dealing with companies or corporations with how the term is used in matters of citizenship. If a foreign corporation or company does business in Puerto Rico without registering, the shareholders of the entity expose themselves to personal liability in the event of a claim against the entity.

The main document needed to register a company in Puerto Rico is a "good standing certificate" issued by the State Department of your state, or any other appropriate agency or department. This certificate evidences that the entity has complied with the legal requirements of its state of origin. If the company or corporation has complied with all applicable requirements, it is in “good standing” and the certificate would be issued. If the company or corporation had failed to complete the required filings or fails to pay the applicable fees on a timely basis or any other requirement under applicable law, it lacks "good standing."

A corporation or company not-in-good-standing in its place of origin will not be allowed to register to do business in Puerto Rico.

A good standing certificate is commonly requested by banks and other entities prior to executing a commercial transaction. If the company or corporation is properly registered and up to date in its filing, the person intending to do business with the entity can trust that its charter is in good order and that it is doing business with a duly registered entity.

Once registered in Puerto Rico, if you need a Good Standing Certificate for Puerto Rico it would be issued by the State Department under the seal and signature of the Secretary of State.

Puerto Rico, Foreign LLCs and Corporations

Posted by Santiago Lampón on December 29, 2010

A client in Puerto Rico was wondering if he should register the limited liability company ("LLC") he created somewhere in the United States in Puerto Rico. He had many concerns on the subject, yet he asked the simplest questions of all: Why?

I caught him completely off base when I responded with yet another question: Why did you create the LLC in the first place? Answering a question with a question is perhaps a lack "good manners" or could be interpreted as "avoiding the question." Yet in this case I had a clear purpose in proceeding this way.

Any entity not created in Puerto Rico is considered a "foreign" entity regardless of its place of origin. Whenever someone knocks on my door and tells me that he or she has an LLC or a corporation (makes no difference for purposes of this article) there must have been a reason why this person created the entity. It may sound too obvious thus far, but I ask that you stay with me on this one.

Registering an LLC or a corporation (jointly referred to as "legal entities") in Puerto Rico is not required as a condition precedent to doing business. True, you could not open a bank account if the entity is not registered; but, who cares nowadays? Any such entity would just do business as usual, only subject to any licensing requirements as applicable to the specific line of business it intends to conduct.

Down the road, the shareholders or members of the entity will deeply care if it was not registered to do business in Puerto Rico. Under our laws, any entity not registered in the Department of State as a foreign entity "does not exist" for all legal purposes. Well, if the entity does not exist, then; who is doing business in Puerto Rico?

The answer is simple: If a foreign entity is not registered to do business in Puerto Rico, in the event of a claim, the shareholders or members of the entity respond for its liabilities in their personal capacity. This may explain why the government does not make it a "requirement" for foreign entities to register.

Hence my client knew the answer to the question. Since he created the LLC with the purpose of shielding himself from future liabilities incurred while in the course of doing business, he needed to register the LLC in Puerto Rico to protect his purpose.