The principle of public-faith registration establishes a protection for acquisitions, made in good faith and for valuable consideration, of the property of a person, natural or legal, apparently entitled to convey title, registered in the Land Registry. As a result, the purchaser of a property that meets the above requirements will be legally protected and may defend this acquisition even if what is registered does not conform to the reality of the property.
Reliable transactions in property trade require security and, in our registration system, a determining factor for security is the existence of the registrations and titles in the Land Registry. In this sense, the legal property status registered in the Registry is iuris et de iure, which translates into a legal presumption of accuracy and completeness of the data registered therein. As a result, the person who acquires a property by relying on the Registry will not acquire a property with unregistered rights. This mortgage principle is known as the public-faith registration and is undoubtedly one of the most important mortgage law principles.
The principle of public-faith registration is provided in article 34 of the Mortgage Act (Ley Hipotecaria “LH“) and establishes that “the third party that in good faith acquires for valuable consideration a person’s title that appears in the Land Registry apparently entitled to convey it, the third party will continue to own the property, once the title is registered, regardless if later the original title of the transferor is annulled or resolved for reasons not stated in the Registry“. Thus, only what is registered will exist for third parties, eliminating the possibility that the transfer become void because the title of the transferor does not exist or needs to be resolved.
Can a non-owner transfer the property?
According to rule, nemo plus iuris ad alium transferre potest quam ipse habet, no one can transfer more than they have, meaning the answer is no. However, as stated above, the protective provision of article 34 LH allows consolidating the acquisition of a property by the person who does not own the property. In fact, if a person sells a property without having right to it, but appears as a registrant that is entitled to convey it, the acquirer will be protected by what is published in the Registry, even if the transferor was not the true owner of the property. The logic behind this mortgage principle has a double meaning. First, to penalise the negligence of the true owner who, by not registering his/her property, causes inaccuracy in the Land Registry. Second, to set up an effective method to protect the acquisition of those who diligently register their right of acquisition in the Registry.
In any case, it should be noted that public-faith registration only reaches legal ownership, that is, the existence, content and conditions of the real-property rights registered in the Land Registry. Therefore, the protection implied for the third-party acquirer stated in article 34 LH does not include the surface data, physical conditions and restrictions of the property.
Requirements for the protection of the public-faith registration
- That the acquirer has the status of a third party: in the mortgage legislation, the notion of the third-party acquirer refers to the third party that acquires the real-estate property by means of legal business and registers its title in the Land Registry.
- That the property is acquired by legal business or similar aspect: this requirement is not expressly established in the context of article 34 LH, but the doctrine of jurisprudence has established that the public-faith registration is excluded from the mortis causa acquisition on a universal basis, acquisitions by the ministry of law, acquisitive prescription and accession.
- That the right for valuable consideration has been acquired.
- That the property or title is previously registered in the name of the transferor.
- That the acquisition is made in good faith: this requirement assumes that the acquirer trusts that the transferor is the true owner of the property and that the true owner has had the diligence to evaluate the particular circumstances of the acquisition.
- That the third party register their acquisition.
In conclusion, the registration of title deeds and other real-property rights in the Land Registry is of the utmost importance since this reduces fraud and risks in real estate transactions by providing the registered information. Thus, whoever acquires this right and appears as the titleholder will have security for property trade and the subsequent registration will activate the principle of public-faith registration that allows the third-party owner to be defended in good faith.