Real Estate Law in Venezuela

The legal basis of real estate property in Venezuela is based on the Constitution of the Bolivarian Republic of Venezuela of 1999, as well as on various laws and regulations that regulate the acquisition, registration, transfer, use and disposal of real estate in the country.

The main legal instruments governing real estate in Venezuela are the Constitution of the Bolivarian Republic of Venezuela (1999), which establishes the general framework of property rights. Article 115 of the Constitution guarantees the right to private property and establishes that every person has the right to the use, enjoyment, and disposal of his or her property. Property is subject to the contributions, restrictions, and obligations established by law for purposes of public utility or general interest. In the same way, the Law of Public Registry and Notaries regulates the system of public registration of documents related to real estate, essential for the legal certainty of real estate transactions. It ensures the publicity, opposability, and priority of rights in rem over real estate.

The Urban Land Act also regulates matters relating to urban land ownership and the regularization of land tenure in cities. The Venezuelan Civil Code contains relevant provisions on property and asset rights, purchase and sale contracts, mortgages, and other contractual and civil liability aspects related to real estate. The Organic Law on Urban Planning establishes the basis for urban planning and land use, including zoning and the regulation of construction. The Law Against Eviction and Arbitrary Eviction of Housing seeks to guarantee the stability of housing and restricts the conditions under which evictions can be carried out. The Housing and Habitat Law seeks to ensure the right to housing and establishes the framework for public policies on housing and urban development.

The political and economic context of Venezuela can influence the application of these laws. Additionally, the National Superintendence of Registration and Notaries (SAREN by its Spanish acronym) and the National Land Institute (INTI) are important government entities in the process of land registration and administration, with which the necessary and mandatory formalities and processes for the acquisition and transfer of such rights must be registered.

Acquiring property in Venezuela involves a number of legal and financial steps. In general terms, the typical process for the acquisition and/or transfer of this right in Venezuela consists of the following:

Property research and selection/price negotiation and agreement

• Look for properties that fit the needs and budget of the buyer;
• Visit the properties of interest and select the one you wish to acquire;
• Negotiate the sale price with the seller or its representative; and
• Once the price has been agreed, an offer to purchase document is made.

Legal review and documentation

We recommend verifying the ownership and legal status of the property in the corresponding Real Estate Registry. Subsequently, apply to the corresponding municipal office for a municipal solvency document to ensure that there are no property tax debts. Finally, obtain a technical report of the property if necessary.

Signature of the purchase option document

This contract sets out the terms and conditions of the sale, including the price, form of payment and the date of the final sale, usually a percentage of the price is paid as a deposit and commitment to the trade.

Financing management (if necessary)

If a mortgage loan is required, you must go to a financial institution to apply for it, this process may include the appraisal of the property and the approval of the credit.

Preparation of the definitive purchase-sale document

When the steps described above are certain, the final purchase and sale document is drawn up, which must be drafted by a lawyer; This document must contain all the details of the operation, as well as the property, and comply with the established legal requirements.

Payment of taxes and duties

After the notarization of the transfer of the property before the corresponding registry office, the real estate transfer taxes and other possible taxes and fees associated with the purchase must be paid, considering that the payment of some of the taxes may constitute necessary requirements in the processing of the transfer or acquisition of the property.

Signing of the purchase-sale document before a notary public

Both parties sign the purchase-sale document in the presence of a notary public, in order for the notary to publicly attest to the quality of the contracting parties, to subsequently register the transfer of ownership.

Land Registry

The notarized purchase-sale document must be registered with the corresponding Subordinate Registry Office, this step is crucial for the transfer of ownership to be official and for the buyer to acquire the legal rights to the property.

Change of services and direct debits

Finally, once the property is in the name of the buyer, the change of ownership of the basic services and the direct debits will have to be carried out, if necessary.

This is a general process and may vary in specific details depending on the region in Venezuela. Our recommendation is to hire the services of a lawyer or a real estate agent who is well-versed in local laws and procedures to ensure that the entire process is done correctly.

In Venezuela, the real estate registration system is carried out through the Subordinate Registry Offices, which are dependencies of the Autonomous Service of Registries and Notaries (SAREN). These offices are responsible for the registration and control of all legal acts involving real estate, such as purchases, sales, mortgages, donations, adjudications, among others.

To register real estate in Venezuela, the following steps must generally be followed:

• Drafting of documents: The purchase-sale document or any other act to register must be drafted, this is usually done with the help of a lawyer;
• Application for registration: The interested party must submit the document to the Subordinate Registry Office corresponding to the jurisdiction where the property is located;
• Document review: The registrar reviews the documents submitted to ensure that they meet all legal and tax requirements;
• Payment of registration fees: The registration fees and the corresponding taxes must be paid. The costs may vary depending on the value of the property and the type of legal act to be registered;
• Document registration: Once the documents have been reviewed and the payments made, the registrar proceeds to register the legal act in the registry books; and
• Issuance of registered documents: The registrar issues a certified copy of the document already registered, which serves as legal proof of the registration of the legal act.

It is important to note that the process may vary depending on the specific nature of the legal act and any additional requirements that may arise during the registration process. In addition, the registration system in Venezuela has faced challenges including bureaucracy, slow processes, and the need for modernization.

The legal liability of the seller in Venezuela in real estate transactions is mainly governed by the Civil Code, the Horizontal Property Law, and other regulations that may apply depending on the specific nature of the transaction. Below are some of the most relevant aspects regarding the seller's liability in the context of a real estate transaction:

Property title

The seller must have a valid title deed and be legally empowered to sell the property, it is their responsibility to ensure that the property is free of encumbrances and liens that may affect the transaction.

Declaration of hidden defects

The seller is responsible for any hidden defects that the property has and that have not been reported to the buyer before the sale; If hidden defects are discovered after the sale, the buyer might have the right to sue the seller for repair or compensation.

Duty of information

It is the seller's obligation to inform the buyer of any relevant situation sellers know about the property that may affect the purchase decision, such as pending litigation or limitations on the use of the property.

Regulatory compliance

The seller must ensure that the property complies with applicable planning and building regulations, failure to comply may result in penalties or the need for adjustments or demolitions.

Purchase and sale agreement

The purchase and sale contract must comply with all the required legal formalities and be registered with the corresponding real estate registry office, the seller must provide all the necessary documentation for this process.

Delivery of property

The seller must deliver the property in the conditions agreed in the contract, any discrepancy between what was agreed and the condition of the property on delivery may result in liabilities for the seller.

Payment of taxes and debts

The seller is responsible for the payment of real estate taxes until the date of sale and must ensure that there are no outstanding debts that could affect the transaction.

It is important to note that both buyers and sellers often seek legal advice during real estate transactions to ensure that their rights and interests are protected and that all legal obligations are met, so we recommend consulting with an up-to-date legal professional on the laws and regulations in force in Venezuela to obtain accurate and detailed information on the legal responsibilities in a real estate transaction.

Mortgages and other collateral are legal instruments used to ensure compliance with an obligation, usually in the context of financing or loans. Some of the most common guarantees in asset financing in Venezuela are described below:

Mortgage

It is a security interest that is created in real estate, without dispossessing the debtor of it. The mortgage must be registered in the corresponding Subordinate Registry Office for its validity against third parties; In the event of default by the debtor, the creditor may apply to a court for foreclosure of the mortgage in order to obtain payment of the debt with the proceeds of the sale of the mortgaged property.

Non-possessory pledge

It is a guarantee that falls on movable property, such as equipment, inventory, accounts receivable, among others. It allows the debtor to maintain possession of the asset, but this is affected by the guarantee of the obligation. Like the mortgage, it must be registered for its enforceability against third parties.

Bail

It consists of the obligation assumed by a third party (guarantor) to fulfil the debtor's obligation if the debtor fails to do so. It is a contract by which the guarantor commits himself to the creditor.

Antichresis

Although less common, it is the delivery of a real estate property to the creditor so that the creditor can be collected with the results of said asset, the outstanding credit, with the debtor maintaining ownership of it.

Assignment of rights

Economic rights of contracts can be assigned as collateral. For example, future receivables under a lease may be assigned to the creditor as collateral.

Floating warranty

It is used to guarantee obligations with a set of debtor's assets, which can change (such as inventory or accounts receivable).

It is important to note that each of these guarantees must comply with certain legal formalities for their validity and effectiveness, such as the drafting of contracts, registration, and notification to third parties. Additionally, in the Venezuelan economic and legal context, it is crucial to consider factors such as political and economic stability, inflation, and changing legislation, which can affect both the valuation of guarantees and the possibilities of enforcing them.

Asset and business leasing in Venezuela is a contractual arrangement through which one party, known as a lessor, grants the right to use an asset or business to another party, called a lessee, for a specified period of time in exchange for a payment or series of payments.

Lease agreements can be of various types and encompass different assets, such as real estate, vehicles, machinery, equipment, and other tangible property. In the business context, they can also refer to the lease of a company or an operating business unit.

In legal and fiscal terms in Venezuela, the legislation that regulates leases is the Commercial Code and the Real Estate Leases Law for commercial use, among other applicable regulations. In addition, asset and business lease agreements must comply with the provisions of the Civil Code regarding the form and the rights and obligations of the parties.

The aspects to consider in the leasing of assets and businesses in Venezuela are the following:

• Lease agreement: It must be clearly drafted, specifying the conditions, terms, duration, amount of the rent, responsibilities of the parties and any other relevant clauses;
• Rights and obligations: The lessor has the obligation to deliver the property in a condition that serves the use for which it has been leased, while the lessee must use the property as agreed and make the agreed
  payments;
• Lease duration: The duration of the contract must be agreed upon by both parties and may be for a fixed or indefinite period, subject to renewal;
• Costs and taxes: Payments may be taxable, and both the landlord and tenant must be aware of their tax obligations. In Venezuela, the applicable tax could be the value added tax (VAT), among others;
• Dispute resolution: It is important to establish in the contract the mechanisms for dispute resolution, which may include arbitration or mediation;
• Applicable law: In case of international business or parties of different nationalities, the law applicable to the contract must be defined; and
• Registration: Some types of leases may require registration with competent authorities for their validity against third parties.
  

It is essential that both landlords and tenants are advised by legal professionals to ensure that their lease agreements comply with all applicable legal and tax regulations in Venezuela.

Real estate assets are subject to a series of permits and regulations that must be complied with to carry out any project of this nature. The regulations may vary depending on the region and/or municipality, as well as the type of construction, some of the permits and general procedures usually required are the following:

• Building Permit: Granted by the mayor's office or the corresponding municipality, this permit is essential before starting any work. To obtain it, the project plans must be submitted, which must be endorsed by a registered engineer or architect;
• Zoning Certificate: This document indicates that the intended use of the construction is in accordance with the land use plan of the area where the land is located;
• Environmental Impact Assessment: Depending on the scope of the project, it may be necessary to conduct an Environmental Impact Assessment (EIA) and obtain approval from the Ministry of People's Power for Ecosocialism (formerly known as the Ministry of the Environment);
• Firefighters' Permit: This is required to ensure that the design of the project complies with fire safety standards;
• Urban property tax: A payment that is made in some municipalities for the use of public space for construction;
• Habitability Permit: Once the work is completed, it is necessary to obtain a permit that certifies that the building is suitable for habitation;
• Land Registry: The property must be registered in the corresponding Public Registry to legalize the construction or restructuring carried out; and
• Permit for Connection of Services: For services such as electricity, water, and sewer, permits must be obtained from utility companies.
  

It is important to note that this list is not exhaustive and may vary depending on the local laws and regulations in the corresponding municipalities and municipalities. In addition, the legal and administrative process in Venezuela can be complex and subject to change, so it is always recommended to consult with a lawyer or a professional specialized in the matter.

In Venezuela, as in other Latin American countries, the application of ESG standards is still an ongoing process. In the Venezuelan context, characterized by significant economic and political challenges, the incorporation of these practices may face additional obstacles. However, it is important to note that Venezuela, like other countries, is a signatory to various international agreements that promote environmental sustainability and social responsibility.

The status of ESG enforcement in Venezuela is varied, and due to the country's political and economic situation, there may be a more limited focus on the implementation of these practices compared to other nations in the region. State-owned and some private companies may have programs and policies in line with ESG standards, but the lack of a consolidated regulatory framework can make it difficult to assess their true scope and effectiveness.

Companies looking to align with ESG criteria in Venezuela could focus on the following areas:

Environment: Practices that seek to minimize environmental impact, such as waste management, emission reduction, biodiversity conservation, and energy efficiency;

Social: Aspects related to the well-being of workers, social inclusion, the impact on local communities and respect for human rights; and

Governance: Transparency in corporate governance, ethical business practices, compliance with applicable laws and regulations and the implementation of anti-corruption policies.

In Venezuela, ESG standards could be more prominent in the private sector, especially in those companies that seek to attract foreign investment or that are listed on international stock exchanges, where ESG criteria are increasingly important to investors.

In Venezuela, direct taxes are not usually applied to sales directly; instead, sales are generally subject to indirect taxes. However, it is important to understand the tax structure to have a complete view.

Direct taxes are those levied on the income or assets of natural or legal persons. In Venezuela, the main direct tax is the income tax (ISLR). This tax applies to income obtained by natural or legal persons resident in the country, as well as to certain income obtained by non-residents that come from Venezuelan sources.

The sale of real estate in Venezuela is subject to various direct taxes, among which the following stand out:

• Income tax (ISLR): This tax is applied to the profit obtained from the sale of a property. The capital gain is determined by the difference between the sale price and the adjusted cost of the property. For individuals, the rate varies and can reach up to 34% depending on the amount of the gain, while for legal entities, the rate is 34%. There are deductions and allowable costs that can modify the taxable base;
• Advance payment of income tax: In cases of alienation of real estate or rights over the same, an advance tax of 0.5% calculated on the price of the alienation shall be paid, whether the alienation is made in cash or on credit. This advance payment shall be credited to the amount of the tax resulting from the definitive tax return for the corresponding fiscal period;
• Real estate transaction tax: Some municipalities may impose a tax on real estate transactions. The percentage varies according to the respective municipal ordinance;
• Registration fees: At the time of formalizing the sale of a property, it is necessary to pay the registration fees before the corresponding Public Registry office. The associated costs are variable and depend on the value of the property and the applicable rate in each registration; and

Tax on large financial transactions: The property purchase payment may be subject to this tax., currently if the payment is made in legal currency in Venezuela (Bolivar) the tax rate to be applied is 0%, but if the payment is made in a foreign currency other than legal course, a 3% tax rate is applied on the amount paid.

Chapter authors and key jurisdiction contacts: 

Alejandro Gómez Rutmann | Deloitte Legal | Venezuela, Ariel Cantillo | Deloitte Legal | Venezuela and Carlos Terán Pizzani | Deloitte Legal | Venezuela

Download: Handbook for Real Estate Transactions