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

Analysis:

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 jpalli@wwti.net



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