Ownership in Ecuador
Ownership of real estate in Ecuador is similar to that in North America, often referred to as “fee simple” or “absolute.” Property can be purchased by an individual or a couple, or by a corporation, trust or other legal entity. Many U.S. citizens purchase through their Individual Retirement Accounts. Because of the additional expense and paperwork required, buying through a corporation is not recommended, although there are cases where it is warranted.
There are no restrictions on property ownership by foreigners in Ecuador or requirements that they be legal residents.
Hire an Attorney
Before you proceed to closing on a property, we strongly advise that you hire an attorney. Although it is common practice among Ecuadorians to close real estate purchases without an attorney, we suggest that non-Ecuadorians would be doing so at their own peril. Even among locals, there are many cases when complications go undetected until after closing and money is lost.
A bi-lingual (Spanish – English) attorney can guide you through the purchase process, answer questions and provide English translations of documents. Most important, the attorney will conduct a title search to make sure the property is free of liens or other encumbrances. The attorney, even if he or she is recommended by a real estate agent, works for the buyer.
Unlike the U.S. or Canada, Ecuador and other Latin America countries, operate under a civil law system. This has limited bearing on contract law, including real estate, but could be a factor if legal complications arise later.
The Purchase Process
After conducting a title search, the attorney will draw up a purchase contract, describing terms of the purchase and the purchase price, as well as other conditions of the sale. The contract will be in Spanish and it is important that non-Spanish speakers obtain an English translation of the document. Keep in mind, however, that only documents in Spanish are legal in Ecuador.
If the buyer is not paying full price at closing, such as in the case of the purchase of a condominium that is under construction, the attorney will prepare a promesa de compra-venta, or “promise to buy” document. Once the document is signed by buyer and seller and notarized, it is legally binding. This is usually accompanied by a down payment to the seller, typically 10% to 30% of the purchase price or a price agreed to by buyer and seller. The down payment is non-refundable unless otherwise stipulated in the contract.
If the buyer is ready to pay full price, the attorney will prepare a compra-venta, the final purchase contract. By-passing the promesa de compra-venta will mean a savings in time, legal fees, and notary fees. After the compra-venta is signed and notarized, it is registered at the cantonal land registry office and becomes the official title to the property. When the compra-venta is executed, the buyer pays the seller.
Since the promesa de compra-venta is superseded by the compra-venta it has no legal standing once the compra-venta is executed. This means that any terms or conditions not carried forward to the compra-venta are no longer in effect once the sale is final. The buyer should be aware that until the promesa de compra-venta or the compra-venta are executed, buyer and seller are not legally committed to a deal.
In some cases, a small deposit, or earnest money, will be paid to hold a property, in which case the attorney will draw up a short contract that, when notarized, is legally binding.
Know the Facts Before Closing
The attorney should review the entire purchase process with the buyer prior to closing, explaining the approximate time-line, all fees and taxes involved. Expect to pay the attorney between $600 and $800 for his or her services. A few attorneys charge a percentage of the purchase price but since the closing work is the same for both expensive and inexpensive properties, we recommend against the method unless it works out to a smaller fee than that charged by other attorneys.
Power of Attorney
If the buyer will not be in the country for the closing, he or she should execute a power of attorney while in Ecuador, naming a representative to sign for him or her. Generally, power of attorney is granted to the closing attorney.
Transfer of Funds
If the funds for the purchase of a property are not already in Ecuador, they can be wired from overseas. Most closing attorneys maintain a bank account to accept wired funds.