KEYWORDS:
Guarantee fund, Land Registry, Torrens system, registration system, effectiveness, insurance fund, title insurance, registry function, qualification.
The guarantee fund for registered properties was initially conceived under Executive Order No. 511 dated July 10, 1920, and later reaffirmed by Land Registration Law No. 1542 as the “Registered Land Insurance Fund.” Therefore, its origin must be traced back to the year 1920, which marks the entry into force of said Executive Order. This was its original name, and it was established under Articles 125 to 135 of the said Executive Order, which has since been repealed first by Law No. 1542 and subsequently by Law No. 108-05 on Real Estate Registration.
Its regulation has preserved the same spirit in Articles 39 to 46 of Law No. 108-05 on Real Estate Registration. This fund was intended as a measure to improve the system, yet it is currently not operational. Its effects are suspended to date by Article 2 of Resolution No. 622-2007 of March 29, 2007.[1]
Its objective is to collect fees or special contributions for the operation and sustainability of the Real Estate Jurisdiction, as well as to compensate affected parties in the case of inaccuracies.[2] Currently, registry errors are not subject to direct reparation but are usually limited to being corrected. In this sense, effective reparation is necessary, firstly by the acting official and secondly by the State, to redress the damage caused to individuals who relied on the Registry’s information.
However, we maintain that the guarantee fund remains a valuable tool, currently suspended mainly due to economic reasons. When establishing the motives behind the enactment of the Real Estate Registration Law, the Legislature stated the following in one of its recitals: “WHEREAS it is essential to strengthen the system’s guarantees with respect to the Registered Land Insurance Fund, contributing to ensure that the fund’s resources adequately meet the system’s needs and safeguard legal guarantees.”[3]
The current reality in Dominican society is that damages suffered by a third party due to an error attributed to the Registrar of Titles are solely compensated by the State. It is widely known that lawsuits against the State have low enforcement effectiveness due to the prevailing lack of funds, especially when the fund designated for such cases has been suspended.
The Supreme Court of Justice has upheld the notion of compensation for damages caused by a Registrar of Titles due to errors in the formal publicity it grants with public faith, by affirming the following:
“Considering, furthermore, that the lower court acknowledges the omission that harmed the Association by preventing it from being considered in the enforcement proceedings against Apartment 7D2 and its owner, when it states in its ruling: ‘the omission of a creditor, as occurred here with the Asociación Mocana de Ahorros y Préstamos para la Vivienda, does not invalidate the enforcement proceedings, nor could it be claimed that it overrides another properly registered creditor; the situation raised only leads to damages against the State.’”[4]
Notwithstanding the above, we firmly assert that Registrars of Titles, as auxiliaries of justice and guarantors of the public faith of the registry, must be held accountable for every administrative act they perform or omit in the exercise of their duties, in accordance with the provisions of Organic Law No. 247-12 on Public Administration.[5]
Indeed, the guiding principle should be accountability in the performance of entrusted duties, particularly in a system that offers broad protection to third-party acquirers acting in good faith and for value. The Registrar of Titles must ensure the highest possible degree of legal certainty in every juridical act executed. For this reason, the Legislature explicitly established in Resolution No. 2669 issued by the Plenary of the Supreme Court of Justice on September 10, 2009, Article 46, the following: “The qualification function is the exclusive responsibility of the Registrar of Titles or the Assigned Registrar of Titles, as applicable, with respect to actions in which they intervene.”[6]
On the international front, Spanish authors such as Chico y Ortiz and Roca Sastre note that the existence of an Insurance Fund for compensation in exceptional cases where the registry system harms an owner, and the way such fund is financed, is a clear positive attribute of the Australian registry system.[7]
In comparative analysis, it is interesting to note that Spanish legislation does not include a Guarantee Fund, instead making Registrars of Titles directly liable. Article 296 of the Spanish Mortgage Law[8] provides:
“Registrars shall be civilly liable, first with their sureties and then with their other assets, for all damages caused:
- By failing to record in the Daily Book, register or preliminarily annotate within the statutory period the titles submitted for registration.
- By errors or inaccuracies in registrations, cancellations, preliminary annotations, or marginal notes.
- By failing to cancel without just cause any registration or annotation, or omitting a marginal note within the statutory period.
- By canceling any registration, preliminary annotation or marginal note, without the required title and prerequisites established by this Law.
- By errors or omissions in certificates of registration or of encumbrance-free status, or by failing to issue such certificates within the statutory period.”
The Spanish Mortgage Law clearly typifies the omissions and errors of registrars, thus making it possible to do without a Guarantee Fund. This could be due to several factors that require analysis to assess its functionality and effectiveness.
This is confirmed in Article 300 of the Mortgage Law, which establishes that “anyone who loses a real right or the action to claim it due to error, malice or negligence of the Registrar may demand immediate compensation from said Registrar.”[9]
In line with the above, the implementation of a Guarantee Fund would entail, among other things, the following: (i) the creation of a robust structure to manage and administer the funds collected and distribute them in accordance with the Law; (ii) constant monitoring of the conduct and performance of the Registrars of Titles, who might otherwise intentionally misuse the Guarantee Fund; and (iii) unless current legislation is amended, judges in the Real Estate Jurisdiction would be directly responsible for hearing personal claims (damages) against the Guarantee Fund, which would require adequate training in this regard.
Therefore, we argue that Dominican society is already overburdened from a tax perspective and cannot be expected to bear another levy, such as the special contribution allocated to the Guarantee Fund. Law No. 108-05 envisioned that this special contribution would be collected every time a Certificate of Title is issued.
Along the same lines, we reiterate that Dominican society, particularly in the real estate tax sector, is already overtaxed and cannot reasonably be expected to bear the burden of a special contribution to the Guarantee Fund. Law No. 108-05 envisioned that this contribution would be collected upon issuance of a Certificate of Title.
Consequently, we argue that property owners would be subject to multiple taxes to complete a real estate transfer, which, in our opinion, constitutes both an economic and procedural excess. We suggest that such funds, once the Real Estate Jurisdiction achieves budgetary autonomy, should be drawn from existing taxes levied on real estate assets, such as: (1) the real estate transfer tax; (2) the real estate property tax; and (3) just compensation in the event of land adjudication, among others. Failing this, an alternative compensation mechanism should be implemented.
We believe that the efficiency of the Dominican real estate system should not depend on an economic sacrifice by the State or an excessive one[10] by the citizens. Therefore, we favor adopting a cost-benefit perspective, holding public officials directly accountable through their personal assets.
In this context, we note that implementing the Guarantee Fund would require the use of public funds to establish administrative structures and human resources, which could become a barrier to its implementation. Therefore, we support the idea that, in the short term, compensation for damages should be claimed directly from the Registrar of Titles, which would have significant systemic impact.
BIBLIOGRAPHY
CHICO Y ORTIZ, José María. Studies on Mortgage Law. Volume I. Third Edition. Madrid: Ediciones Jurídicas S.A. 1994.
Spain. Mortgage Law, Consolidated according to the Decree of February 8, 1946, amended by Laws 7/1998, 1/2000, 24/2001, 53/2002, 7/2003, 22/2003, 62/2003, and by Organic Law 15/2003.
Participation of Lic. Héctor Alíes Rivas in the Real Estate Law Panel (Video). Accessed: June 5, 2017. Available at: https://www.youtube.com/, published on November 21, 2016.
Dominican Republic. Law No. 108-05 on Real Estate Registration, amended by Law No. 51-07 of March 28, 2005.
Dominican Republic. General Regulation of Title Registration, established by Resolution No. 2669-2009 of September 10, 2009, with its amendments, p.22
SCJ, Judgment No. 5 dated June 4, 2003, issued by the First Chamber.
Dominican Republic. Organic Law of Public Administration No. 247-12. Official Gazette No. 10691 of August 14, 2012.
[1] The doctrine has discussed the power of the Supreme Court of Justice to amend or suspend what is established by a Law through a Resolution.
[2] Participation of Lic. Héctor Alíes Rivas in the Real Estate Law Panel (Video). Accessed: June 5, 2017. Available at: https://www.youtube.com/, published on November 21, 2016.
[3] Ibid.
[4] SCJ, Judgment No. 5 dated June 4, 2003, issued by the First Chamber.
[5] Dominican Republic. Organic Law of Public Administration No. 247-12. Official Gazette No. 10691 of August 14, 2012.
[6] Dominican Republic. General Regulation of Title Registration, established by Resolution No. 2669-2009 of September 10, 2009, with its amendments, p.22
[7] CHICO Y ORTIZ, José María. Studies on Mortgage Law. Volume I. Third Edition. Madrid: Ediciones Jurídicas S.A. 1994.
[8] Spain. Mortgage Law, Consolidated according to the Decree of February 8, 1946, amended by Laws 7/1998, 1/2000, 24/2001, 53/2002, 7/2003, 22/2003, 62/2003, and by Organic Law 15/2003.
[9] Spain. Mortgage Law, Consolidated according to the Decree of February 8, 1946, amended by Laws 7/1998, 1/2000, 24/2001, 53/2002, 7/2003, 22/2003, 62/2003, and by Organic Law 15/2003.
[10] We do not criticize the sacrifice, provided that it results from a cost-benefit perspective.
