ECUADOR Law and Practice Contributed by: Randy Arévalo, Diego F. Amen, Darío Vicuña and Sandra Touma Faytong, VIVANCO & VIVANCO
2.6 Important Areas of Law for Investors When purchasing real estate in Ecuador, an investor must navigate a multi-disciplinary legal landscape. The most critical areas are: • civil and registry law; • urban and municipal law; • tax law; • environmental law; and • corporate law. 2.7 Soil Pollution or Environmental Contamination In Ecuador, the legal framework regarding environ - mental liability is governed by the principle of objec - tive liability, as established in the Constitution and the Organic Environmental Code. • Owner liability: The current owner of a real estate asset is responsible before the State for the reme - diation of environmental damage or soil contamina - tion found on the property, regardless of whether the buyer caused the pollution. • Right of recourse: While the buyer must assume the immediate cost or obligation to remediate before the environmental authorities, they retain a civil right of recourse against the seller or the actual party responsible for the contamination. To succeed, the buyer must prove that the damage existed prior to the transfer and was not disclosed. • Mitigation: This underscores the vital importance of conducting Phase I and Phase II environmental site assessments during the due diligence process, especially for industrial or brownfield assets. 2.8 Permitted Uses of Real Estate Under Zoning or Planning Law Determining the permitted uses and development potential of real estate in Ecuador requires a detailed analysis of local municipal regulations and urban plan - ning instruments. Zoning is a dynamic system that allows for negotiation and enhancement through spe - cific agreements with local governments, rather than a static set of rules. One of the primary mechanisms for project enhance - ment is the onerous concession of rights ( concessão onerosa de direitos – COD). In major cities, develop -
• Public Registry: All formal real estate is registered. Registration has a constitutive effect; ownership does not legally pass to the buyer until the Land Registry records the deed. • Process: Includes (i) payment of municipal taxes, (ii) execution of the Public Deed before a Notary and (iii) filing with the Land Registry. • Title insurance: This is not used in Ecuador. Legal certainty relies on the principle of public registry faith. Buyers mitigate risk through exhaustive legal due diligence. 2.4 Real Estate Due Diligence Buyers usually carry out real estate due diligence, which is typically led by legal counsel in Ecuador and involves: • analysing the Encumbrance Certificate for at least the last 15 years to ensure a clear chain of title and the absence of liens, lawsuits or prohibitions to sell; • reviewing the local Land Use Certificate to verify permitted uses, maximum buildability and potential public work affectations; • confirming that property taxes and special improvement contributions are fully paid; and • for industrial or commercial assets, verifying the existence of environmental licences and municipal operation permits. 2.5 Typical Representations and Warranties Commercial real estate transactions are governed by the Civil Code, which provides a foundational layer of protection that operates independently of any specific contractual language. • Statutory warranties: The Civil Code provides for warranty against eviction and redhibitory vices. • Typical clauses: Sellers represent that they are the lawful owners, that taxes have been paid and that the asset is free of litigation. • Remedies: Buyers can seek the redhibitory action or the quanti minoris action (price reduction). • Survival and caps: Statutory claims for hidden defects expire after one year for real estate. Liabil - ity is typically capped at the purchase price. • R&W insurance: Virtually non-existent in the local market.
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