ECUADOR Law and Practice Contributed by: Randy Arévalo, Diego F. Amen, Darío Vicuña and Sandra Touma Faytong, VIVANCO & VIVANCO
3.4 Taxes or Fees Relating to the Granting and Enforcement of Security The constitution and enforcement of real estate col - lateral in Ecuador involve transactional costs primarily centred on notarisation and public registration. While the legal system does not impose stamp duties or documentary taxes per se, it requires the payment of specific regulated fees and contributions: notary fees, registration fees, loan origination taxes and enforce - ment costs. 3.5 Legal Requirements Before an Entity Can Give Valid Security Directors must ensure that granting security serves the company’s interest. While financial assistance rules (a company lending money for the purchase of its own shares) are not as strictly codified as in the UK or EU, the principle of corporate purpose must be respected. A formal resolution from the shareholders’ meeting is generally required to encumber the company’s main productive assets. 3.6 Formalities When a Borrower Is in Default In Ecuador, real estate security enforcement depends on the chosen legal instrument. Mortgages require a judicial special executive proceeding, a slow process that typically takes 18–36 months to reach a public auction. In contrast, guarantee trusts allow for extra - judicial enforcement, where a trustee follows pri - vate contractual procedures – such as independent appraisals – to liquidate the asset in only 6–10 months. As of 2026, all pandemic-era foreclosure stays have been lifted. While lenders are actively enforcing guar - antees, they often prefer restructuring operational assets like hotels and malls to avoid holding illiquid real estate. Additionally, a nascent secondary market for non-performing loans (NPLs) has begun to emerge, offering new entry points for distressed debt investors. 3.7 Subordinating Existing Debt to Newly Created Debt In Ecuador, it is possible for existing secured debt to become subordinated to newly created debt.
without necessarily issuing direct debt. For stabilised assets, securitisation trusts are common, allowing owners to raise capital on the Quito or Guayaquil Stock Exchanges by issuing securities backed by future cash flows. This diversified approach ensures that high-impact projects remain viable despite fluc - tuations in traditional banking liquidity. 3.2 Typical Security Created by Commercial Investors There are three common sorts of securities that are typically created by a commercial real estate inves - tor who is borrowing funds to acquire or develop real estate, which have distinct purposes and require - ments. • Mortgage: The most traditional security. It must be granted via public deed and registered in the Land Registry. It typically covers the land and all future industrial or commercial improvements. • Trust: This is the preferred structure for high-value commercial projects. The borrower transfers the title of the property to an autonomous patrimony managed by a trust company. • Pledge: Used for movable assets within the prop - erty, such as industrial machinery or specialised equipment. 3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders There are no general restrictions on granting mortgag - es or trusts to foreign financial institutions in Ecuador. However, if the property is in a national security zone, foreign lenders may face hurdles in taking direct title upon foreclosure. Repayments There are no restrictions on making repayments abroad, but they are subject to the currency outflow tax ( impuesto a la salida de divisas – ISD). As of 2026, it is vital to check the current rate (which has fluctu - ated between 0% and 5%). Loans from international multilateral organisations or for specific productive sectors may be exempt from this tax if registered with the central bank.
237 CHAMBERS.COM
Powered by FlippingBook