ECUADOR Law and Practice Contributed by: Randy Arévalo, Diego F. Amen, Darío Vicuña and Sandra Touma Faytong, VIVANCO & VIVANCO
• By agreement: Through inter-creditor agreements where a first-rank mortgagee agrees to step down to a second rank to allow for “fresh money” or new construction financing. This requires a public deed and a marginal note in the Land Registry. • By law: Under insolvency proceedings, certain labour and tax claims have statutory priority over secured creditors, regardless of when the mort - gage was recorded. 3.8 Lenders’ Liability Under Environmental Laws Lenders’ liability under environmental law is influenced by mortgage acquisition. As a general rule, as long as the lender only holds a mortgage, it is not liable. Foreclosure Risk Liability arises if the lender forecloses and takes title to the property. As the new owner, the lender becomes objectively liable before the state for any existing con - tamination (as discussed in previous sections regard - ing objective liability). This is why environmental due diligence is now a standard requirement for banks before approving large commercial loans. 3.9 Effects of a Borrower Becoming Insolvent Security interests granted within the “period of sus - picion” (usually six months to one year prior to the formal declaration of insolvency) can be voided if it is proven they were granted to defraud other credi - tors or to give an unfair preference without receiving Mortgages granted for new loans in the ordinary course of business are generally respected and main - tain their priority. 3.10 Taxes on Loans There are no current national proposals to cre - ate stamp taxes for mortgages. However, investors should monitor municipal ordinances, as cantons (like Quito or Guayaquil) frequently update their tables for registration fees. Digitalisation There is a nationwide push to fully digitalise the Land Registries, which is expected to reduce the time for equivalent value. Ordinary Course
recording security interests but may involve new administrative service fees.
4. Planning and Zoning 4.1 Planning and Zoning Framework
The regulation of land use and construction in Ecua - dor is based on a balance between national standards and municipal autonomy. At the legal apex are the Constitution and LOOTUGS, which establish manda - tory national guidelines. On a technical level, the Min - istry of Urban Development and Housing ( Ministerio de Desarrollo Urbano y Vivienda – MIDUVI) issues the Ecuadorian Construction Standard ( Ecuatoriana de la Construcción – NEC) to ensure structural safety and seismic resistance across the country. At the local level, each municipality exercises its authority through the PUGS, which defines zoning, building densities and permitted uses. The Secretari - ats of Territory are responsible for technical reviews and the issuance of licences, while specialised agen - cies in cities like Quito and Guayaquil handle inspec - tions and sanctions. Recently, the process has been streamlined by allowing private “collaborating entities” to certify the technical compliance of projects before permits are granted. 4.2 Development Process, Challenges and Enforcement The acquisition of development rights in Ecuador begins with verifying land-use compatibility via a for - mal zoning certificate. Subsequently, developers must obtain an urbanistic licence by submitting architec - tural, structural and environmental plans for valida - tion by the municipality or accredited collaborating entities. High-impact projects may utilise the onerous concession of rights, allowing for increased density or height in exchange for compensatory payments or public infrastructure works. While the legal system provides avenues for third-par - ty objections, these are most effective during the initial planning phases. Nevertheless, affected parties may file administrative complaints against specific permits. Under LOOTUGS and the Organic Code of Territorial Organisation, Autonomy and Decentralisation ( Códi-
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