PUERTO RICO Law and Practice Contributed by: Antonio J Santos and Donald E Hull, Pietrantoni Mendez & Alvarez LLC
3.4 Taxes or Fees Relating to the Granting and Enforcement of Security The stamp taxes and recording fees payable in connection with the granting and cancellation of mortgages are similar to those payable with regard to transfers of title. The Internal Revenue stamp taxes for the origi - nal of the deed of constitution and the deed of cancellation of mortgage are calculated at the rate of USD2 for the first USD1,000 (or frac - tions thereof), and USD1 for every USD1,000 thereafter, based on the amount of the mort- gage plus an additional amount equal to 10% of the mortgage to cover protective advances. The Internal Revenue stamp taxes for the certi - fied copies are calculated at the rate of USD1 for the first USD1,000 (or fractions thereof), and USD0.50 per USD1,000 thereafter. Legal Assis - tance stamps are also required to be affixed to the deeds and are calculated at .0001 times the amount of the mortgage plus an additional amount equal to 10% of the mortgage to cover protective advances for the deeds of constitu - tion and cancellation of mortgage (and half of that amount for the certified copies). The fees for recording the deeds of constitution and cancellation of mortgage in the Registry of Property are calculated at the rate of USD2 per USD1,000 (or fractions thereof) for the first USD25,000 and USD4 per USD1,000 for amounts in excess of USD25,000, plus a filing fee of USD15.50. The calculation of recording fees is based on the amount of the mortgage. In addition, the Notarial Law requires payment of a notarial tariff to be calculated on the basis of the amount of the mortgage transaction. For trans - actions with stated amounts up to USD10,000, the applicable notarial tariff is USD150.00. With regard to transactions with amounts between USD10,000 and USD5 million, the parties may
negotiate the notarial tariff, but in no event may the tariff be greater than 1% of the transac - tion amount or less than 0.5% of the transac - tion amount. For transactions with mortgage amounts of more than USD5 million, the par - ties are free to negotiate the notarial tariff but the tariff in those cases will never be less than USD25,000. 3.5 Legal Requirements Before an Entity Can Give Valid Security There are no special legal rules or requirements (such as “financial assistance” or “corporate benefit” rules) applicable in Puerto Rico that must be complied with in order for a debtor to give a valid lien over real estate assets. However, third parties granting security for the benefit of others must account for fraudulent transfer and fraudulent conveyance challenges that may be available under the Puerto Rican Civil Code and US federal bankruptcy statutes. If successful, these challenges may result in the lender’s loss of its security over the real estate assets. 3.6 Formalities When a Borrower Is in Default Under Puerto Rican law, a real property mort - gage is not duly constituted or effective unless it has been recorded in the Registry of Prop - erty. Therefore, before enforcement of a real property mortgage lien is sought, the secured party should confirm that the mortgage has in fact been recorded in the land records. Prior - ity among real property liens is generally deter - mined on the basis of the order of filing of the corresponding lien instruments in the Registry of Property. However, it is significant to note that there is a statutory preferential lien for unpaid property taxes. Enforcement of a real property mortgage lien in Puerto Rico is accomplished pursuant to a
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