Our legal council, C. Felipe Danzilo has just sent us the following:
The purpose of this letter is to inform you about the legislation currently in effect regarding foreclosures. In that regard, first some history: Up until January 17, 2006 foreclosures had to be effected by a competent court. For that purpose, when a property was sold on terms, the sales contract included a mortgage and reasons for foreclosure.
Thus, when the reasons for foreclosure came about, the procedure
was the following:
1) The
plaintiff would file a collection or “executive” suit before a competent judge;
2) The judge
would then order that the defendant pay or consign the indebted amount to the
order of the court within 24 hours after being served. If the defendant had not
renounced the procedure of the collection suit, then he would be served so that
he could oppose the foreclosure by making specific arguments such as payment or
setoff of the debt. In most cases, however, the debtor renounces the procedures
of the collection suit, in which case the judge orders the attachment of the
mortgaged asset and the publication of its auction for twenty consecutive days;
3) Once the
publications have taken place, the mortgaged asset is auctioned off and title
is given to the highest bidder. The plaintiff participates in the auction with the
amount of his credit. During the first call for the auction no bids are
accepted for less that 2/3 of the foreclosure price set by the creditor and the
debtor in the mortgage document.
With the issuance of the new Notarial Code on January 17th, 2006, however, we have been allowed a new course of action in order to accomplish foreclosures without having to appear before a competent judge !!!! Said course of action is established in articles 60-71 of said body of laws and operates as follows:
1) The
parties must agree to this procedure in the public document (escritura) wherein
the debt is contracted (i.e. we sell a Unit to a Buyer on terms and in the
“escritura” in which we document this transaction both parties set a
foreclosure price for the unit and agree that the procedure tales place before
a Notary);
2) Once the
debtor’s credit becomes past-due, a Notary notifies the debtor of this fact and
demands that he pay within the next 24 hours. In that demand he must also
insert the following information:
a) The
obligation that is pending and the value of the same;
b) The name
of the person or account number to which he is to make his payment;
c) The date
and place in which the auction of the mortgaged property is to take place for
the price previously agreed to with the creditor, which will take place three
days after the publication in a local newspaper of the auction notice; and,
d) The clear
expression of the identity of the person to whom payment can be made at any
time prior to the auction.
3) In cases
in which a physical address for the practice of notices is authorized by the
creditor for the sale of mortgaged assets via Notary and the debtor is not
found in said premises, the notice will simply be affixed at the entrance of
said address and a copy of the same must be given to any person at that address
and two of his/her neighbors who will act as witnesses. Additionally, a video
of this act can also evidence these actions.
4) The
minutes wherein the demand of payment or notification by the Notary is made
must be inscribed in the public registry in the same registral antecedent in
which the mortgage was inscribed. This inscription will have the same effects
as an attachment.
One last note is that the
Notary who constituted the original guarantee cannot participate in the
execution of the same.
My opinion is that all
sales made must include foreclosure via Notary due to the fact that it is much
more expeditious that going through the judicial execution of the mortgage
which can take months and costs a lot more due to the applicable court costs.
Let me know if you
have any questions or comments.
ABOGADO C. FELIPE
DANZILO
