Cuba's new real estate market

Brookings just published (pdf) a paper of mine on Cuba’s new real estate sector, which represents one of the most interesting new features of the Cuban economy.  After decades of limited, in-the-shadows transactions, a November 2011 law ended the prohibition on simple sales of residential property.  The result is a market where demand is bifurcated between those with normal incomes and those with high incomes or relatives abroad interested in making a purchase, and there is no mortgage finance to smooth over the difference.  Information is imperfect in this market, but in its way it’s a vibrant market with brokers operating on foot and on line, and money coming in from abroad.  A by-product of this change is that Cubans are registering their property titles in large numbers regardless of whether they intend to sell, and transactions carried out illegally in the past are being legalized and properly documented.  If you count property rights as an element of human rights, this is a step forward.  A property title only has full meaning if you can liquidate the asset it describes, and Cubans can now do that.

Odds and ends

• Miriam Leiva’s note last week on the passing of her husband Oscar Espinosa Chepe.

• AP: 182,799 Cubans have traveled abroad in the eight months since restrictions were largely eliminated.

• Geoff Thale and Ana Goerdt of the Washington Office on Latin America on the state of internal criticism in Cuba, and the government’s response to it.

• AFP: Cuba and the United States talked September 20 about search and rescue operations and collaboration, with both sides’ Coast Guards at the table.  Cuban delegation statement here.

• In Cuba Standard, an English language version of the article on the Cuban Supreme Court’s housing decision.

• Granma on the eternal question: does is it pay off to play short in center field?  A review of the evidence says no.

• Juventud Rebelde on a very honest man in Matanzas.

Housing: making the illegal legal

Cuba’s Supreme Court has ruled that illegal home purchases made before the law changed in 2011 can now be legalized. 

This article in Cubaencuentro, with links to the court decision and order, explains the decision and the case based on an interview with the plaintiff.  (The writer, Mirella Betancourt, happens to be my wife.)

It boils down to the following: Decree-Law 288, which legalized home sales in 2011, made no provision for past home sales even though it is common for new laws to contain transitional measures that apply new norms to past actions. 

One such past action, which resulted in the court case, is the 1998 purchase of a Havana apartment for $5,000 by Bertha Bouly Wilson, a woman from Guantanamo province.  Owner Ricardo Andux Barrueta vacated the home, and Bouly moved in.  In a legal maneuver typical of the time, they married, Bouly explained, with the intention of divorcing so that the property could pass to her in the divorce settlement.  But the divorce did not take place, and in time Andux tried to regain possession of the home and to have Bouly evicted.  Bouly turned to the courts to try to obtain full legal ownership of her home.

She and her attorneys fought a losing battle for six years.  After the new real estate law went into effect in 2011, Bouly argued in Havana’s top provincial court that the law should not penalize her for a transaction that was illegal in 1998 but would be legal  today.  She lost that case too, with the court deciding that since the new law did not address past real estate transactions, it had no basis to rule in her favor.

Only by continuing to litigate, “with hope for a miracle,” she says, did she fend off eviction.  Her last option, an appeal to the Supreme Court, gave her a complete victory.  Its February 28, 2013 decision declared the 1998 transaction to be valid today.  It ordered that she and Andux appear before a notario (a local Ministry of Justice official) to have her name inscribed on the property title and that of Andux removed.  It also ordered that in the event that Andux would not appear, the provincial court would appear in his stead to ensure that the transfer of title proceeds.

In its decision, the Supreme Court noted that Decree-Law 288 included no provision about pre-2011 home sales, and it repealed old statutes that made those sales illegal.  That, the court said, left only one legal norm in place, the new one, making home sales legal – past, present, and future.  Hence the Supreme Court declared that the lower court was “in error” on legal grounds in deciding against Bouly, and had failed to act with a “sense of justice that should be most important in a judicial decision when one puts in relief the defenselessness of the appellant [Bouly] in face of the antisocial conduct of the seller [Andux].”

The court then issued a circular to all courts, law firms, and government housing offices to order that the same standards and procedures applied to Bouly be applied to all.  It thus converts its decision into law.

The independence of Cuba’s judicial system is certainly debatable, and indeed the courts are rooted in the Cuban executive.  But regardless of what one thinks of Cuba’s legal system, this decision has impact.

Cuba’s government has already been urging homeowners to update and register their titles.  Now a large number of homeowners previously shut out will have the opportunity to do so.  To the extent that they do, Cuba’s property registry will become more accurate and up to date.  For persons in Bouly’s position, a clear and registered property title means security and protection – from a seller who took your $5,000 and then tries to take his house back, or from some other party, perhaps outside of Cuba, who might press a claim.  For the government, it broadens and consolidates what is one of its most popular reforms.

Odds and ends

• Cuban media continue covering the Snowden case without mentioning that he has requested asylum in Cuba.  These articles discuss his requests to Brazil and Russia, and this foreign ministry statement slams U.S. pressure on other countries.

• There were changes in the membership of the Communist Party’s Central Committee, including the departure of U.S. expert and former National Assembly President Ricardo Alarcon.  The changes represent a “natural process,” the Granma story says.  Raul Castro recalled an agreement made in the last party conference by which members of party committees “at all levels should submit their resignations from their posts when they consider that the reasons for their elections no longer obtain.”  Hence Alarcon and four others, all of whom had left high-level posts elsewhere, left the Central Committee.  Here’s the list of the Central Committee’s 112 members, not yet updated.  More from BBC.

• Radio Marti on the changes in the Cuban penal code that opens the door for reduced sentences in criminal cases.

• The Herald on the latest twist in the case of former Rep. David Rivera’s re-election campaign.

• Financial Times on Cuba’s real estate market.

• El Nuevo has an affectionate profile of the guys at Babalu, ten years into their enterprise.

• “There’s an awful lot to like about this kid,” Yankees manager Joe Girardi said after seeing Cuban phenom Yasiel Puig play with the Dodgers last month.  More from Bill Plashke in the Los Angeles Times.