Mastering the Legal Labyrinth of Third-Party Involvement: Real-life Scenarios
Is your Real Property Law exam looming, leaving you feeling time-crunched? Are you venturing into memory enhancement techniques because understanding this legal concept seems insurmountable? Do you think that the third party in mortgages is more related to the mortgage than property? Fear not; the name might be somewhat extravagant, but this term is straightforward to explain.
We will explore the concept of a third party in mortgages, outline its specific requirements, and provide a series of practical examples that will help you clearly discern this figure in our beloved Civil Law.
The most common example in practice in Spain is purchasing a property from someone registered as the owner in the Property Registry, only to discover later that this person had no right to sell that property.
What is the Third Party in Mortgages?
In essence, we are dealing with the position of a third party who, in good faith and for valuable consideration, acquires a real right from a person registered in the Property Registry with the authority to transfer it.
Therefore, this third party in mortgages (also referred to as a third party, civil third party, or registration third party) is an acquirer of a real right, the validity of which does not expire due to a legal transaction carried out by different individuals, such as a sales transaction.
It appears as a third figure or person in a legal transaction between the buyer and the seller who holds legal ownership of the property that has been sold and cannot be deprived of this right.
This concept has nothing to do with the real right of a mortgage or the presence of a mortgage creditor in the legal transaction. The term derives its name from the legal provision that regulates the position of this third party, the Mortgage Law.
The legal regulation of this figure, as mentioned, is found in Article 34 of the Mortgage Law, which states: “The third party who in good faith acquires for valuable consideration any right from a person who appears in the Register to be entitled to it shall be protected in his acquisition, once the right is registered, even if it is subsequently annulled or resolved by virtue of causes not stated in the same Register.”
The good faith of the third party is presumed (meaning they were unaware of the inaccuracy and genuinely believed they were contracting with the real owner). Therefore, this third party in mortgages will be maintained in their acquisition as long as their right has been registered, even if the right of the grantor is subsequently annulled or resolved for causes not recorded in the Property Registry.
Requirements of the Third Party in Mortgages
For a person (in this case, the registered owner) to be considered a third party in mortgages, they must meet the following requirements:
- Acquisition of a property that has been properly registered in the Property Registry regarding the ownership of a real right. For example, the acquired property must be based on a real right (ownership, usufruct, dominion, use and habitation, servitude, real estate mortgage) and registered correctly.
- Acquisition made in good faith by the third party. For example, if Lucas diligently verifies the owner of a property he is interested in and observes that Maria is registered as the owner, he, securely and responsibly, formalizes the purchase with Maria, who is the registered owner. He has acted diligently.
- Acquisition made for valuable consideration. For example, a sales transaction between Fran and Lucia.
- Acquisition whose origin is based on a previous title, i.e., it comes from the previous owner. For example, if Marta buys a house from the one registered in the Property Registry, not the new owner, she would not be a third party; it would be a normal legal relationship between a buyer and a seller.
Practical Examples of the Third Party in Mortgages
Let’s observe the relevance of the third party in mortgages in different practical situations that may arise regularly in our daily lives:
Example 1: Armando’s Usufruct
Sara sells a house to Miguel, and Armando holds a right of use and enjoyment registered in the Property Registry for the property Sara sold to Miguel. The legal transaction, i.e., the sale, is formalized, and Armando’s usufruct does not extinguish due to the registration protection provided by the legal framework, specifically Article 34 of the Mortgage Law. This registration protection makes Armando the so-called third party in mortgages.
Example 2: The Summer House Surprise
Kike, a young architect, decides to buy a house outside Valencia to spend summers. He buys the house from Sole, the registered owner. Kike pays the price of the house in good faith, knowing the registration status. Sole had carried out an incredible job of document forgery to make Kike believe she was the real owner. Therefore, Sole had no authority to sell the property, as she was not the real owner. This means that Kike is considered a third party in mortgages, susceptible to registration protection.
Example 3: Asunción’s Inheritance
Juan inherits a house from his beloved grandmother, Asun, and the will establishes that his aunt Marta (who, coincidentally, does not get along well with Juan) has the right to use and inhabit the house for her life. However, Aunt Marta anticipated potential conflicts with her nephew Juan and decided to sell her rights of use and habitation to Luis, who buys them willingly for valuable consideration. Luis becomes a third party in mortgages with rights over the property. Poor Juan will have to tolerate Luis due to the registration protection he holds (hopefully better than with Aunt Marta).
Example 4: Carlos and His Servitude, Together Forever
Antonia owns a plot of land with a registered right of way in favor of her neighbor Carlos. After some time, due to economic problems in her family, Antonia decides to sell her plot to Cesar, who is unaware of Carlos’s right of servitude. In this case, even if Cesar decides to eliminate the right of servitude, Carlos still maintains his right due to the registration protection given by Article 34 of the Mortgage Law, making him a third party in mortgages.
Example 5: The Diabolical Mortgage
Pedro has a mortgage debt, i.e., there is a mortgage charge on the property with Banco Santander. Despite the situation, he decides to sell the house to Laura without mentioning anything about the mortgage problem. Laura, unaware of this situation, acquires the property in good faith and for valuable consideration, becoming a third party in mortgages, able to defend herself against the mortgage debt Pedro had incurred.
Conclusion
In conclusion, congratulations on making it this far. We have seen how the figure of the third party in mortgages is a person who acquires a real right that cannot be extinguished by a legal transaction carried out by different individuals.
It is also important to remember that, to become a third party in mortgages, one must meet the four requirements clearly outlined. Additionally, remember that this figure has nothing to do with the mortgage itself, except for the name and the designation of the legal rule that regulates it (Mortgage Law).