The Seller's Disclosure: Your Legal Obligations in Cuenca Real Estate Transactions

Navigating the sale of your Cuenca property as an expat requires more than just local knowledge; it demands a precise understanding of Ecuadorian property law to protect your investment. As a practicing Real Estate Broker and Lawyer here in Cuenca, I've seen firsthand how a lack of clarity on disclosure obligations can jeopardize a sale or, worse, lead to post-closing legal action. This guide moves beyond generic advice to give you the specific, actionable intelligence needed to conduct a legally sound transaction and safeguard your financial interests.

Unlike jurisdictions with standardized, multi-page disclosure forms, Ecuador's approach is grounded in the Civil Code's principles of good faith and the explicit revelation of "hidden defects" (vicios ocultos). The legal onus is on you, the seller, to ensure the property you transfer is free from significant issues that you know about and that are not immediately obvious to the buyer.

The Core Legal Obligation: Disclosing Vicios Ocultos (Hidden Defects)

Your primary legal duty is to disclose any material facts or hidden defects that could significantly impact the property's value or a buyer's decision to purchase. This isn't about cosmetic flaws; it's about substantial issues that a buyer could not discover through a standard visual inspection. Failure to disclose such a defect can give the buyer grounds to sue for a price reduction or even a full rescission of the sale.

Key Areas of Mandatory Disclosure

1. Structural and Systemic Defects: This is the most critical category. You are legally obligated to disclose known issues with the property's fundamental components.

   • Water Intrusion: Persistent leaks from the roof, windows, or foundation; past flooding events; or chronic dampness issues (humedad).
   • Foundation and Structural Problems: Significant cracks, settling, or any known instability in the foundation or load-bearing walls.
   • Faulty Systems: Known, recurring problems with electrical wiring (especially non-code-compliant "suicide showers") or plumbing systems, including septic tank issues.
   • Unregistered Construction: This is a major red flag in Cuenca. If you've built an addition, enclosed a patio, or made significant alterations without securing permits from the Municipality, you must disclose this. Unregistered construction can lead to fines and demolition orders for the new owner.

2. Legal and Title Encumbrances: The property must be transferred with a clean title. This is verified through a critical legal document.

   • Hyper-Specific Detail #1: The Certificado de Gravamen. Before any notary will agree to draft the final deed (Escritura Pública), they will require an updated Certificado de Gravamen from the Property Registry (Registro de la Propiedad). This is the property's official legal background check. You must disclose—and are expected to clear before closing—any liens, mortgages, legal disputes, or other encumbrances that appear on this certificate. A sale cannot proceed without a "clean" certificate.

3. Property Type and Associated Obligations: The legal structure of your property dictates specific disclosure requirements.

   • Hyper-Specific Detail #2: Propiedad Horizontal vs. Cuerpo Cierto.
     • Horizontal Property (Propiedad Horizontal): If you are selling a condominium or apartment, you are legally part of a homeowners' association. You must disclose the monthly HOA fee (alícuota), any upcoming special assessments, and provide a Certificado de no Adeudar a la Administración (a certificate from the HOA administration confirming you are current on all dues). Failure to do so can halt the closing.
     • Independent Property (Cuerpo Cierto): For a standalone house, your disclosures focus on clear boundary lines, utility access, and any easements (servidumbres) that may affect the land, such as a shared driveway or utility right-of-way.

The Paper Trail: Where Disclosure Becomes Legally Binding

While there isn't a single "disclosure form," your declarations are legally recorded in the transaction's core documents:

• Minuta de Compraventa (Promissory Sales Agreement): This is the initial, binding contract drafted by a lawyer that outlines the terms, price, and conditions of the sale. Any specific disclosures (e.g., "property is sold as-is, acknowledging the known roof leak which is reflected in the price") should be written into this agreement to protect both parties.
• Escritura Pública de Compraventa (Public Deed of Sale): This is the final deed, signed before a Notary and registered at the Registro de la Propiedad. Within this document, you formally declare that the property is free from liens and hidden defects. A fraudulent declaration in the escritura constitutes a serious legal offense.

Financial Realities: Taxes You Must Understand

While your lawyer handles the calculations, a savvy seller understands the tax landscape to anticipate net proceeds accurately.

• Hyper-Specific Detail #3: The Plusvalía (Capital Gains) Tax. This municipal tax is often a surprise for expats. If you sell your property for a higher price than what is recorded on the deed when you purchased it, you may be liable for this tax. Crucially for expats who may not stay long-term, the tax rate is higher if you sell within the first five years of ownership. The calculation is complex, often based on the difference between the municipal valuation (avalúo catastral) and the sale price, but it's a cost you must be prepared for.

• Property Transfer Tax (Impuesto de Alcabala): While the buyer is legally responsible for paying this tax, you need to know it's a key part of the closing process. In Azuay province, the rate is approximately 1% of the sale price. The buyer must show proof of payment before the final Escritura can be registered, so any delay on their part affects your closing timeline.

⚠️ Broker's Legal Warning: The Peril of Concealment

In my dual capacity as a broker and lawyer, the biggest mistake I see sellers make is the intentional non-disclosure of a known material defect. If a buyer discovers a significant problem after the sale (e.g., a foundation that was cleverly patched and painted over to hide a structural crack) and can prove you were aware of it, they can initiate a legal claim for saneamiento por vicios redhibitorios (remedy for hidden defects). This can lead to a court order forcing you to pay for expensive repairs or, in severe cases, to nullify the entire sale and return the purchase price. When in doubt, disclose.

Our Commitment to Your Secure Transaction

Selling your home in Cuenca should be a rewarding experience, not a legal gamble. Our role is to serve as your legal and financial guardian. We conduct thorough due diligence on your own property before listing it, identify any potential disclosure issues, obtain the necessary municipal certificates (Certificado de no Adeudar al Municipio), and ensure every declaration you make is accurate and legally sound. We transform complexity into clarity, ensuring your sale is not just profitable but ironclad.

Ready to sell with absolute confidence? Schedule a complimentary property risk consultation with us today. We’ll ensure your Cuenca property sale is secure, transparent, and legally protected from start to finish.