Find out how the order of encumbrances works in judicial auctions and why it is crucial for your investment. Learn about the principle of registry priority in simple terms.
What should you know before investing in auctions?
Have you ever wondered why some people hesitate so much before taking part in an auction? The answer lies in the order of encumbrances (cargas), probably the most crucial aspect and the one that causes most mistrust among novice investors.
The principle of registry priority: the golden rule
Contrary to what many people think, the order of encumbrances is not determined by their importance. In other words, a mortgage does not take priority over a seizure simply because it is a mortgage. The key lies in something called the "principle of registry priority" (principio de prioridad registral).
What does this principle involve?
It's as simple as this: whoever reaches the Registro de la Propiedad (Land Registry) first takes precedence. Like a queue for tickets to your favourite concert: whoever gets there first has priority.
Timing is precise
- Every second counts
- An encumbrance lodged one second earlier takes priority
- The date on which the right was created doesn't matter
A practical example
Imagine this situation:
- Juan signs a mortgage on Monday
- María registers a seizure on Tuesday
- Juan's mortgage is registered on Wednesday
Surprisingly, María's seizure would take priority over Juan's mortgage! Why? Because it reached the Registry first.
Why is the order of encumbrances so important?
When you win a property at auction:
-
The following will be removed:
- The encumbrance for which the asset is being auctioned
- All encumbrances registered after it
-
The following will remain:
- All earlier encumbrances
- You will have to take responsibility for them
Key point
Even if your bid doesn't cover the full debt, the encumbrance for which the asset is being auctioned always disappears.
Tips for investors
- Don't automatically rule out a property because it has earlier encumbrances
- Include earlier encumbrances in your calculations
- Bear in mind that you will probably have to take on the earlier encumbrances
- Analyse the history of encumbrances at the Registro de la Propiedad
Conclusion
The order of encumbrances may seem complex, but now you know it rests on a simple principle: whoever reaches the Registry first has priority. Before taking part in your next auction, browse our auction directory to find opportunities and put this knowledge into practice.
Frequently asked questions (FAQ)
Does the importance of an encumbrance determine its priority?
No, priority is determined solely by the order in which it was entered in the Registro de la Propiedad, regardless of the type of encumbrance.
What happens to later encumbrances when I win a property?
All encumbrances registered after the one that gave rise to the auction are removed automatically.
Do I have to pay earlier encumbrances if I win a property?
Yes, earlier encumbrances remain and you will have to take responsibility for them, even though they were not originally your debts.
Can I lose the property if I don't pay the earlier encumbrances?
Yes, if you don't deal with the earlier encumbrances, the property you have just acquired could be put up for auction.