The Impact Of The Cuban Foreign Investment Act Of 2014 On Foreign Real Estate Investments

Business Insights: Cuba

Cuba's National Assembly passed the Cuban Foreign Investment Act of 2014 earlier this year, authorizing foreign investment in all sectors other than health and education for its population and military institutions (with the exception of the military commercial system). Chapter 6 of the Act permits foreign investors to acquire ownership and other property rights over Cuban real estate. Specifically, Article 17 authorizes real estate investments and permits the ownership of real estate or other property rights, but such investments must be made by joint venture, international economic association agreement or totally owned foreign capital company. Investments can be for housing and buildings for private or tourist related purposes, housing or offices of foreign persons or real estate development for tourism purposes.

Real Estate as a Cuban Contribution to a Joint Venture

The law also contemplates the possibility of real estate as a contribution to a joint venture agreement between a foreign entity and a Cuban entity. Article 18.1(d) includes as contributions to capital, property rights over movable and immovable properties and other property rights thereon, including usufruct and surface rights.

The Cuban party's contribution to the joint venture may be in the form of land, buildings, usufruct rights (the right to use the property for a certain period of time) and surface rights.

Usufruct Rights in Cuban Legislation

According to Cuban Civil Code (Law No. 59/87), the right of usufruct allows for the free enjoyment of the property of another, with the obligation to preserve its form and substance, unless the instrument constituting it or the law provides otherwise. The rights and obligations of the usufruct holder (usufructuary) are determined by the usufruct document.

The usufructuary is obligated to use the property in accordance with its purpose and may make such improvements, facilities or installations necessary for its adequate maintenance, conservation and enjoyment. Article 210 of the Cuban Civil Code establishes the right of usufruct is nontransferable and may be encumbered, unless the title provides otherwise.

Article 211 of Cuban Civil Code prescribes that the Cuban State may grant an usufruct state-owned property to individuals or corporations with the formalities provided under applicable law. When granting the right, the state may establish conditions different from those indicated in the Cuban Civil Code...