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Jun 27, 2007

Pro-tenant rental market


Rents: Can landlord and tenant freely agree rents in Argentina?1

Landlord and tenant enjoy the freedom to contract the amount of rent.

Argentina houses realestateNonetheless, Argentine law imposes certain limitations on this freedom. Thus, rent must be payable on a monthly schedule and cannot be indexed for inflation during the lease term. The landlord may require payment in advance but no more than the equivalent of one month’s rent.

Security Deposits

The landlord may require a security deposit, which must not exceed the equivalent of one month’s rent for each year of the lease term.

What rights do landlords and tenants have in Argentina, especially as to duration of contract, and eviction?

Rental agreements for residential urban properties may have terms of no less than two years, and no more than ten years. Contracts entered into for a shorter or longer term are, by operation of law, extended or limited, as applicable, to the statutory period.

The minimum statutory period does not apply to agreements for the lease of:

  • Premises used as an embassy, consulate or other official international or diplomatic organizations, as well as properties used by personnel thereof;
  • Furnished residential property rented for vacation purposes located in an area recognized for tourism2; provided, if the lease term exceeds six months, the contract shall be inconsistent with vacation use;
  • Animal, vehicle or other storage space (even if part of a larger property);
  • Stalls, booths and stands at markets and fairs; and
  • Premises rented to the national, provincial or local governments or to any government agencies.

Tenants can only be evicted through judicial proceedings. If the eviction is predicated on the tenant’s arrears in paying rent, the landlord must demand payment of past due rent from the tenant at least 10 days before commencing the eviction proceeding. A landlord may also file an eviction proceeding before the lease term has expired and enforce an eviction order upon expiration. Nonetheless, the landlord will bear all costs associated with the proceedings if the tenant does not contest the action and timely leaves the property.

By law, the landlord may not terminate a lease before the minimum statutory period has lapsed. The tenant may terminate the lease before the minimum period, but only after the first six months of the contract term.

If a tenant chooses to terminate the lease before expiration of its term:

  • The tenant must give no less than 60 days’ formal written notice to the landlord (a certified letter (carta documento) is the conventional means);
  • The tenant must pay damages to the landlord equal to:
    • one and half months’ rent if the termination notice is given during the first year of the lease; or
    • one month’s rent if the termination notice is given after the first year.

Argentina villa propertyIf the tenant abandons the premises or dies during the term, the lease may be maintained on its original terms by any person(s) living with the original tenant at the time and who is a family member or was treated by the tenant as a family member.

The rules governing court eviction proceedings vary from one province to another. As a general rule, all jurisdictions require service of a summons and complaint on the tenant to allow the tenant notice and an opportunity to be heard. Since 2002, the rules applicable to the City of Buenos Aires require landlords to post security (e.g., a cash deposit or a lien over the property) for the tenant’s benefit if the action seeks immediate possession of a leased residential property based on an alleged hold-over or payments in arrears. The posting of this bond or guarantee enables the landlord to obtain an eviction order much sooner than under prior rules.

After the lease has been executed and the tenant has occupied the property, landlord and tenant may amend (in writing) the lease term and the conditions of surrender to the landlord. If, upon request by the landlord and hearing of the tenant, the amendment is approved by a court, the landlord may enforce the amendment and demand immediate surrender of the property if the tenant fails to comply with the amended agreement.

EVICTION FOR NON-PAYMENT OF RENT

Duration until completion of service of process 60
Duration of trial 300
Duration of enforcement 80
Total Days to Evict Tenant 45
Courts: The Lex Mundi Project

How effective is the Argentinean legal system?3

The 2002 amendments of the civil procedure rules applicable in the City of Buenos Aires have greatly shortened the time for landlords to recover property from tenants failing to pay rent. In addition, landlords may sue for unpaid rent through an accelerated procedure, which can include summary remedies like ex parte seizures of the tenant’s property.

Still, judicial inefficiencies and wily tenants often delay collection and eviction proceedings. While the 2002 amendments are significant, it remains to be seen whether courts will maintain the favorable trend for landlords. It can be substantially more difficult and costly to evict tenants in Argentina than in (“pro-landlord”) UK or (“pro-tenant”) US.

Because of persisting uncertainties, landlords are well advised to secure solid guarantees or credit enhancements from their tenants, a practice which is generally accepted.

Legislation

Landlord and tenant matters related to urban property are governed by the 1984 Urban Leases Act (Law No. 23,091), as amended in 1997 by Law No. 24,808. Matters not specifically governed by the Urban Leases Act fall under the Argentine Civil Code and certain other specific statutes. Certain provisions of the so-called Convertibility Law (Law No. 23,928), as amended, also affect leases, most notably with regard to the prohibition of indexation for inflation. Landlord-tenant matters related to the residential lease of non-urban property are governed by the Civil Code.

Specific Provisions Governing Rural Property Leases

Leases of residential rural property are governed by the Argentine Civil Code. The principal differences with urban residential leases are:

  • Rent does not need to be paid monthly, and there is no statutory limit on the rent payable by the tenant as an advance (thus, total rent can be agreed upon for the entire duration of the lease and paid in a lump sum);
  • There is no statutory limit on the security deposit that can be requested from the tenant;
  • For unfurnished properties, the minimum statutory duration is one and one-half years. There is no minimum statutory duration for furnished properties. Once the lease has expired and rent is past due, the tenant may only be evicted upon 90 days’ prior written notice. The tenant can be evicted before the end of the lease term if in arrears of two consecutive months’ rent; and
  • Unless the lease provides otherwise, upon death of the tenant, the tenant’s heirs will inure to the rights and obligations of the tenant under the lease.

Brief History: Recent changes in Argentinean landlord and tenant law

Under the laissez-faire underpinnings of the 1869 Argentine Civil Code, most matters concerning leases were left to the freedom of contract enjoyed by landlords and tenants. This policy prevailed until 1943, with a brief exception between 1921 and 1925.

Argentina realestate homesPursuant to “emergency” legislation and regulations in force between 1943 and 1979, residential leases were forcibly extended and rent heavily regulated by the State. During this period, residential leasing represented an ominous risk to the landlord, as laws allowed the tenant to unilaterally extend the lease without adjustment of the rent. In the inflationary environment frequently occurring during this time, the nominal rent payable would become worthless.

Law 21,342, enacted in 1976, drastically deregulated the landlord-tenant relationship. After the Urban Leases Act was signed into law in 1984, the government tampered (see, e.g., Law Nos. 23,542, 23,680 and 23,747) with leases only occasionally to account for the effects of hyper-inflation between 1987 and 1989.

In the last few years, residential property values have increased considerably, in some cases exceeding U.S. dollar prices existing at the time of the country’s currency devaluation in 2002. There has also been a substantial increase in rental values. While many have speculated that this will prompt government regulation, the authorities have not taken any specific action to slow, halt or otherwise regulate rental prices.



Footnotes

1 This article focuses on the legal framework for “urban” residential properties. “Urban” property generally refers to real property located within a city or town (including suburbs). Please see the section “Specific Provisions Governing Rural Property Leases” for a summary of the differences with urban property.

2 The relevant statute refers to “tourism purposes”.

3 The Lex Mundi Ratings have been inserted for comparative purposes. They do not necessarily reflect the views of the law firm which authored this article.

   





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