Changes in lease regulations and amendment of the Argentine Civil and Commercial Code
On June 30, 2020, the National Executive Branch (“PEN”) enacted Law No. 27.551 (the “Law”) which introduces changes in the regulation of residential leases and modifies the sections of the Argentine Civil and Commercial Code (“CCCN”) related to this matter.
Said Law is organized in four Titles. Title I contains amendments to the Argentine Civil and Commercial Code. The most relevant ones are the following:
- Electronic domicile: in addition to their elected domicile, the parties of a contract may establish an electronic domicile – i.e. an e-mail account- at which all notices, communications and summons shall be deemed valid.
- Guarantee Deposit: it is established that the guarantee deposit shall not be higher than the amount of rent for the first month. Upon refund, the amount to be furnished by the landlord shall be equivalent to the amount of rent for the last month of the lease, meaning that the regulations consider the value adjustment of the guarantee deposit.
- Minimum term: the minimum term of all lease agreements is raised from two to three years, and the exceptions to the minimum term set forth in section 1.999 of the CCCN (embassies, consulates, leases for touristic purposes, storage and fairground exhibition, among others) are maintained.
- Charges and taxes: it is expressly stated that tenant shall not be responsible for the payment of any extraordinary condominium fees. Furthermore, parties no longer have to agree on who shall pay any taxes levying on the property (provincial and municipal), since it is now a responsibility of the landlord.
- Early termination: a period of one month’s notice is provided for in the event that tenant wishes to early terminate the lease. However, the impossibility of doing so prior to the six months validity of the agreement is still in force. The Law also establishes that if the early termination is notified three months or more in advance, no compensation shall be paid, provided that at least six months of the agreement have elapsed.
- Renewal: either party may summon the other within the last three months of the lease agreement for the purpose of negotiating the renewal of the agreement. In the event of silence of landlord or their refusal to reach an agreement, tenant may terminate the agreement without having to pay any compensation.
Title II establishes certain complementary regulations to lease agreements. The most significant ones are the following:
- Securities: should a security be requested, tenant shall propose at least two of the following: (i) title of a real property, (ii) bank guarantee, (iii) surety insurance, (iv) third party guarantor (joint and several) or (v) tenant’s personal guarantee (evidenced by paycheck receipt or by any other reliable means). Landlord shall accept one of the securities proposed by tenant.
- Adjustment and indexing: lease agreements are exempted from the provisions set forth in sections 7 and 10 of Law No. 23.928 and its amendments, meaning they are exempted from the prohibition on indexing. However, in residential leases, the amount of rent may only be adjusted annually. Furthermore, rent shall be fixed as a single value and payable on a monthly basis, i.e., no staggered leases can be agreed. Moreover, it is established that adjustments shall be made using the CPI (Consumer Price Index) and RIPTE (Average Taxable Remuneration of Stable Workers) indexes.
- Presentation to AFIP: lease agreements shall be declared by landlord before Argentina’s Federal Tax Authority (“AFIP”) within its term, in the manner and to the extent provided for by such agency.
Title III creates the National Program of Social Lease, aimed at adopting measures to facilitate access to adequate rental housing through formal agreements. The Ministry of Internal Affairs, Public Works and Housing, through the Housing Office, will be the governing body responsible for designing public policies to make this program effective.
Finally, in Title IV, the Executive Power is called to carry out the necessary actions to promote the development of mediation and arbitration proceedings, either at no or low cost, applying specific methods for the resolution of conflicts derived from the rental relationships.
The provisions set forth in Law No. 27.551 come into force the day after its publication in the Official Gazette and shall be applied to all agreements entered into after its effective date, that is to say, as from July 1st, 2020.
This report should not be considered as legal or other type of advice from Allende & Brea.
For further information on this topic please contact Diego Botana, Fernando Martínez Zuviría and Guido Celentano