Pro-tenant rental market
May 14, 2015
Landlord and tenant matters related to property leased for residential purposes are governed by the Argentine National Civil and Commercial Code, which became effective on 1st August 2015. 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.
Under the laissez-faire underpinnings of the original Argentine Civil Code (enacted in 1869), 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 .
Pursuant 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 (LawNo. 23,091), 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 2014, the Argentine Congress enacted a new National Civil and Commercial Code (Law No. 26,994), which, as to leases of residential property, restated with a few exceptions the provisions of the Urban Leases Act.
In the last few years, residential property value has increased considerably, in some cases exceeding U.S. dollar prices existing at the time of the country’s currency devaluation in 2002, and leading to 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.
Landlord and tenant enjoy the freedom to contract the amount of rent. Nonetheless, 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.
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.
Duration of Lease; Eviction
Rental agreements for residential properties may have terms of no less than two years and no more than twenty 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 foreign personnel thereof;
- furnished residential property rented for vacation purposes ; provided, if the lease term exceeds three months, the contract shall be presumed inconsistent with vacation use;
- storage space;
- stalls, booths and stands at markets and fairs; and
- premises rented with a specific purpose stated in the lease contract, which normally should be fulfilled within a term of less than two years.
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 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 one-half months’ rent if the termination notice is given during the first year of the lease;
- one month’s rent if the termination notice is given after the first year; or
- two months’ rent in case of leases granted for less than the minimum statutory period (according to one of the statutory exemptions to that period).
If the tenant dies during the term, the lease may be maintained on its original terms by the tenant’s heirs. However, 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 is also entitled to maintain the lease on its original terms, and such entitlement preempts over the rights of the tenant’s heirs.
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.
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.
The Effectiveness of The Legal System
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.
Because of persisting uncertainties, landlords are well advised to secure solid guarantees or credit enhancements from their tenants, a practice which is generally accepted.