Real estate in Argentina: how to acquire title to or lease urban property to do business in Argentina

To a greater o lesser extent, doing business in a country always encompasses the use of real estate. In this article, we will cover the basics of real property rights and leases over urban facilities in Argentina.

1) Real property rights

Real property rights to do business in Argentina may be acquired mainly through ownership or surface rights. They are governed by the Civil and Commercial Code of the Nation (Código Civil y Comercial de la Nación or CCCN).

There is no restriction for foreign individuals or companies to acquire title to real estate in Argentina, except rural lands and border areas.

When individuals hold real estate, inheritance law must be addressed, since Argentine jurisdiction and laws apply to real estate located in Argentina (CCCN, Articles Number 2,643 y 2,644).

a) Ownership

Under Article Number 1,945 of the CCCN, ownership over a land extends to the underground and airspace, to the extent their uses are possible, except as provided by special provisions and laws that may restrict the owner´s rights (e.g. provisions on treasures, mining law, airspace law). All buildings, crops and plantations belong to the landowner, with the exceptions of surface rights.

According to the above-referenced legal provision, real estate property cannot be distinguished from land ownership and the same deed includes both, except for surface rights.

b) Surface right

The CCCN regulated surface rights for the first time in Argentine law (Articles Number 2,114 through 2,128), effective as from 1 August 2015.

This new real property right enables to hold rights similar to ownership over constructions, plantations or forests and all their proceeds, separately from the land they are built or grow on (CCCN, Article Number 2,114) and for an extended period. As an owner, the surface right holder may also mortgage the surface property or subject it to the horizontal property or condominium regime (CCCN, Article Number 2,120).

Surface rights may have a maximum legal term of 50-years over plantations and forests, and of 70-years over buildings. (CCCN, Article Number 2,117).

Surface rights terminate upon expiration of the agreed upon term, express resignation, the occurrence of a subsequent condition, consolidation, or lack of use for certain terms (5-years in cases of forestation and plantation and 10-years in the event of construction) (CCCN, Article Number 2,124).

Upon termination, the landowner owns what is planted, afforested or built by the surface right holder, free from any right or encumbrance (CCCN, Article Number 2,125). The landowner must compensate the surface right holder, unless otherwise provided by agreement (CCCN, Article Number 2,126).

c) Conveyance of title to the property

Title to real estate is conveyed through the granting of a public deed authorized by a public notary, the delivery of possession to the land, and the record of the deed before the Public Registry of the relevant jurisdiction (Registro de la Propiedad Inmueble) to make the transaction enforceable vis-à-vis third parties. The Public Registry´s records are publicly available.

As for protection to the buyer and before authorizing the execution of the deed of transfer, the public notary must study the seller´s title to the real state to establish any possible imperfection and ask the Public Registry to inform on existing attachments and encumbrances. The public notary must also check that all local taxes levied on real estate are paid until the date of the closing. The State and public notary will be held liable in case of damages arising out of Public Registry´s inaccuracies and professional malpractice. Title insurance is not available in Argentina.

Further to the above, the CCCN grants buyers of real estate an eviction guarantee (CCCN, Article Number 1.034), entitling the buyer to recovering damages against the seller if the buyer loses the real estate acquired due to the existence of a third party’s better title to the property (CCCN, Article Number 1,040). The seller is also responsible to the buyer for certain hidden defects in the real estate property (CCCN, Article Number 1,051).

Local stamp taxes apply to the conveyance of real state, their rates varying according to the jurisdiction the real estate is located in (around 3% of the purchase price). The purchase of a family’s only residence is exempt from stamp tax in some provinces.

Provided real estate is new, VAT applies to the transaction at the rate of 10.5% or 21% according to the real estate has housing or commercial purposes.

2) Leases

Urban leases are governed by the CCCN (Articles Number 1227 through 1,250)[1]. The CCCN sets forth certain public order provisions regulating urban leases the parties must abide by and cannot be set aside by contract.

a) Formalities

Lease contracts do not have specific formal requirements and a written instrument will suffice (CCCN, Article Number 1,188).

b) Minimum and maximum terms

Regardless their purpose, all urban leases have a minimum legal term of two years (CCCN, Article 1198). Maximum terms cannot be longer than 20-years for housing purposes and 50-years for commercial purposes (CCCN, Article 1197).

Unless expressly agreed, tenants do not have security of tenure and therefore lack of the right to renew the lease at the end of the contractual lease term. Continuance of occupation of the property and payment of the rent after the expiration of the term will not be deemed as a tacit renewal; the contract will remain in force until any of the parties terminates it by reliable communication (CCCN, Article Number 1,218).

c) Rent

Lease´s price may be set in local or foreign currency. It cannot be adjusted by any indexation method. In practice, inflation effects over the rent are contractually considered through periodical increases in the price (e.g. every six months or yearly) or by pegging the rent to certain goods or services related to the tenant´s activity (e.g. a given commodity).

VAT is levied on the rent at a rate of 21%. Leases for housing purposes are exempted from VAT.

A security deposit is common in market practices. However, in the case of leases for living purposes, the security deposit cannot be higher than one-month rent for every hired year (CCCN, Article 1,196, Sub-Article b)).

d) Sublease. Assignment of the contract

Unless otherwise agreed to the contrary, the tenant may sublease a part of the property (CCCN, Article Number 1,214).

The tenant may assign its contractual position to a third party if the landlord consents to it (CCCN, Article Number 1,213, first paragraph, and Article Number 1,636 and subsequent). The contractual prohibition to assign the contract includes the prohibition to sublease and vice versa (CCCN, Article Number 1,213, second paragraph). To sublease the whole property is deemed to be an assignment of the contractual position (CCCN, Article Number 1,213, third paragraph).

e) Advanced termination

The tenant may terminate the contract at will after six months of the term have elapsed. However, the landlord is entitled to compensation equivalent to one and a half monthly rent in case termination takes place during the first year of contract and to one monthly rent if it operates afterward (CCCN, Article Number 1,221, Sub-article a).

For additional information on this or any other issue related to doing business in Argentina, please, sign up for our Legal Blog or contact us at any time.

[1] Rural leases have a special regime set forth by Law Number 13,246.

Mario Eduardo Castro Sammartino

Our publications exclusively express the author´s opinion and do not purport to be legal counsel on any case. Should you need it, you must consult with your trusted lawyer or may contact us at your convenience. If you liked the article, please, share it.

 

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