New Law on Urban Lease Agreements

On June 30, 2020, Law No. 27,551 on urban lease agreements was published in the Official Gazette (the “Urban Lease Law”). The Urban Lease Law introduces amendments with respect to the special domicile to be informed by the parties- and, in particular, to the regulations of the National Civil and Commercial Code (“CCC”) regarding urban lease agreements and the rules that govern its minimum term, obligations of the parties, guarantees, renewals, adjustments to the leasing fee, declaration before the National Tax Authorities (“AFIP”) and alternative dispute resolution for urban lease agreements. The law entered into force on July 1, 2020.

The following are the principal amendments introduced:

In the First Book – General Part

1. Special address in the conclusion of contracts. Possibility to choose.  The new law amends Section 75 of the CCC establishing that the parties to a contract can choose a physical address and may also provide an electronic address in which all notices will be deemed effective.

In the Third Book – Private Contracts – Urban lease

1. Residential lease. Requirements: Section 1,196 of the CCC limits the requirements applicable to the tenant: a) the advanced payment of more than one month of rental fee cannot be required, b) no deposit greater than the amount of one month of rental fee can be required and it will be returned as the equivalent to the price of the last month of the lease at the time of the restitution of the property, c) the payment of goodwill value or any equivalent cannot be required, and d) the signature of promissory notes or any other document that does not form part of the original contract cannot be required.
2. Minimum term of the urban lease contract. Exceptions: Due to the amendments introduced, sections 1,198 and 1,199 of the CCC set the minimum legal term of the lease agreement in three (3) years, except for urban lease agreements destined for: a) Headquarters of the embassy, ​​consulate or international organization, and properties destined for habitation of its foreign diplomatic or consular personnel; b) Room with furniture leased for tourism or similar purposes. c) Storing goods; d) Exhibition or offer of goods or services in a fair. The minimum legal term does not apply either to agreements that are intended to fulfill a specific purpose expressed in the contract.
3. Obligations of the Landlord. Preservation of the property: Section 1,201 of the CCC establishes the obligation of the landlord to carry out repairs required due to deterioration in its quality or defect, originated by any cause not attributable to the tenant. In cases where urgent repairs are necessary, the tenant shall notify the tenant and after the refusal or silence of the landlord, the tenant may carry it out the repairs by himself, at the charge of the landlord, once at least twenty-four (24) consecutive hours have elapsed from the receipt of the notice. If the repairs are not urgent, the tenant must notify the landlord in order to ask him to carry them out such repairs within a period that may not be less than ten (10) calendar days.
4. Frustration of use or enjoyment of the property. Section 1,203 of the CCC empowers the tenant to request the termination of the contract, or to stop paying the price for the period that he cannot use or enjoy the property for causes not attributable to him.
5. Tenant’s obligations. Payment of charges and contributions. Section 1,209 of the CCC limits expressly the expenses in charge of the tenant, eliminating the possibility of being forced to pay property taxes. The tenant shall not pay those taxes that encumber the property nor the extraordinary common expenses. It can only be established that usual expenses must be paid by the tenant, understood as those related to normal and permanent services available to the tenant, regardless whether these are considered as ordinary or extraordinary common expenses.
6. Early termination. Section 1,221 of the CCC establishes that after six (6) months from the execution of the lease agreement, the notice to terminate the agreement shall be sent one (1) month in advance.  The regulations highlight that in the cases of residential lease agreements, if the landlord sends the notice to terminate the agreement with an anticipation of three (3) months or more, the payment of any compensation for said concept is not applicable.
7. Renewal of the lease agreement. Section 1,222 bis of the CCC establishes for contracts for real estate destined to urban housing that the notice related to the renewal of the agreement within the last three (3) months of the agreement, has term of fifteen (15) days after which the silence or refusal by part of the landlord grants the tenant the right to terminate the agreement after its expiration without liability to pay any compensation.
8. Notice demanding payment and eviction. Section 1,222 of the CCC now establishes that in the case of residential destination, the notice shall be sent for the period of 10 days adding that the notice sent to the address reported in the contract is considered valid. The tenant must return the leased property. In no case may the landlord refuse to receive the keys of the property or include conditions on such reception, without prejudice to the keeping for himself the claims related to the pending obligations borne by the tenant. In case the tenant is obliged to deliver the keys by means of a court procedure, all costs related to it shall be paid by the landlord.

Complementary regulations to urban lease agreements:

Rental collateral: The tenant must provide the landlord at least two (2) of the following rental collaterals: a) Real property title; b) Bank guarantee; c) Surety insurance; d) Guarantee of bail or joint guarantor; or e) Tenant’s personal guarantee, which is documented with a salary receipt, income certificate or any other reliable means. The landlord cannot require a rental collateral that exceeds the equivalent of five (5) times the monthly value of the lease, except in the case provided in subsection e), in which said value can be raised to a maximum of ten (10) times.

Adjustments: In the case of urban lease agreements for properties intended for residential use, the price must be set as a single value and for monthly periods, on which only annual adjustments can be made consisting of equal parts of the monthly variations of the consumer price index (CPI) and the average taxable remuneration of stable workers (RIPTE), which must be prepared and published monthly by the Central Bank of the Argentine Republic (BCRA).

Judicial delivery of the fee: If the landlord of a property refuses to collect the rental fee, the tenant must send the landlord a notice requesting him receive it within forty-eight (48) hours after the reception of such notice. In case of silence or refusal from the landlord, the tenant, within three (3) business days following the expiration of the period stated in the notice, must proceed to the judicial deposit of the owed amount.

Obligation to inform AFIP: The urban lease agreements must be informed by the landlord before AFIP, within the term, in the manner and with the scope that AFIP shall establish.

National Social Rental Program

The new law also creates a program for the adoption of measures intended to enable access to decent housing for rent through formal agreements.  The governing body of such regulations is the Ministry of the Interior, Public Works and Housing, through the Ministry of Housing for people who are in a vulnerable situation, with special consideration of those victims of gender violence and the elderly people.

Alternative methods of dispute resolution

It is stipulated that the Executive Power must carry out the necessary actions to promote the development of areas of mediation and arbitration which shall befree or low-cost, applying specific methods for the resolution of disputes derived from the lease relationships.

Optional mediation

Section 6 of Law 26,589 establishes the optional application of the compulsory preliminary ruling mediation procedure for the claimant and the defendant will not be able to question the way chosen by the petitioner.