Argentina Real Estate Law

The Federal Constitution and Treaties on Human Rights expressly provides for the right to private property.  Real estate in Argentina is governed by the Argentine Civil Code and by other specific laws (i.e. Law 13,512 on Propiedad Horizontal and Law 24,441 governing trusts).  Law 26,737 imposes limits on the ownership or possession of rural land by foreign individuals or legal entities.

This is not applicable in Argentina

No, international laws are not relevant to real estate in Argentina, with the exception of the Treaties on Human Rights (please refer to question 1.1) and general rules provided by investment protection treaties.

According to Law 26,737, foreign ownership of rural land shall not exceed 15% of the total amount of “rural lands” in the Argentine territory.  This percentage is to be calculated also in relation to the territory of the province or municipality where the relevant lands are located.  In addition, ownership by the same foreign owner (i.e. foreign individuals, foreign entities or local entities controlled by a foreign person) shall not exceed 1,000 hectares of the “core area”, or the “equivalent surface” determined according to the location of the lands.  Furthermore, foreign investors may not own more than 15% of the real property in the country, province or municipality and the same foreign owner shall not exceed 1,000 hectares of the “core area”, or the “equivalent surface” determined according to the location of the lands.  The Interministerial Council of Rural Lands (Consejo Interministerial de Tierras Rurales), the enforcement agency of the new law, shall define the location of the “core area”.

Likewise, under security zone regulations, foreign ownership in certain areas of national security, such as frontier zones, requires prior consent of a Federal Agency, which is normally granted.

In principle, acquisition of real property in the city of Buenos Aires by a foreign entity (in particular, when more than one asset is being acquired) may require the registration of a branch of such foreign entity before the public registry (“IGJ”).

The types of rights over land are outlined in Laws passed by the Federal Congress, mainly in the Civil Code, which include ownership, co-ownership, usufruct and easements, among others.  Additionally, Law 25,509 ofSuperficie Forestal allows separation of ownership of land and forestry.

Some significant real estate transactions are of a purely contractual nature, such as leases.

No.  As a general rule, any buildings or constructions are attached to the real estate in question, in other words, they are incorporated in the real property forming an indivisible unit.

In general, all land and related real estate rights over such property (and its encumbrances) must be registered with the local real estate registry.

There is no title insurance system in Argentina.

Real estate rights over land which are not registered are not effective against third parties.

Certain contractual rights over property (for example, leases) do not need to be registered.

This is not applicable in Argentina.

Ownership is transferred to the buyer upon the date that the notarial deed of conveyance is executed.  Possession by the acquirer is required for the conveyance of legal title.

Priority against third parties is obtained through timely registration of the notarial deed with the relevant real estate registry.  Priority among different registrations is granted by the date and order number of the notarial deeds given by the real estate registry at the time of the filing.

There is one real estate registry for each Argentine province and another one for the city of Buenos Aires.  Each real estate registry has its own particular rules.

The Land Registry of the applicable jurisdiction issues a certificate stating that the title has been duly registered.

Transactions cannot be completed electronically but the follow up of certain filings may be accessed online.  Broadly speaking, information on ownership is not available online; in the city of Buenos Aires’s registry, it is possible to obtain the identity of the owners of a given property online, though.  For purposes of requesting registration, a copy of the public deed together with a formal petition shall be furnished to the land registry.

Yes, compensation can be claimed under general rules of tort liability.

There are no restrictions on public access to the register, but the petitions can only be signed by certain professionals (lawyers, notary publics, engineers, accountants, surveyors or real estate brokers).

(a)   Selling and purchasing agents (or realtors)

A real estate broker may intervene as an intermediary on behalf of either the seller or the purchaser.

(b)   Lawyers

Legal advice is recommended in connection with the negotiation or execution of any binding document.  Lawyers usually provide tax and foreign exchange advice for transactions involving any international parties.

(c)   Notaries

The deed of conveyance (escritura pública) has to be executed before a notary public, who is responsible for verifying that the seller has good title on the property.

(d)   Others

A surveyor (agrimensor) should check that the boundaries of any property outside city centres as described in the real estate registry correspond to the parties’ understanding of same on the ground.

Some of the persons detailed above, such as notaries, may have regulations on fees depending on local rules and regulations, although, in many cases, these regulations are not followed by the parties involved.  In general, fees are agreed as a percentage of the transaction’s price.

During the crisis, real estate transactions declined significantly for both local and international investors.  In addition, in recent months, some real estate transactions have been adversely affected by foreign exchange restrictions, mainly, as a consequence of a general restriction pursuant to which the ability of Argentine residents to acquire foreign currency for this type of transaction has been suspended indefinitely.  The impact by this new regulation has been significant on the market, since, historically, real estate transactions involving the acquisition of real property are denominated and paid in a foreign currency.  The market has not yet recovered from these restrictions.

After the 2001 turmoil and current inflation, real estate transactions are considered a safe shelter for investors; consequently small apartments are the trend.  Although no particular trend towards retirement homes or akin has developed locally yet, there are signs of new investment in this sector, mainly focused on foreign residents, who could take advantage of a well-developed private health care system in Argentina.

Execution of the deed of conveyance between the buyer and seller and registration of such deed with the local real estate registry is required to transfer real estate.  Beforehand, parties may execute a preliminary contract (Boleto de Compraventa).  Recent regulations state that sellers must inform the tax authority about every offer, negotiation or transfer involving an immovable property for an amount exceeding AR$300,000 (approximately US$62,000).

Yes.  Under the general duty of good faith common to any contract, the seller should reasonably disclose any encumbrance or hindrance which may impede the buyer from fully enjoying the property.  Besides, these kinds of representations and warranties are contractually agreed, whereby the seller ensures he or she has good title.

In addition, disclosure is required by the consumer protection law.

Please refer to question 7.4 below.

Real estate transactions are customarily negotiated on an “as is” basis.  However, the Argentine Civil Code provides for certain implied warranties on a sale granted by the seller to the buyer.  These warranties consist of the following: (i) that the seller has good title and the property is free of encumbrances (Garantía deevicción) (see question 7.5); and (ii) that the property has no hidden defects (Garantía por vicios redhibitorios).

The Civil Code provides for an implied warranty to title in all sale contracts.  Although parties may include a contractual provision restricting or waiving this implied warranty, it is a widespread practice to include a clause pursuant to which the seller declares that it has good title to the property and that it is free from any charges or encumbrances.

There are certain legal charges attached to immovable property relating to municipal and provincial taxes, expenses and maintenance of building common areas and the charges levied by the utilities companies.

Since 2002, foreign exchange controls impose restrictions on persons (or entities) to borrow from foreign persons (or entities), or make payments of principal or interest thereto.  Furthermore, Central Bank registrations and approvals may be necessary.

The repatriation of funds may also be subject to restrictions.  In principle, foreign residents investing in Argentina are subject to a one-year deposit equivalent to 30% of the total funds introduced into the Argentine exchange market.  There are certain exceptions, including foreign direct investments, which include, with certain limitations, investments in real property.

Cross-border financings to Argentine residents -as a general rule- carry the obligation to repatriate and liquidate the funds into the foreign exchange market as well as the maintenance for a one-year minimum term and, unless an exception applies, are also subject to the 30% mandatory deposit.  Note that there is an exception commonly used for financing the acquisition of real estate that requires the loan to have an average term (considering the repayment schedule for principal payments and interests) of not less than 2 years and the investment of 100% of the proceeds in fixed assets or inventory.

Also, during the last semester of 2011, new foreign exchange regulations have limited the ability of local residents to purchase foreign currency to the extent the amounts in question are not consistent with their tax returns.  This has limited the number of real estate transactions being closed since most of the real estate market uses foreign currency as a payment method.

Mortgages and trusts are the most common collateral in connection with real estate.  A mortgage remains in full force and effect until all secured amounts have been paid in full or the mortgage is otherwise cancelled by mutual agreement.  However, unless extended, the registration of a mortgage will automatically expire 20 years as from the registration date.

Mortgages may be realised by judicial or private procedures.  Regarding judicial procedures, the mortgagee may commence an ordinary declaratory trial, an expedited trial, a mortgage expedited trial or a provincial foreclosure trial.

If the debtor issues mortgage letters (“letras hipotecarias”), the mortgagee may realise it by private procedure without the contribution of the debtor.  The mortgagee may: a) request directly to the register the issuance of a second copy of the deed; or b) require the payment of the debts that exist on the property regarding ordinary expenses, taxes and fees that weigh on the property.  Should the debtor not pay the debt within ten (10) business days from the request, the mortgagee may auction the property as if debt free.  In that case, the lender will order itself, without court intervention, a public auction sale of the property, by an auctioneer appointed by and with the usual conditions of that place.  Notices shall be published.  The base of the auction will be the amount of debt at the time of the sale.

None, except for the registration with the relevant real estate registry of mortgages or trusts over land.

Trusts are also widely used as security devices.  A trust will be formed upon the transfer of ownership in trust of a property by a settlor to a trustee who will undertake to exercise the rights in respect of it for the benefit of certain beneficiaries.  The trust property forms a separate estate from both the trustee or the settlor’s estate (except fraud).  The trust’s duration may not exceed thirty years.  The benefits of the trust in guarantee over the mortgage include: the property remains bankruptcy remote from the debtor’s assets; out-of-court foreclosure is allowed; and rotation of beneficiaries is easier.

a)         Income tax

Non-resident individuals or legal entities without a permanent establishment in Argentina are taxed only on income from Argentine sources; income arising from assets placed or used in Argentina is deemed to be from an Argentine source.  The corporate tax rate applicable in Argentina is 35%, whereas the tax rate for individuals ranges from 9 to 35%.  Income Tax Law provides certain particular rules applicable to real estate transactions such as a roll over alternative in order to defer the income allocation (venta y reemplazo).  Income tax treatment must be analysed on a case-by-case basis.

b)         Tax on Presumed Minimum Income

This tax applies to all assets of Argentine companies and other entities, such as trusts, common investment funds, permanent establishments of foreign entities and individuals in Argentina or foreign individuals who own rural immovable property.  This tax applies, at a 1% rate, should the total assets value exceed AR$200,000 (around US$52,000) at the end of the financial year.  Any tax payable hereunder is allowed as a credit towards normal corporate income tax.

c)         Personal assets tax

The Personal Assets Tax Law provides that all individuals residing in Argentina are subject to a tax upon their worldwide assets, while individuals not residing in Argentina are only liable for this tax upon their assets located in Argentina.  In general, the tax on personal assets goes from 0.5% to 1.25% depending on the total value of tax assets as of 31 of December of each relevant fiscal year.  A tax rate of 1.25% is applicable to non-resident individuals holding assets subject to this tax.

d)         Transfer of immovable property tax

A federal tax upon the transfer of immovable property (Impuesto a la transferencia de inmuebles, “TT”) is applicable to individuals who transfer real property if certain requirements are met.  The current rate is 1.5% of the transfer value of the property.

e)         Stamp tax

Stamp tax is a provincial tax levied on public or private instruments executed in Argentina, or, if executed abroad, when negotiated assets are in Argentina or have effects in Argentina.  In general, this tax is calculated on the economic value of the agreement and the parties who executed the document (and the notary public if applicable) are severally and jointly liable for its payment.

TT becomes due when the immovable property is deemed to be transferred (i.e. the time a preliminary contract is executed and possession is granted, or at the time the public deed of conveyance is executed; whichever occurs first).

Income Tax is payable on a yearly basis for Argentine residents.

Non-residents pay the Income Tax by means of withholding.

Personal Assets Tax and Tax on Presumed Minimum Income are payable on a yearly basis.

Stamp tax must be paid within a number of days as from the date the document is executed (usually 10 or 15 days).

Please refer to the answer to question 9.1.

VAT is applicable only to certain immovable property transactions, such as sales of new buildings and sales of refurbished buildings.  In the case of sales of new buildings, VAT is payable (10.5% for residential buildings and 21% for other buildings) upon that proportion of the price which relates to the new building, and in the case of refurbished buildings, on the proportion of the sale price which relates to the refurbished parts of the building.

Please refer to the answer to question 9.1.

Yes.  The sale of shares of an Argentine corporation by a non-Argentine resident is exempt from Argentine income tax.  In contrast to this, in principle, an assets sale performed by an Argentine resident company would be subject to Argentine income tax at a rate of 35% on the difference between the sale price and the residual tax value of the asset.  During 2012, the Government disclosed its willingness to modify this regime and provide some form of taxation to stock transfers but, as of today, no amendment to the existing regime has been passed.

Leases are governed by the Argentine Civil Code and by the Urban Leases Law (“ULL”).  Certain law provisions (the bulk of them aimed to protect the lessee) are considered public policy and therefore mandatory for the parties.  Lease contracts need only be in writing without requiring notarial deed or any registration, yet.

The types of business leases that exist are urban leases, rural leases and commercial leases, each of which are governed by a different set of rules.

The ULL provides for a minimum term of three years for urban business (commercial) leases.  Any lease contract entered into for a shorter term than the legal minimum will be considered as executed for the minimum term irrespective of its actual provisions.  Lease agreements are also subject to a maximum term of 10 years.  Recent case law has allowed longer terms though.  A maximum term of 50 years for this type of leases is contemplated in the Bill to Reform the Civil and Commercial Codes (the “Bill”). The Bill has not yet been passed but is expected to be approved during 2013.

b)    Rent increases

Parties are free to agree staggered price mechanisms unless this implies some way of indexation (for example, a rent increase by means of a clause taking the inflation index into account would be void).

c)     Tenant’s right to sell or sub-lease

A tenant may sub-lease in whole or in part the leased premises unless otherwise agreed.  It is customary, though, that an express prohibition to sub-lease is included in the agreement.

d)    Insurance

Usually, parties agree that the tenant must insure the property.

e)     (i)         Change of control of the tenant

There are no mandatory provisions on this matter under applicable law.

e)         (ii)         Transfer of lease as a result of a corporate restructuring (e.g. merger)

There are no mandatory provisions on this matter under applicable law.

f)     Repairs

The regulation of this matter is generally left to the parties but the general principle reflected in the Civil Code is that the tenant shall be responsible for carrying out minor repairs and regular maintenance of the leased property.  The tenant is also responsible for those repairs arising from the tenant’s fault or wilful acts.  Any defects in the structure of the property or more serious repair works must be borne by the landlord.

VAT is applicable to rentals of all types of immovable property (other than that used for the lessee’s personal housing), if the rental exceeds AR$1,500 (approximately US$400) per month.  However, there are some exemptions and the tax treatment must be analysed on a case-by-case basis.  For other taxes, please refer to question 9.1 above.

In addition to usual termination clauses (term expiration, default, breach of contract, etc.), termination of the lease is triggered by the total destruction of the leased property.  In all cases where the termination is not caused by the fault or wilful misconduct of the parties, such termination will not result in any obligation for compensation, except for the repayment of all sums paid in advance.  Notwithstanding the minimum terms indicated in the answer to item (a) of question 10.3, after the first six months of the lease have elapsed, the tenant has a legal right to terminate the lease prior to the expiry of the minimum contractual term.  In order to benefit from this right, the tenant must give the landlord notice of its decision to terminate the lease at least 60 days prior to the date on which it intends to vacate the property.  Should the tenant exercise this right during the first year of the tenancy, it is also obliged to compensate the landlord in the amount of one and a half month’s rent.  This compensatory payment is reduced to one month’s rent after one year of tenancy.

The fact that title to the freehold property is transferred does not affect the underlying lease; the lease contract remains in full force and effect against the new owner of the property.

Green leases are not common in Argentina.  However, parties are free to agree such kinds of obligations.

Urban development in Argentina is basically governed by provincial and municipal zoning regulations and building codes; therefore, they differ in each jurisdiction.

The federal government sets the minimum environmental standards for the protection of the environment, and the provinces and municipalities establish specific standards and implementing regulations.  The Argentine Constitution forbids the introduction of hazardous waste into the country.  Federal laws relate to various environmental issues such as industrial and waste management and disposal, air, land and water pollution, etc.  Provinces have also enacted environmental laws requiring companies to prepare and file environmental impact statements in order to obtain the relevant permits.

Certain provinces such as Buenos Aires and Santa Fe have enacted specific regulations for the so-called “large commercial areas” which apply to supermarkets, malls, shopping centres and department stores (large retailers).

The right to private property is guaranteed by the Federal Constitution.  However, both the federal State and the provinces are empowered to governmental taking (expropiación) providing the following requirements, among others, are met: (i) the Federal Congress (or the provincial legislature as the case may be) must enact a law declaring the public interest triggering the taking; and (ii) prior and due compensation must be paid to the owner.  The compensation may be judicially determined should the parties fail to agree on it.  In principle, loss of profits is not compensated though case law has loosened this restriction in certain special circumstances.

National and local governments may force a land owner to sell land to it.  According to national proceeding, the land should firstly be declared as of “public use”.  After that, declaration starts an administrative procedure to determine the scope of the compelled sale and to value the property.

If the land owner does not agree with the conclusions of such procedure, the government must fill in a judicial claim to force the sale.  The judicial decision will only rule on the price of the land.  The price only includes the “objective price” of the property and direct damages of the expropriation; personal circumstances or lost profits are not taken into account.

Control of proper zoning, land use, building codes and other restrictions are carried out by provincial and municipal authorities.

Environmental compliance is controlled at the federal, provincial and municipal level.  The provinces have recently begun to work actively on these matters.  Buyers usually obtain reliable information on environmental matters through due diligence on existing administrative or judicial cases and from any claims initiated before administrative authorities.  Further, prospective buyers usually inspect the property on site.

It is not possible to provide a complete list of permits and licences required for the use of real estate because there may be as many regulations as the number of Argentine provinces and municipalities.

Building or use permits are regularly obtained, although it may take some time.  The cost of and timing for the issuance of building or use permits have to be analysed on a case-by-case basis.

Please refer to the answer to question 11.3.

There are national and local regulations on the protection of historic monuments.  In general, the declaration of “public use” of a particular property only limits its use, but should the conservation of the historic monument be jeopardised, the government may compel the sale.

Argentina has no national register on pollution or contamination.

If damage to the environment is determined, clean up (or remediation) will be mandatory.

The Federal Government has taken some general measures in order to reduce electricity and gas consumption by means of charging higher tariffs when consumption increases are detected.

Argentina is not a party to Annex 1 of the Kyoto Protocol, so there are no mandatory reduction targets applicable to activities held in our country.

Please refer to the answer to question 12.1.

No, there are no rules of general application on this matter.

The proven Buenos Aires – Argentina lawyer professionals at the Kier Joffe law firm have experience working with foreign clients involved in all kind of cases in Argentina. Buenos Aires Argentina attorney professionals are knowledgeable in almost all the practice areas of law, to service its international cases in Buenos Aires Argentina. International clients will have the confidence of knowing that the case is being handled by an experienced and knowledgeable Buenos Aires  lawyer in Argentina.

www.kierjoffe.com