Letting agreements and the new lettings law in Argentina

The new Lettings law 27,551 (NLA) limits the freedom of contracting provided for in the Argentine Civil and Commercial Code (CCCN), in the context of a real estate sector in crisis, with owners and tenants affected in their margins and income by the pandemic.

The covid-19 pandemic deepened this situation, which led to the enactment of emergency regulations in March 2020 (Decree 320/2020), which mainly provided for the freezing of rents, extension of contracts and suspension of evictions for 6 months. Faced with this delicate scenario facing the sector, the NLA regulates numerous essential elements of the locative relationship that cannot be left aside by agreement between the parties.

The main obligations derived from a residential rental contract are essentially two: that the landlord deliver the property object of the contract to the tenant for a certain time (art. 1200 CCCN), and in view of this, the tenant must pay the rental price to the landlord agreed (art. 1208 CCCN).

The NLA had an impact on these two variables, extending the minimum contract term (art. 1198 CCCN) and regulating the price adjustment mechanism (art. 14 NLA). These two elements, added to the regulation of the deposit (art. 1196 CCCN) and the guarantee (art. 13 NLA) that the lessor must accept, and the obligation to declare the contract to the AFIP (art. 16 NLA) have significant to alter the economic equation of the contract, and reduce the incentives to contract from the supply side.
So, the way to counteract these disincentives could be by increasing the rental price at the beginning of the relationship, which affects the tenant’s entry costs (deposit and guarantee). The opposite of the end pursued.