A Q&A guide to corporate real estate law in Argentina.
The Q&A gives a high level overview of the corporate real estate market trends; real estate investment structures, including REITs; legislation; title and public registers of title; confidential information; state guarantee of title; tenure; sale of real estate; seller's liability; due diligence; warranties; cost; taxes and mitigation, including VAT and stamp duty/transfer tax; climate change targets; third party outsourcing; restrictions on foreign ownership or occupation; finance; leases; planning law and consents; and proposals for reform.
To compare answers across multiple jurisdictions, visit the Corporate Real Estate Country Q&A tool.
This Q&A is part of the PLC multi-jurisdictional guide to corporate real estate law. For a full list of jurisdictional Q&As visit www.practicallaw.com/realestate-mjg.
The main trends in the real estate market include:
Residential sector. In recent years, real estate investment in the residential sector proved to be a safe investment and a means to protect savings. However, as real estate projects are long in duration, the effects of inflation must be considered in particular. Inflation is increasingly becoming the main concern of developers facing new real estate projects. Due to an increase in the price of land and in the cost of construction, investment in the residential sector has considerably decreased over the last months.
Commercial office sector. Interest in the construction of new office buildings has also decreased for the same reasons as in relation to the residential sector. In addition, business activity is currently slow in Argentina, which further weakens the office market because it is directly linked to business activity.
Hotels sector. Tourism boomed in Argentina following the devaluation of the peso during the last decade. Therefore, there is a huge interest in the development of hotels. The largest projects are located in Buenos Aires, which is South America's most visited city by tourists, and in other main tourist destinations. Over the last years, condo hotels have become one of the most preferred structures among the investors.
Rural sector. The real estate industry in rural locations has been very active since devaluation of the peso in 2002. However, due to government intervention restricting meat exports and affecting wheat prices, expansion of real estate in the rural sector has recently declined slightly. Also, following the enactment of Law No. 26,737 in December 2012, the ownership and possession of rural lands by foreign persons has been restricted, which will negatively affect foreign real estate investment (see Question 22, Rural land ownership by foreign persons).
Shopping centres. There are many opportunities for shopping centre developments, especially in medium-sized towns in the provinces and in Buenos Aires, where the population is wealthy thanks to the interaction with the rural sector.
The most significant recent deals are:
Acquisition of Grupo Posadas. Groupe Accor has acquired the hotels owned by Grupo Posadas in Argentina, including the Hotel Caesar, the Hotel Caesar Cerrito and the hotel project One in Village Pilar.
High-rise office space in Catalinas Norte. Catalinas Norte is the key office space area in Buenos Aires. Constantini Group is constructing what is meant to be the tallest building in the city.
The re-opening of the Village Recoleta Mall. This is one of the key shopping centres in the City of Buenos Aires, with more than 100 stores and 12 cinemas.
The development of Mil Columnas. This will be the largest shopping mall in South America, with more than 20,000 stores.
There are three major business structures through which an investor (either a physical person or a legal entity) can participate in the real estate market:
Direct acquisition of real estate.
Participation as shareholder in a company that owns real estate.
Participation in a real estate trust that invests in Argentinean real estate.
Real estate investment trusts (REITs) do not exist in Argentina, at least as they are known in other countries (for example, offering tax benefits, and so on).
Institutional investors are essentially trust managers and investment companies. They are involved in the real estate market as developers of:
Residential buildings.
Office buildings.
Shopping centres.
Developments in rural areas.
The role of private investors is often limited to residential and office markets. Lately, however, interest in hotel investments and shopping centres has increased. Investors willing to take part in these projects generally:
Provide the necessary funds to finance the construction.
Receive units of apartments, offices or hotel rooms, when the developer ends the project.
The main sources of real estate law are the:
National Constitution (1853).
Civil Code (1869).
Condominium Property Act (Act 13,512).
Registration of Condominium Property Act (Act 19,724).
National Real Estate Act (Executive Order 20,440/73).
Real Estate Register Act (Act 17,801).
Act related to Trusts (Act 24,441).
Division of Land Act (Act 14,005).
Horizontal Property Act (Act 20,276).
Urban Planning Code (Act 449).
Urban Leases Act (Act 23,091).
Rural Leases Act (Act 13,246).
Building Codes of each province.
Rural Land Law 26,737.
Real estate property is not distinguishable from land ownership. Therefore, buildings and other constructions on a particular piece of land cannot be owned independently from the corresponding land. Buildings are considered fixtures which belong to the owner of the land, under statutory provisions of the Civil Code.
Titleholders are considered to own the land and everything below and above the land, subject to specific legal restrictions (for example, restrictions relating to aerospace, utilities and mining).
Therefore, the land itself, and any buildings on it, are registered together.
Legal title to real estate requires both the:
Execution of a sale deed, passed before a notary public.
Transfer of the property.
Legal title is effective from the date of grant. However, to be fully enforceable against third parties, the title must be filed and registered with the Real Estate Register of the relevant province.
The main information and documents which must be registered in the public Real Estate Register are:
Public deeds creating, transferring, declaring, modifying or terminating interests in real property.
Judicial decisions establishing attachments or other precautionary measures on real property, or restraining orders preventing the owners from disposing of the property.
Preliminary sales agreements of real estate property under the Registration of Condominium Property Act, or of real estate divided into lots under the Division of Land Act.
There is no obligation to register all documents. Only the most relevant information must be included in the Real Estate Register.
Persons with a legitimate interest in discovering the legal status of the property, documents, precautionary measures or restraining orders can request a special judicial authorisation to obtain a copy of the relevant title deed, recorded in the Notary's College (Colegio de Escribanos) in the province where the deed was granted.
The information available at the Real Estate Register can be obtained through reports or certificates issued by it.
There is no specific state guarantee concerning the accuracy of records made by officers based on public deeds or other documents. However, any party incurring loss due to a registration error can sue the state for damages caused by the inaccuracy of the Real Estate Register.
Title insurance is not yet available. Insurance companies are currently analysing the possibility of providing title insurance within the Argentinean market. However, it is unlikely that title insurance will become available in the near future.
Ownership of real estate is governed by the Civil Code, which applies to all real estate located in Argentina. Under the Civil Code:
Legal titles which exist in rem can only be created by law.
There are a limited number of in rem titles that can be admitted and registered (for example, mortgages, leasehold rights, servitudes and usufruct).
All real estate rights are derived from ownership and generally comprise:
Ownership rights. Similar to common law, these rights are defined as those pursuant to which a certain thing is subject to the absolute will and discretion of a given person (subject to any specified legal restrictions).
Personal rights. These rights may also exist in relation to real estate (for example, leases and gratuitous use).
Real estate brokers are usually hired for the sale and purchase of real estate or for lease transactions. Real estate is usually marketed in newspapers, or directly marketed to clients and investors.
Commercial negotiations depend on the size and value of the property that is being sold or leased.
A buyer's offer to purchase real estate property, made through a broker, often includes a reserve. Under the reserve, the potential buyer provides a deposit to the seller or broker of a certain amount of money, as proof that the offer is reliable (see below, Sale contract). If the agreement is not completed for reasons attributed to the potential buyer, the potential buyer will lose the amount of money deposited as reserve (usually 5% to 10% of the purchase price offered).
The reserve, once accepted by the seller, creates a period of exclusivity for the potential buyer against rival buyers. If the seller accepts the reserve, but subsequently withdraws his acceptance of the offer, the seller must reimburse the deposit/reserve received from the potential buyer plus an additional amount equal to the deposit/reserve.
The purchase agreement is a contract by which the seller agrees to deliver and convey a real estate property to the buyer in exchange for a purchase price. Through the purchase agreement, both parties are bound to execute the corresponding public transfer deed. To assure protection against the seller's bankruptcy or reorganisation proceedings, the buyer must pay at least 25% of the purchase price under the reserve.
The offer is based on conditions offered or foreseen in the reserve. The broker then takes the real estate off the market until the seller decides whether to accept the offer. Once the seller accepts the reserve, there are several alternatives as to when the parties become legally bound, depending on the payment conditions.
To be enforceable against third parties, the public deed of transfer of title must be registered in the relevant provincial Real Estate Register.
The transfer of title to real property is made before a notary public, through a deed that must be registered in the Real Estate Register in the province in which the real estate property is located.
Between the parties, the transfer is completed once the public deed is executed.
In relation to third parties, see above, Registration.
Buyers of real estate are, by law, granted an eviction guarantee. This entitles the buyer to sue the seller for damages if the buyer loses the real estate acquired due to a judicial decision supporting a third party's claim to a better title to the property.
The seller is also responsible to the buyer for hidden defects in the real estate property, provided the defects:
Are relevant.
Existed before the sale.
The existence of hidden defects means the buyer can file legal proceedings to either:
Terminate the agreement, with the return of the purchase price plus interest.
Reduce the purchase price but continue with the purchase.
The time limit for either lawsuit is three months from the date the buyer becomes aware of the defect.
Before the execution of any arrangement, it is advisable to perform a detailed audit or due diligence relating to the following issues:
The parties of the transaction.
The object or purpose of the transaction (that is, the real estate property itself, including the ownership background, its conditions, its legal and administrative status, and any environmental concerns).
Any issues related to the target project or development (for example, feasibility and the applicable regulatory framework).
The legal audit should be completed simultaneously with other similar analysis and studies carried out by the following professionals:
Notary public.
Accounting and financial advisors.
Architects.
Engineers.
Land surveyor.
The seller must warrant that:
The seller holds perfect title to the real estate property (that is, that there are no doubts regarding the seller's capacity to sell).
There are no liens or encumbrances that prohibit the seller from freely disposing of the property.
The property is free from occupants or tenants.
The seller can also warrant that, under municipal zoning regulations, the real estate property can be used for a specific commercial activity.
The buyer can inherit liability for damage relating to the real estate, if the damage occurred before the purchase. The Civil Code provides for objective liability in certain cases, which means the owner is presumed responsible for damage caused by defects in the property, unless he can prove guilt of either:
The seller.
A third party.
Therefore, the buyer has the burden of proving that the damage to the property existed before the purchase. However, the parties can contractually agree that the seller will not be responsible for the damage caused before the purchase.
If it is not possible to determine precisely the extent of the damage caused by each party, the Environmental General Act (Act 25,675) establishes joint and several liability of the seller and the buyer, irrespective of any potential right of recovery between the parties.
The seller is liable for any damage caused to the real estate property, up to the date the property is legally transferred to the buyer (however, see Question 4).
However, the seller is responsible for hidden defects in the real estate property, if both of the following applies (Civil Code):
The defects are relevant.
The buyer claims for the damage within three months from the date it becomes aware of the defect(s).
The parties can set out who will be liable for hidden defects in the purchase contract. However, the seller retains liability for environmental damage from any hazardous waste it created, as it is responsible for managing that hazardous waste from the moment it is created until its final disposal.
The buyer usually pays:
The costs of the title search carried out by the notary public.
Fees to the notary public (since the notary public is usually appointed by the buyer) which typically vary from 0.8% to 1% of the value of the property.
50% of the stamp tax.
Between 1% and 5%, as agreed in each case, of the price paid as commission to the relevant real estate brokers. Purchases of urban real estate property are generally subject to a commission of between 1.5% and 3%, while commission on rural estate purchases may vary between 1% and 2%.
The seller usually pays:
50% of the stamp tax.
Between 1% and 5%, as agreed in each case, of the price paid as commission to the real estate brokers.
The cost of the certificates of title to the real estate property, and the certificates reflecting that there are no restraining orders preventing the owner from disposing of the property.
Taxes, fees and services to be paid in relation to the property.
VAT is generally not payable on the sale of real estate property.
However, VAT may be payable on improvements made by construction companies to the owned real estate properties when the property is sold. In these circumstances, the taxable base (that is, the amount that is taxable) is determined by the agreed value of the improvements, as provided in the purchase agreement (provided the agreed value is not lower than the increase in the fiscal value of the property due to the improvement or its proportional cost). The general applicable VAT rate is 21%, although improvements for housing purposes are levied at a 10.5% rate.
Stamp tax is payable on any sale or purchase agreement that bears the signature of both parties, at the rate specified by the province.
The taxable base is the total value of the transaction as set out in the purchase agreement. The applicable rate varies (usually about 3% of the purchase price) depending on the province.
Local tax authorities can claim the total stamp tax due from either party to the transaction. However, it is customary for each party to simply pay 50% of the due stamp tax (see Question 16).
To pay the applicable tax, a tax return must be filed. The payment term depends on the relevant province, usually ranging from ten to 20 working days.
Subject to certain limitations, the purchase agreement for a family's only residence is exempt from stamp tax in some provinces.
The most common methods used to mitigate tax liabilities when acquiring a real estate portfolio are:
To fulfill the procedure outlined in Act 11,867 on the transfer of going concerns. This procedure involves a notification to the tax authority.
The creation of an escrow account to cover any potential tax liabilities. The buyer usually requests an indemnity letter from the seller.
For the buyer to request from the seller an indemnity letter against potential tax claims.
Holding business premises.
There are currently no targets to reduce greenhouse gas emissions from buildings.
However, in 2003, the Province of Buenos Aires enacted Act 13,059 to implement an energy efficient system for insulating buildings (although the regulatory details of this law are not yet defined).
In addition, a draft law was passed in the legislature of the City of Buenos Aires which promotes sustainable construction. The Bill is currently being analysed.
Companies usually hire real estate brokers and advisers to manage their real estate portfolios and their accommodation needs.
In December 2012, the National Congress enacted Law No. 26,737, which sets out the protection regime of the national domain over the property, possession or control of rural land in Argentina (Protection Regime). The Law was further regulated on 29 February 2012, by Regulatory Decree No. 274/2012.
The Protection Regime considers as foreign ownership any purchase, transfer, assignment of possession rights of rural lands, to be made in favour of "foreign persons". Foreign persons are defined to include foreign individuals and legal entities controlled by foreign capital, subject to certain requirements set out under the Law. Some specific exceptions for foreign persons are provided (for instance, for foreign persons with ten years of continuous, permanent and verified residence in Argentina).
As from the effective date of the Law (5 January 2012), any purchase, transfer or assignment of possession rights of rural lands in favour of foreign persons must be previously authorised by the Argentine Registry of Rural Land.
The principal restrictions under the Law are that:
Foreign persons (physical or legal) cannot own or possess more than 15% of the rural lands in Argentina.
Foreign persons (physical or legal) of the same nationality cannot own or possess more than 30% of those 15%.
Foreign persons (physical or legal) can own only up to 1000 hectares in the "nucleus area" (as defined under Decree No. 274/2012) or the "equivalent surface" in Argentina.
Foreign persons (physical or legal) cannot own or possess rural lands containing, or bordering, large and permanent bodies of water, unless specifically authorised.
Foreign individuals or legal entities cannot own or possess rural lands which are located in border security zones, unless specifically authorised (see below, Authorisations required for border areas).
According to the Law, all acts executed in violation of the Law are absolutely and irrevocably null and void, and create no right of indemnification in favour of the authors of and participants in that an illegal act.
The Law also provides that the Argentine Registry of Rural Land is empowered to initiate administrative proceedings to investigate possible breaches of the Law. The results of the investigation must be notified to the potential violator, following which it will have ten business days to collect and submit evidence. The National Director of the National Register of Rural Land will analyse the incident, and apply the penalty which it deems appropriate (if any). The penalties vary between warnings, fines and special disqualification orders from six months to two years.
The purchase of real estate property by foreign persons in frontier security zones (that is, zones that are between 150 kilometres from terrestrial borders and 50 kilometres from shorelines) is subject to prior and special authorisation issued by the National Commission for Security Zones.
To become a shareholder of an Argentine company, foreign companies must:
Register with the competent Argentine Public Registry of Commerce.
Demonstrate that the foreign company:
performs its main activity outside Argentina;
holds sufficient assets outside Argentina;
has decided, at board level, to register the company in Argentina; and
provides details about its shareholders.
In addition, if a foreign company develops habitual business in Argentina, it must either (section 123, Business Association Act):
Register a branch in Argentina.
Establish a local subsidiary.
A company's change of control does not affect its holdings of real estate, except in the case of foreign shareholding (in relation to rural land, see Question 22, Rural land ownership by foreign persons). Foreign-controlled local companies in frontier security zones are considered to be foreign companies.
The National Constitution (Constitution) empowers the government to compulsorily purchase real estate for public use (Article 17, Constitution):
In certain circumstances provided by law, and with prior express approval of Congress.
If compensation is paid.
Public use comprises any activity for public welfare (for example, construction of a new highway) (National Expropriation Act (Act 21,499) (Expropriation Act)).
The following steps are taken during a compulsory purchase:
A declaration of public use by law.
The filing of expropriation judicial proceedings.
A price appraisal of the property determined previously by a court.
A court order for the expropriation and determining the amount of compensation.
The property being taken from the owner after payment of the compensation.
Compensation must be determined by a court order which takes into consideration the value of the real estate property when both the:
Property is taken.
Compensation is actually paid.
The compensation must reflect both (Expropriation Act):
The market value of the real estate property.
Any damages that are a direct consequence of the expropriation (that is, the compulsory purchase).
However, any type of compensation that could be a product of lost profits is excluded from the calculation of compensation (Expropriation Act).
Business premises can be subject to several municipal contributions, which vary according to the province in which the business is located.
The main contribution levied on business premises is the inspection of security and hygiene contribution. This is usually calculated by applying a fixed rate on the company's gross income. The rate is usually 0.5%.
Business premises may also pay other contributions, depending on their commercial activity and location. These contributions include the:
Contribution for lighting, sweeping and cleaning of streets.
Contribution for publicity and propaganda made.
Acquisitions of large real estate portfolios or companies holding real estate are generally financed with equity. It is common for small groups of investors to collectively create trusts for financing the acquisition of large real estate portfolios.
It is uncommon to use real estate to raise finance. However, it is possible for real estate to be used as a collateral guarantee for the receiving of finance.
Finance is generally acquired in residential and office construction projects using a guarantee trust, in which the real estate is transferred to a trustee. These trusts are generally created by a property developer, who may later become trustor or trustee.
Investors assume a role of both a:
Trustor, by providing the necessary funds for the construction.
Beneficiary, by being entitled to receive a unit (such as an apartment, a lot, and so on) at the end of the project.
Real estate securitisation is not common in Argentina.
Parties cannot agree to set aside the provisions of the Urban Leases Act, which regulates contractual lease provisions.
Since a lease is a private agreement, it can be executed without any specific requirements, except that the lease agreement must be in writing and duly signed.
The following are prohibited, whatever the cause:
Currency updates of the rent.
Price indexation (that is, a normalised average price for a given class of goods or services, during a certain amount of time. The index measures the economy's price level or the cost of living).
Costs variation.
Debt restatement.
The effect of inflation is usually mitigated in real estate business contracts, mainly through the following mechanisms:
Price escalation clauses in leases.
Price variation according to the cost of the lease.
Fixed prices combined with variable prices for the payment of the purchase price of new apartments.
These rules are based on the use and custom of the local real estate market and have been supported by local courts.
VAT is payable on real estate leases at a rate of 21%. In some cases, VAT may be subject to certain exemptions in relation to residential, agricultural and governmental uses.
Urban leases have a minimum term of:
Two years, if leased for residential purposes.
Three years, if leased for commercial purposes.
In both cases, the maximum term is ten years. Parties cannot agree to lease terms shorter than the minimum or longer than the maximum.
Unless expressly agreed, the tenant cannot renew the term of the lease at its termination.
In both rural and residential leases, it is often expressly agreed that, without the express written agreement of the landlord, the tenant cannot:
Sublet the real estate property.
Assign its rights under the lease agreement.
In the absence of this agreement, the tenant can sublease the real estate.
If the real estate is leased to a well known company (that is, a company with a known brand, track record and commercial activity) for business purposes, it is usual to allow the tenant to sublease or assign the agreement in favour of companies of the same corporate group, but the original lessee remains the tenant under the lease as guarantor of the sublease or assignment.
The tenant is required to make general repairs as necessary for the regular use of the real estate property. However, it is generally understood that the owner pays for extraordinary repairs (that is, repairs which go beyond the necessary repairs for regular use of the property). There is an exception to this principle when the repairs are due to the tenant's fault or negligence. In these circumstances, the tenant must pay these costs.
Improvements to the real estate cannot be made without the express agreement of the landlord.
The lessee (tenant) is usually responsible for obtaining general fire and civil liability insurance (covering damages that might occur in the leased real estate). The lessor (landlord) is nominated as the beneficiary of those insurance policies.
Both the landlord and the tenant can terminate the lease in the following circumstances:
An act of force majeure.
Total eviction from the real estate.
Partial eviction from the real estate (that is, an eviction resulting from the landlord depriving the tenant of use of a portion of the leased premises).
In accordance with an express clause setting out when the lease can be terminated.
The landlord can terminate the lease due to:
Non-payment of rents (if this has been agreed in the lease agreement).
Performance of harmful works or unauthorised improvements to the premises.
Changes to the agreed use.
Abandonment of, or damage to, the real estate.
The tenant can terminate the lease due to:
A unilateral decision to terminate the agreement.
Existing defects in the real estate that hinder its use.
The Reorganisation and Bankruptcy Act (Act 24,522) (Bankruptcy Act) refers to preventive and bankruptcy proceedings, among others, in relation to both physical persons and companies. Under the Bankruptcy Act, insolvency rules are mandatory and therefore cannot be modified by agreement between the parties.
There is no specific regulation established by law. Therefore preventive proceedings (that is, proceedings foreseen in the Bankruptcy Act to avoid the bankruptcy of the debtor) are subject to general bankruptcy rules. Under these rules, the preventative proceedings can continue after the filing of bankruptcy proceedings until the declaration of the tenant's bankruptcy, if the tenant requests this within a certain time. In this case, the debtor tenant will continue performing his obligations under the lease agreement.
If the real estate is for commercial use, the lease agreement is suspended on the tenant's bankruptcy until the judge makes a final order (unless the judge orders the immediate continuation of the lease after the bankruptcy). The landlord must appear before the bankruptcy judge and state his desire to continue or terminate the agreement. If the court does not make a decision within a certain term established by law, the lease will terminate.
The authorities responsible for planning control vary depending on the:
Province in which the real estate is located.
Urban distribution (that is, guidelines to be followed for city planning).
The municipalities (that is, locally elected governing bodies) are generally responsible for controlling and regulating the construction. The following are the most significant rules for construction and planning:
Urban Planning Code.
Building Codes.
Authorisation Code.
Environmental Impact Act.
Internal regulations.
The following planning consents are required:
Use Certificate, approved (180-day duration).
Conditional Use Certificate (365-day duration).
Other authorisations specific to the activity involved.
In addition, real estate developments require an Environmental Aptitude Certificate which:
Determines whether or not to carry out the plan, programme or project.
Sets the conditions to be performed to protect the environment and natural resources (if the plan, programme or project is to be carried out).
In relation to initial planning consents, the main authorisation and consultation procedures are overseen by:
General Management of Works Control and Cadastre (Dirección General de Fiscalización de Obras y Catastro).
General Management of Authorisations and Permits (Dirección General de Habilitación y Permisos).
The Environmental Aptitude Certificate is a required initial consent (see Question 41).
Third parties can take legal action to stop a project, by filing precautionary measures. Interested and/or potentially affected parties can file complaints if the project may eventually affect their rights or the rights of the community in general. The courts resolve these matters on a case by case basis.
After analysing and concluding that the activities, projects, programmes or enterprises have a significant environmental effect, the government must convene a public hearing within ten working days (Environmental Impact Act).
From the moment the application is received, the Environmental Aptitude Certificate takes about 180 days to be issued.
There is a right of appeal against planning decisions, but there is no specific appeal system under the Environmental Impact Act. Planning decisions can thus be appealed through standard administrative proceedings (Administrative and Tributary Litigious Code of the City of Buenos Aires).
There are currently several proposals in the House of Representatives to modify the Horizontal Property Act.
See also Question 20 for reforms in the areas of energy efficiency and sustainable construction.
Main activities. This body was founded in 1980 by a real estate broker, to create an entity that would represent the industry. It has a direct link to the government and helps to preserve the common interest of the sector.
Main activities. This institution offers a web service related to the housing sector.
Main activities. This institution offers a web service related to the construction sector.
Main activities. This body regulates environmental issues.
Main activities. This body assists urban construction projects, including supervision and co-ordination. It participates in the development of construction projects and the commitment to develop urban and housing programmes in public, national and provincial areas.
Description. This is an official website of the Ministry of Economy and Finance where up-to-date original language text of legislation can be obtained.
T +54 11 43 79 68 35
F +54 11 43 79 68 60
E pnicholson@ebv.com.ar
W www.ebv.com.ar
Qualified. Argentina, 1991
Areas of practice. Real estate and hospitality; mergers and acquisitions.
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