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New Rental Law: What is the Casa Propia index that will be used to adjust prices and what will happen to contracts already signed - Infobae
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www.infobae.com
October 11, 2023
The Chamber of Deputies sanctioned a new regime. In this note, the keys to the standard
By Jose Luis Cieri
Congress seeks to organize the rental market with a new law (Illustrative image Infobae)
The Chamber of Deputies has achieved final approval of the reform of the Rental Law, which was approved in June 2020. The victory of the ruling that emerged from the Upper House a few days ago has been confirmed. The main changes to the project promoted by the ruling party senators propose substantial modifications in some of the most controversial points. For example, the duration of the contracts will be maintained at three years and the value will be updated every six months using the Casa Propia coefficient, the same one used by the Ministry of Territorial Development and National Habitat in the Procrear II plans.
For the approved reform to formally come into force, it is necessary to publish it in the Official Gazette, a process that could take around 40 days. Until this happens, the contracts will continue to be three years and will be adjusted annually through the Lease Contract Index (ICL). Once the changes voted on in Deputies are implemented, the new rental scheme approved in the Lower House of the national Congress will begin to take effect.
In a context where the supply of apartments for rent in the city of Buenos Aires has been drastically reduced to less than 450 units and prices have reached high levels (for example, a two-room apartment rose 245% year-on-year), the reform of The Rental Law gained high relevance in the national Congress.
Iván Ginevra, the newly appointed president of the Argentine Real Estate Chamber (CIA), expressed to Infobae his concern about the change in the way contracts are celebrated.
Ginevra does not see an improvement in the situation and fears that the real estate supply could worsen. “This method could result in losses for owners in the face of inflation and increase informality, with agreements outside of real estate, dollarized. In addition, she noted that it could be more difficult for tenants to find housing if the contract is not renewed,” she warned.
As soon as they are put into operation, there will be new rules on the way rental contracts are concluded (Photo: Getty)
Article 7 of that legal body establishes that “the new supplementary laws are not applicable to contracts in the course of execution.” In this way, the format and increases that were signed at the time must be respected.
Thus, contracts signed under the current regulations remain in force until their conclusion. Whoever signed a three-year agreement with year-on-year adjustments will remain in the home until 2026.
To calculate the rent increase, it will be necessary to take the values of the Casa Propia coefficient for the last six months, multiply them among themselves and then multiply the result by the amount of the current rental fee (these are published by the Ministry of Territorial Development and Habitat national).
As an example, if you consider the case of a person who has been paying rent of $70,000 since May 2023 and needs to know how much they will have to pay starting November 2023. Their increase would be estimated at around $97,000 applying the Casa Propia formula. In contrast, if the Lease Contracts Index (ICL) is used, which is interannual, and half of the 115% that was registered in October is taken, the increase would be 57.5%; In this case, the $70,000 contract would increase to approximately $110,000 per month until the next adjustment, which would be next May.
The reform as it came from the Senators and was reaffirmed in the Deputies, the project adds other modifications. One that establishes that “income from the rental of up to two properties will be exempt from paying the Monotax.” It also adds that "the parties may deduct from the Income Tax the sum equivalent to ten percent of the annual amount of the lease contract."
Fines for termination of the contract are agreed according to the rental value at the time of delivery of the property. Tenants and owners can deduct 10% of the annual amount of the rental contract from Income Tax.
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Nueva Ley de Alquileres: como es el índice Casa Propia que se usará para ajustar los precios y qué pasará con los contratos ya firmados
La Cámara de Diputados sancionó un nuevo régimen. En esta nota, la claves de la norma
www.infobae.com
October 11, 2023
The Chamber of Deputies sanctioned a new regime. In this note, the keys to the standard
By Jose Luis Cieri
Congress seeks to organize the rental market with a new law (Illustrative image Infobae)
The Chamber of Deputies has achieved final approval of the reform of the Rental Law, which was approved in June 2020. The victory of the ruling that emerged from the Upper House a few days ago has been confirmed. The main changes to the project promoted by the ruling party senators propose substantial modifications in some of the most controversial points. For example, the duration of the contracts will be maintained at three years and the value will be updated every six months using the Casa Propia coefficient, the same one used by the Ministry of Territorial Development and National Habitat in the Procrear II plans.
For the approved reform to formally come into force, it is necessary to publish it in the Official Gazette, a process that could take around 40 days. Until this happens, the contracts will continue to be three years and will be adjusted annually through the Lease Contract Index (ICL). Once the changes voted on in Deputies are implemented, the new rental scheme approved in the Lower House of the national Congress will begin to take effect.
In a context where the supply of apartments for rent in the city of Buenos Aires has been drastically reduced to less than 450 units and prices have reached high levels (for example, a two-room apartment rose 245% year-on-year), the reform of The Rental Law gained high relevance in the national Congress.
What is the Casa Propia index like?
From the website of the ministry that has housing in its orbit, they report that the formula is an improved modality for updating the quotas for the Casa Propia and Procrear II credits. This coefficient takes into account the lowest indicator between the average salary variation of the last year and the average inflation of the same period. Furthermore, by recognizing that the increase in salaries may vary depending on the branch of activity, it incorporates the Salary Variation Coefficient (CVS) with a capacity of 0.9. That is to say that instead of reflecting the average salary variation in its entirety, it will only do so in 90%.By taking into account the average of the last twelve months in terms of salary variation (CVS) - and not the variation of a single month - it promotes greater stability in updating quotas, since it contributes to moderating the impact of eventual milestones in the evolution of salaries that respond to specific periods.
Iván Ginevra, the newly appointed president of the Argentine Real Estate Chamber (CIA), expressed to Infobae his concern about the change in the way contracts are celebrated.
Ginevra does not see an improvement in the situation and fears that the real estate supply could worsen. “This method could result in losses for owners in the face of inflation and increase informality, with agreements outside of real estate, dollarized. In addition, she noted that it could be more difficult for tenants to find housing if the contract is not renewed,” she warned.
As soon as they are put into operation, there will be new rules on the way rental contracts are concluded (Photo: Getty)
What happens to contracts already signed?
Doubt may arise among tenants and owners about the scope of the new regulations in relation to contracts that were signed and are still in force. Beyond the fact that the new law is still pending enactment for it to take effect, the Civil and Commercial Code is clear about what to do in the case of agreements signed under the previous Rental Law.Article 7 of that legal body establishes that “the new supplementary laws are not applicable to contracts in the course of execution.” In this way, the format and increases that were signed at the time must be respected.
Thus, contracts signed under the current regulations remain in force until their conclusion. Whoever signed a three-year agreement with year-on-year adjustments will remain in the home until 2026.
What will the tenant pay?
Once the modifications approved in the National Congress come into force, tenants must take into account the Casa Propia formula to calculate the adjustments to their rents and, consequently, the monthly payments.To calculate the rent increase, it will be necessary to take the values of the Casa Propia coefficient for the last six months, multiply them among themselves and then multiply the result by the amount of the current rental fee (these are published by the Ministry of Territorial Development and Habitat national).
As an example, if you consider the case of a person who has been paying rent of $70,000 since May 2023 and needs to know how much they will have to pay starting November 2023. Their increase would be estimated at around $97,000 applying the Casa Propia formula. In contrast, if the Lease Contracts Index (ICL) is used, which is interannual, and half of the 115% that was registered in October is taken, the increase would be 57.5%; In this case, the $70,000 contract would increase to approximately $110,000 per month until the next adjustment, which would be next May.
What does the project voted in Congress say?
The key points of the project promoted by the ruling party include:- Maintenance of contracts for three years.
- Semiannual adjustments instead of annual ones.
- Application of the Casa Propia index, which considers the lowest index between the salary variation and inflation of the last year. Currently, the Central Bank's Lease Contract Index (ICL) is used.
- Contracts in national currency.
- Tax incentives for owners who rent their homes.
- Do not publish ads in dollars.
The reform as it came from the Senators and was reaffirmed in the Deputies, the project adds other modifications. One that establishes that “income from the rental of up to two properties will be exempt from paying the Monotax.” It also adds that "the parties may deduct from the Income Tax the sum equivalent to ten percent of the annual amount of the lease contract."
Fines for termination of the contract are agreed according to the rental value at the time of delivery of the property. Tenants and owners can deduct 10% of the annual amount of the rental contract from Income Tax.
www.buysellba.com
