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Rentals: Side B of the total freedom between owners and tenants imposed by Javier Milei's DNU - La Nacion Propiedades
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Alquileres: el lado B de la libertad total entre propietarios e inquilinos que impone el DNU de Javier Milei
El “exceso de libertad” preocupa a algunos especialistas, aunque otros confían en que el mercado se va a autorregular hasta llegar a un punto de equilibrio
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The “excess of freedom” worries some specialists, although others trust that the market will self-regulate until reaching a point of equilibrium.
By Mercedes Soriano
The freedoms granted by the DNU signed by Javier Milei to deregulate the rental market generates everything from controversy and concern to trust in various market leaders.
Javier Milei repealed the Rental Law through a Decree of Necessity and Urgency (DNU) and erased the rules of the game. The real estate market will now face a free will that, in some respects, has never been experienced in the last century.
In that sense, the “excess freedom” worries some specialists, although others trust that the market will self-regulate until it reaches a point of equilibrium similar to the one that worked before the enactment of Law 27,551 in 2020.
1. Freedom to choose in which currency the contract is paid
One of the most controversial points of the DNU is that contracts can be paid in the currency defined by the parties, whether pesos, dollars, euros or another.“As of the measure, what was happening informally will be whitewashed and will now be able to appear in the contract . In short, deregulation means that we have clearer guidelines: owner and tenant will know what they are signing,” says Germán Gómez Picasso, founder of Reporte Inmobiliario.
The parties may choose in which currency the rental contracts and payment are made.
“Especially in the last four months, housing had been dollarized in many parts of the country that did not handle foreign currency, because inflation is uncontrolled. Now I think there is going to be a move towards the dollar, unless the economy stabilizes ,” analyzes Mariano Esper, a lawyer specialized in real estate issues.
The experts consulted by LA NACION rule out that all rents will be charged in foreign currency . “This will depend on the type of property, its location and the purpose for which it is rented. I imagine that it will be different depending on the type of market, but the positive thing is that you will have freedom of choice,” says Gómez Picasso.
Experts rule out that all rents will be charged in foreign currency
There are areas that for years have used to handle rentals in dollars, such as Puerto Madero or houses in countries. This effect may be replicated in other premium neighborhoods. . “It can happen in the northern corridor area of the city of Buenos Aires, for example. in Palermo, Recoleta or in the embassy area, where there were already several homes rented in hard currency,” says Marta Liotto, president of the Unique College of Real Estate Brokers of the Autonomous City of Buenos Aires (CUCICBA).
However, the specialist is confident that in most neighborhoods' rents will continue to be charged in pesos. “Now comes the job of making the owner understand the reality that Argentina has, that although contracts can be made in any currency, the tenant must be able to pay. In short, if they cannot pay it, the good business of the owner of making a freely agreed contract ends, so it is necessary for the real estate agent at this moment to ensure that the ball is not fired for either side," she states.
2. Freedom to decide how long the rental contract lasts
Another freedom that the DNU allows is for the parties to establish the term of the contracts. That is, rental contracts can be made for 10 days, eight months, two years or five years.This freedom exists as long as it is clarified in the contract. Otherwise, if the time is not specified, the term will be two years.
There is no longer a legal minimum term for rentals and contracts can be made for a few days, months or years.
This freedom worries some leaders in the sector. “From 1921 to 2023 there was a minimum period, so this is a situation unknown to all Argentines,” says Mariano Esper, a lawyer specialized in real estate issues, who believes that so much freedom “is going to be a problem.”
In that sense, he believes that when it was imposed more than 100 years ago, “it was to prevent owners from managing the market as they please and harming tenants. .” For example, if a landlord only makes a contract for three months, the tenant would find themselves in an unstable and expensive situation.
Gervasio Muñoz, president of the National Tenants Federation, thinks the same: “As there is no minimum contract term, the owner can decide to rent the home for days or a few months and that would unleash a deeper crisis.”
However, some specialists believe that the contracts will resort to old practices and will establish the equilibrium point that used to be two years. “While the rental law was in effect, people who wanted to make contracts outside the norm generally agreed in two years. That decision was not because a rule told them to, but because due to history or inertia it has always been done that way,” says Federico González Rouco, an economist specialized in housing.
This is the first time in more than 100 years that Argentine law will not limit the term of rental contracts
“The three-year period was very long, , so moving to a two-year period makes more sense. I think this is another of the elements that will lead to greater supply in the market,” says Gómez Picasso.
3. Freedom to terminate the contract
A controversial point that takes away stability for the tenant is that any of the parties has the freedom to terminate the contract. . Since mid-2020, the only one who could terminate the rental contract of a property was the tenant, protected by law and paying a certain fine. Meanwhile, “the landlord could not resolve it unilaterally without cause because it was prohibited by the minimum legal period,” he details.However, the lawyer maintains that “once the DNU comes into force, the regime changes completely: since there is no minimum legal term, the same applies as for any contract, that is, the possibility of agreeing that any of the parties can terminate the contract. contract without cause, under the guidelines and procedures that the contract determines. .”
Once the DNU comes into effect, the tenant can terminate it “by paying the equivalent of 10% of the balance of the future rental fee, calculated from the date of the termination notification to the end date agreed in the contract,” it says. the DNU.
“But regarding the landlord it does not say anything and since there is autonomy of will and contractual freedom, article 1076 of the Civil and Commercial Code governs,” says Esper. It indicates that "a subsection was added to article 1219 that says that the contract can be terminated for any reason that the parties agree to in the contract , so there is the possibility of agreeing that the landlord can terminate the contract if it is specially agreed upon."
As of the validity of the DNU, the owner will be free to terminate the rental contract without cause, unless the contract prevents him from doing so.
In short, if it is specifically agreed in the contract, the landlord can terminate it without cause at any time. And if it is not agreed upon, the owner cannot terminate the contract without cause while the tenant can, protected by law.
4. Freedom to index the contract
For Liotto, the type of product will also affect the index chosen by the parties. There may be one in properties that better defend prices in the most exclusive neighborhoods, such as Palermo or Recoleta. But for the specialist, the chance to talk between the parties could allow contracts in pesos in other neighborhoods to not necessarily be adjusted for inflation. “ They will be able to be updated by the cost of living index, salaries or by whatever the parties agree to .” “It is the best scenario,” she says.In addition, he adds that contracts in dollars , which are made with the objective of protecting against inflation, would not be updated because they would not be devalued .
Contracts may be indexed to any index, whether public or private.
5. Freedom to decide when to adjust the rental price
The periodicity of the adjustments is also left unregulated. “Owners will have to be convinced to try a quarterly update index when there is high inflation and a semi-annual update when there is less. I don't see it as complicated and I think that the conversation about the matter will lead to a good outcome," says Liotto.Although the possibilities are infinite, there are those who think that in general terms the criteria will be unified . “I don't think we will enter a period of total heterogeneity. Before 2020, contracts could be monthly and they were not made. There was no rule that said it had to be adjusted semiannually based on inflation expectations and the majority agreed on it that way. There was an informal rule of doing what the person next door did that everyone validated, so I'm not afraid of it getting out of hand because I trust the coming and going of people,” believes González Rouco.
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