Urgent Consideration Law – Leases: Special Regime

In April 2020, the Executive branch of government submitted a bill for urgent consideration (Ley de Urgente Consideración: “LUC”) to Parliament, which after long and intensive negotiations which derived in several changes throughout the text, was finally passed by Parliament as Law Nº. 19.889, promulgated by the Executive Power on July 10, 2020 (“LUC”) and published in the Official Gazette.

In this first installment referring to the LUC, we comment on the innovations introduced to the real estate leasing regime. The LUC introduces the modality of leasing of real estate without guarantee, whose scope of application includes those real estate lease contracts that, regardless of their location, meet the following conditions:

a) The purpose of the leased property must be residential housing. Notwithstanding, the new regulatory regime does not consider variation of destination the fact of the installation on the property of a “small domestic or artisanal industry” with up to two dependents, or a professional or similar practice, as long as they comply with the municipal regulations in
force and do not represent any inconvenience for the neighborhood;

b) The absence of guarantee of any nature in favor of the lessor;

c) The contract must be formalized in writing, expressly providing the price and the term of the lease;

d) It must be expressly stated by the parties their will to be subsumed within this legal regime.

In case of not complying with any of the detailed conditions, the traditional statute provided for by Decree-Law 14.219, of July 4, 1974 and the Civil Code (depending on the particular situation) will apply. Without prejudice to other details provided for the content of the contracts of this new category of leases, the traditional requirements for the enforceability of the contracts against third parties and the assignment requirements continue to apply.

Particularly noteworthy for this contractual regime is the greater flexibility for certain contractual provisions or the legal procedure foreseen for the eviction for its various reasons, foreseeing shorter procedural deadlines, as well as limiting the list of opposable exceptions and challenges.