How landlords and tenants survive in a country with 100% plus inflation
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Landlords and Tenants in Argentina are between a rock and a hard place. There is a substantial rental property shortage caused by an incompetent government that made laws that made it so unattractive for Landlords to rent properties that many choose to short-term their properties using tools like Airbnb. Hopefully, a new government will change these, making the market more stable.
The Chamber of Deputies passed a bill this week that proposes, to put it simply, to restore some of the controversial aspects of the Rental Law, which has proven unworkable. This week, the Chamber of Deputies approved a bill to re-establish an earlier law amid soaring inflation. The current law requires tenants and owners to adjust their rental fees once per year. The contracts due to expire pressure tenants to accept the price increase that owners want by updating the agreement based on market conditions.
Many tenants are asking for extensions because they cannot afford to pay the higher prices demanded by owners and have fewer rental options. They also want more time while searching for another property they can rent. According to the Sole College of Real Estate Brokers of Buenos Aires, 30% of Buenos Aires renters have to ask for an extension of their lease because they can’t find a home to rent.
It is an extension that can be used to extend the contract for several months and update the agreed price in a shorter period than required by law. It can be used to update the prices of contracts and ensure they keep up with inflation. In June of this year, 42% of the rental supply was dollarized, according to a survey by Mercado Libre.
Enrique Abatti says that while waiting for the Senate to approve the project, extending the lease for three months is convenient to stay up to date with the inflation. He adds that if the tenants do not confirm that the price has gone, it will likely be replaced immediately due to the lack of supply.
It clarifies, “During the extension, no staggered increase can be done. Therefore if you extend for one year, the contract will be signed for that period”. Therefore, the company recommends that it only be for short periods to update the rental price periodically. The tenant or owner may extend the contract monthly, quarterly, annually or for any term to avoid losing money against inflation.
Recent extensions have been made for six-month periods, but due to the rapid devaluation of the property, owners prefer shorter terms. According to Zonaprop, the publication values of apartments available for rent have increased by an average of 89.6% in 2023. The ICL, which is used to update the rents from the norm, has only increased by about 66.03%.
Lawyers who specialize in real estate have high expectations of approval by Congress’s upper chamber. The lawyer says that this tool will be a great benefit while the Senate is dealing with it. It allows the contract to be extended for several months, and if approved, the agreement would have been renewed with an increase of at least four months and the new rules instead of being prolonged by a contract governed under the old laws.
The changes in the rental law were approved by deputies and have six critical points for owners and tenants.
This extension tool allows for the exact terms of the current contract to be extended up to 20 years but at a lower price and shorter period than the one established in the new law. Since staggered increases cannot be made during the extension, it is recommended to make brief extensions to update your price in shorter periods than the annual update provided by the new law.
A second important fact is that contracts signed before or after the law’s enactment can also be extended. Two scenarios are supported by this.
- Contracts extended before the new laws can be made with the same conditions as before, like the 2-year extension or the semi-annual rental adjustment.
- Contracts signed under the new legislation are often extended by those who have not done so. Warranties that have expired or will soon expire under the new law are often extended for a short time, so the adjustment is staggered. The ICL is criticized for its unfair conditions, and owners are often forced to choose this alternative due to the lack of available units.
The disadvantages of extension are more pronounced for tenants, who lose the stability and security of having their own home after two to three years. They also run the risk of being without a residence every six months. The extension. This problem is generally resolved when the landlord says that the tenant has been a good tenant and that the landlord wants to keep the relationship going.
What is the process of extending a lease?
Most often, extensions are free of cost and signed by both parties. The document states that the parties “have decided to extend their contract by the specified number of months at a price set under the conditions of the original contract,” Abatti says. “In addition, they must clarify the time and date of expiration.” It is recommended that the extension be done during daylight hours to allow for a review of the condition in which the property will be delivered if the contract is not extended. The extension can be made free of charge if it is made between the parties.
Both parties must pay a fee if a notary or lawyer is hired as an intermediate. If the real estate agent is used to sign the agreement, the parties must each pay the fees.
The lawyer concludes by stating that the ” guarantor who places up his property or salary as a security must sign the extension because otherwise he will be released from his obligations. It is important to note that in Buenos Aires, this person must waive indefeasibility before a notary. This is because, in the area, a single residence is considered indefeasible unless a waiver is made.
Markets with a tendency for zero supply
Due to the lack of available rental homes, tenants needing to move try negotiating with their landlords until they find another home. It is not easy for people who don’t own a home to go through this odyssey. According to the City Housing Institute’s (IVC) report, renters say it takes them four months to find a home to rent.
German Gomez Picasso of Real Estate Report, the founder of Real Estate Report, says: “The number of apartments currently available in search engines for unfurnished rental properties for three years or more is one. This is not good in a city such as Buenos Aires where there is a growing and constant demand for rentable housing.”
When the outrageous prices in pesos are compared to the dollarized, it is clear that there is an issue. Real estate experts warned after last month’s PASO that this number may rise.
Source: Translated from La Nacion
Please check with a lawyer or notary before signing any contracts.
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