How does Executive Order 70/2023 Impact on Lease Contracts for Residential and Commercial Use?

In a significant policy move, Executive Order 70/2023, commonly known as the “DNU,” issued under Javier Milei’s Administration on December 21, 2023, has ushered in sweeping changes to Argentina’s leasing framework. The executive order repealed Law 27.551 on leases and introduced amendments to various pertinent articles of the Civil and Commercial Code. These changes have reverberated on lease contracts, for both residential and commercial use.

The DNU heralds a new era of contractual freedom, affording parties the opportunity to define the terms of their lease agreements as they see fit.

The duration of lease contracts is now subject to mutual agreement between parties. While the executive order provides general parameters, it intervenes only in cases where a specific term is not stipulated:
• Temporary leases will adhere to the customary practices in the locale where the property is situated.
• For leases intended for permanent housing, the term stands at 2 years, while other lease purposes are set at 3 years.

The obligation now hinges on the delivery of money when the debtor owes a specific amount of currency, irrespective of its legal tender status within the country. This pivotal amendment grants parties the leeway to negotiate rents in US dollars or other foreign currencies.

Under the new provisions, debtors are obligated to settle dues exclusively in the agreed currency, precluding any recourse to payment in pesos at the official exchange rate unless explicitly stipulated. Crucially, the DNU solidifies this stance by barring judges from intervening in payment modalities or currency agreements once mutually consented.

Parties now wield authority to determine rent adjustments. Any index, whether public or private, can be used, as long as it is expressed in the same currency in which the rent value was agreed.

The DNU allows parties to tailor the frequency of rent payments to their preferences, but with a minimum threshold of one month.

The DNU grants parties the freedom to mutually agree on the amount and currency for the security deposit. Additionally, parties are empowered to determine the refund modality upon termination of the lease contract.

The landlord may terminate the contract for: (i) deviations in property usage; (ii) neglect or abandonment of the leased property; (iii) tenant’s failure to pay rent for 2 consecutive periods; (iv) for any other cause set forth in the contract.
Conversely, the tenant may terminate the contract in case of: (i) the landlord’s non-compliance with the obligation to maintain the property suitable for the agreed use – unless the damage is caused directly or indirectly by the tenant; and (ii) non-compliance with the eviction guarantee or latent defects in the property.

Notably, the DNU introduces a pivotal amendment allowing tenants early contract termination at any time, a departure from the previous six-month threshold. In this case, the tenant must make a payment equivalent to 10% of the future rent balance, calculated from the date of notice until the contract’s conclusion—a significant departure from prior protocols that imposed a fixed monetary penalty of one and a half-month’s rent for the first year and one-month’s rent as from the second year.

The DNU repealed articles of the Civil and Commercial Code related to the payment of improvements. Previously, landlords had to foot the bill for necessary enhancements made by the tenants, even if not agreed under the contract.

Furthermore, the DNU eradicated constraints surrounding loss of luminosity, thereby affording tenants the latitude to seek contractual termination or rent reduction in instances of diminished illumination.

Among other notable modifications, the DNU abolishes provisions relating to compensation, effectively precluding tenants from offsetting expenses and claims with rent payments.