For those people who are looking to rent a house, some significant legal changes were made regarding ​​house renting, which may benefit future tenants. The new rules for the annual price adjustment of house renting may have a very positive impact when end users make payments. The house rent increases will be made according to the annual inflation rate rather than the 15% fixed rate that used to be paid before; a rate that has been considered excessive and did not allow higher range of negotiation between landlords and tenants in order to calculate the rent increase.

The House Rent Rate Increases

During the administration of 2010-2014, the proposed reform to the Article 67 of the Law on Urban and Suburban Leases was introduced into the stream of the Congress, with the intention  of changing the house rent rate increases, taking into consideration the low inflation that the country has experienced in recent years.

After several years of discussion, the law was approved on March 2016 with the vote of mostly all current legislators. And this past June 3rd the reform was published in the official newspaper and getting into force immediately.

How is calculated the annual increase for house renting?

As noted earlier, these changes transformed the way that contracts will govern the house rent increasesand rental of property that have been agreed in colones (dollar contracts may not be increased during the whole term of the contract).

It is important to remember that this does not affect commercial contracts and that the rules apply to all new contracts; previous contracts shall be governed by the previous rules and adjustments can only happen once a year.
Some highlights of the new regulations are:

• It reduces to a 10% the percentage of cumulative inflation rate that the landlord can apply to increase the price and the inflation rate will be according to the official consumer price index of the Instituto Nacional de Estadística y Censos. Higher adjustments to the provisions of this law are voids.
• The increase shall be calculated according to the percentage of cumulative inflation for the 12 months prior to the annual expiration of the contract when it is 10% or less than this percentage.
• If the percentage is greater than 10%, the Ministerio de Vivienda y Asentamientos Humanos (Mivah) will establish the increase based on various parameters set out in the law. This entity will be providing, monthly, public information regarding the maximum rates that can be applied.
• The new regulation gives instructions on when the adjustments will start and what can a tenant do if there is no agreement on the increase.
• The agreement between landlord and tenant is valid only when the agreed price adjustment is under the provisions of the law, for the benefit of the tenant.

An interdisciplinary legal team at your service

If you need assistance in the field of renting a house, either as a landlord or prospective tenant, we can help you with our vast experience in real estate law and related operations. Our founder, Msc. Eduardo Rojas Piedra, was recognized as an expert on the subject by a major national newspaper.

We can also give you assistance for setting up corporations focusing on the business of renting houses, or buying real estate.
Our interdisciplinary legal team in ERP Lawyers & Associates has all the expertise and knowledge needed to help you within a wide range of legal services. Do not hesitate to contact us that we will provide you with relevant and timely information.

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