Regulation of property rights under the new Argentinean Civil and Commercial Code

On August 1, 2015, the new Civil and Commercial Code (hereinafter the “new Code”) will enter into force in Argentina. Chapter 4 of this new Code governs property law, maintaining most of the provisions set forth in the previous Civil Code, and also introducing new provisions.

General theory of property rights.

The new Code establishes a general theory of property rights, introducing common aspects such as its definition, features, subject matter, classification, etc. Previously, the said aspects were dispersed in different parts of the Civil Code, generating unnecessary repetitions and confusion over the said provisions. This is the reason why under this new Code, these aspects will be compacted, and thus, clarifying the said provisions.

Section 1882 of the new Code defines property right as a legal power exercised over property with the exclusive intervention of its owner. This definition proves to be useful in differentiating property rights from personal rights. Personal rights involve the creditor´s capacity to demand performance of an obligation owed by the debtor.

The subject matter of property rights may consist in property either as a whole or as an undivided part. In this sense, property is no longer expressly required to be in the market. Moreover, the new Code, under Section 1883, establishes that the subject matter may also involve property specifically set forth in the law, such as rights over rights such as usufruct, pledge, etc.

With regard to the classification of property rights (Section 1888 to 1891), the new Code provides the following criteria: (i) property rights over property personally owned (e.g. ownership, condominium, etc) and over property owned by another person (e.g. mortgage, usufruct, etc); (ii) property rights over principal obligations (e.g. co-ownership, surface rights) and over accessory obligations (mortgage, pledge, antichresis); (iii)property rights over recorded property (e.g. ownership in real property) and non recorded (e.g. ownership in non recorded property); (iv) property rights exercised over the possession of property and not exercised over the possession (easement and mortgage).

With regard to the creation of property rights, this new Code maintains the provisions set forth in the previous Civil Code, under which it is established that property rights may only be created in accordance with the provisions specifically described in legislation (“numerus clausus”). However, the new Code has eliminated the possibility for a property right not defined in the Code to be considered a personal right, either by means of a contract or will. Therefore, there being no provisions regarding this aspect, the judges may decide whether there is a personal right or not.

The new Code maintains in effect the provisions regarding the following aspects: the preference right (“ius preferendi”)and the right to follow the property into whosoever hands it may be(“ius persequendi”)(Section 1886); the theory of the title and the modes of acquiring property rights (Section 1892); declarative publicity of registration with regard to real property (Section 1892 and 1893); the terms of adverse possession; registration as the basis for acquiring recorded personal property in good faith.

Codification of property rights.

It should be noted that the new Code introduces new types of property rights, including:

Real property condos (conjuntos inmobiliarios): Pursuant to Section 2073, real property condos mean country clubs, gated-communities, industrial, corporate or nautical parks. The said enumeration is merely illustrative, since the new Code establishes the possibility of including within this category of property rights “any other urban business venture regardless of whether it was created for a permanent or temporary residential, labor, commercial or business purpose, also including businesses with multiple purposes, in accordance with the provisions set forth in the local administrative regulations”.

The real property condos must comply with the following requirements: (i) closure; (ii) common and exclusive interdependent units, which form an independent unity; (iii) the undivided and perpetual condition of the common units; (iv) bylaws.

The new Code provides the legal framework applicable to real property condos, supplementing the Common Interest Community. All personal and property rights over preexisting real property condos must operate in accordance with the regulation of the real property condominium.

Private cemeteries: Although private cemeteries have existed for many decades, they were not legally regulated. As a consequence, with the new Code, private cemeteries are codified, providing legal certainty.

It should be noted that the new Code imposes on the owner of a private cemetery the obligation of notarizing the instrument by which the property is submitted to that particular purpose. The instrument is notarized in the Real Property Registry together with the filing of the bylaws of the cemetery. After the filing, the local authority grants the applicable authorization and the private cemetery is entitled to operate as such. From then onwards, the cemetery owner cannot change the cemetery´s purpose nor be submitted to any warranty. (Section 2104).

Surface rights: Surface right involves a temporary property right over real property not personally owned, which allows its holder to use, enjoy and dispose the property subject to the right to plant, afforest or build ( or right over what is planted, afforested or built) in relation to the said realty. (Section 2114).

Previously, the Civil Code prohibited the surface right. Instead, under the principle of accession, the owner of the land owns land, plantation and buildings. However, Law No. 25509 introduced the right of forest surface, permitting land to be owned by one person and the plantation and its proceeds owned by someone else.

The new Code has abrogated the said law and introduced both the right of forest surface, with a maximum legal term of 50 years, and building surface, with a maximum legal term of 70 years.

The right of surface can only be acquired in an inter vivos act through a contract or gift, or upon death. The surface right cannot be acquired through adverse possession unless there is a fair title and good faith.

With regard to the parties subject to this right, there are differences between the landowner and the surface right holder. On the one hand, the surface right holder is entitled to afforest, plant, build, and be the owner of the proceeds. On the other hand, the landowner has the right of ownership provided that he does not intervene on the right of the surface right holder. It should be highlighted the debate surrounding the warranties on the surface property.

The surface right terminates upon completion of the established term (or by operation of law), or by express resignation, occurrence of a condition, consolidation, or upon 5 years from the last use in cases of afforestation and after 10 years in cases of construction. The landowner owns what is planted, afforested or built by the surface right holder and, thus, the landowner must compensate the surface right holder unless otherwise provided by agreement.

Moreover, the new Code codifies certain property rights that, although they were legally regulated, they were included in special laws.

Condominium right: Law No. 13,512 governed the said right, however, on August 1st; this law will be abrogated by the new Code, updating the provisions regarding condominium. The new Code defines condominium right as an autonomous property right. In addition, the new Code establishes that the homeowners’ association is a legal person (Subsection H, Section 148), and thus, having greater liability. However, the new Code does not set forth any provision regarding the subsidiary responsibility of the manager of the homeowners’ association arising from debts of the association.

It should be noted that the new Code clearly defines the concept of the unit of a condominium (Section 2038), common elements (Section 2040), necessary common elements and unnecessary common elements (Section 2041 and 2042), exclusive elements (Section 2043). Moreover, the new Code introduces the homeowners´ board, which was not regulated under Law No. 13,512. Under the new Code, the said board is entitled to be in charge of the condominium administration upon vacancy or absence of the manager, in which case, the board must call for a meeting within 30 days.

Regarding common and special expenses, the new Code establishes that the debt certificates issued by the manager are enforceable. In addition, the manager of the homeowners´ association may choose to collect payment of the expenses either from the owner of the unit or the tenant.

Timeshare right: Law No. 26,356 regulated this right. Nowadays, this Law has been abrogated by the new Code, which introduces the timeshare right in a clearer form.

Timeshare is a form of ownership in personal or real property whereby many customers own allotments of usage in the same property for a specified period of each year. Timeshare is used for the purpose of accommodation, commerce, tourism, industry, among others. It should be noted that the new Code sets forth the duties of each of the parties, and also establishes that relationships arising from the timeshare are subject to the provisions regarding consumption.

Finally, the new Code amends certain aspects regarding property rights already set forth in the previous Civil Code.

Usufruct: The new Code excludes the concept of imperfect usufruct and broadens the term of perfect usufructs (maximum of 50 years).

Right of cohabitation: the New Code establishes the possibility of creating this right in favor of the surviving partner. Unlike surviving spouses, the partner has more limitations. Section 527 of the new Code provides that: (i) the surviving partner must not own real property; (ii) maximum term of the cohabitation right of 2 years; (iii)the cohabitation right terminates when the partner enters into a new civil partnership or marries.

Guarantee property rights.

The new Code introduces provisions common to mortgages, pledge and antichresis (Section 2184 to 2204), improving the interpretation of such concepts and avoiding repetitions. It should be noted that the new Code maintains the impossibility of creating judicial guarantee property rights, either implicit or legal, and testamentary. In addition, the code introduces the possibility of including within the amount of the encumbrance, both capital, interests and costs (Section 2193).

With regard to the right of antichresis, it can be created over recorded personal property for a maximum term of 5 years. The maximum term over real property, on the other hand, cannot exceed 10 years.

Section 2232 introduces the pledge of credits. Moreover, Section 3223 and 3224 of the new Code, introduce the validity of the clause that authorizes the creditor to take possession of the property subject to the pledge, after the term for payment finishes. However, if such possession is taken at the time the contract is made, then, it will be invalid. Finally, pursuant to Section 2229, the amount of the pledge must be ascertained by an expert, either designated by the parties by mutual consent or following a pre-established procedure of appointment, or otherwise by court decision upon request of the creditor.

Possessory and Property actions.

The new Code introduces the action for recovery of ownership (acción reivindicatoria) (Section 2252), quiet title action (Section 2262), action for the recognition and enforcement of an easement (Section 2264) and the action to define boundaries (Section 2266). More particularly, it should be noted that a person who attempts to bring a property action can use possessory actions against any fact or future lawsuits. Finally, current legislation entitles both possessor and holder to bring possessory and property actions.

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