Dr. Enrique Luis Abatti, a renowned Argentine lawyer with an extensive background in Real Estate Law and president of the Chamber of Property Owners of the Argentine Republic (CAPRA), recently published this article in La Nación. With more than 35 years of legal experience and numerous specialized publications, Abatti is a leading voice in matters related to urban leases, condominium property, and housing access policies. In this article, he proposes legal and contractual alternatives for those who, despite not qualifying for a traditional mortgage, wish to purchase property in Argentina’s current economic context.
Real estate leasing essentially involves renting a property owned by the lessor (the “grantor”), with the irrevocable purchase option granted to the tenant (the “lessee”). This mechanism may also include a financial component with the intervention of a third-party lender—either a private investor or a bank—and can even be securitized.
Originally, leasing emerged as a financial tool in which a credit institution acted as intermediary. Under earlier legislation, only financial entities or companies dedicated exclusively to leasing could serve as lessors, excluding individuals. Today, however, the law allows any individual or legal entity to act as a lessor, significantly broadening the possibilities, especially in real estate.
Why is leasing advantageous compared to traditional rentals or mortgages?
1. How does it work?
Leasing combines rental and purchase into a single contract. All monthly payments made as rent are credited toward the final purchase price.
2. Legal backing.
The contract must be executed through a public deed and registered with the Land Registry.
3. Tax treatment.
Leasing offers favorable tax benefits, such as paying VAT as installments become due instead of upfront at the beginning of the contract.
4. Contract structure.
Leasing has two stages: (a) rental, and (b) purchase, should the lessee exercise the option to buy.
5. Registration.
The contract must be notarized and registered to be enforceable against third parties.
6. Monthly payments.
The lessee pays a periodic rent (“canon”) composed of a rental value plus a financial component.
7. Expenses.
Ordinary and extraordinary expenses, including taxes and insurance, are borne by the lessee unless otherwise agreed.
8. Subleasing.
The lessee may rent out the property unless expressly prohibited.
9. Transferability.
Although not prohibited by law, contracts often restrict the lessee from assigning their position.
10. Price determination.
The purchase price can be set at the beginning or determined at the end of the contract, usually through appraisals, with previous payments deducted.
11. Transition to purchase.
After paying two-thirds of the installments—or earlier if agreed—the lessee can exercise the purchase option, typically by covering a residual value of about 25% of the property’s worth.
12. Advantages.
• Expedited eviction in case of default (as little as 5 to 90 days, compared to 18+ months in standard rentals).
• Greater legal security for owners than mortgages, since ownership remains in the lessor’s name until purchase is executed.
13. Bankruptcy of the lessor.
If the lessor goes bankrupt, the contract remains valid and the lessee retains the right to purchase under agreed terms.
14. Sale and lease-back.
This variant allows a property owner in need of liquidity to sell the asset to a creditor and immediately lease it back with an irrevocable repurchase option.
Overall, leasing provides an innovative legal mechanism for real estate transactions, offering benefits for both lessors and lessees, provided that contracts are properly drafted and the economic environment is relatively stable.
Article by Enrique Abatti, originally published in La Nación.
