Chile has attracted foreigners for centuries, and its real estate market continues to be a popular destination for tourists, expats, investors, and entrepreneurs, drawn not only by the beautiful landscapes and charming cities of this diverse but consistently gorgeous country, but by its famously secure investment climate and general openness to immigrants.
Given Chile’s foreigner-friendly laws and generally welcoming culture, purchasing or leasing real estate here is doable and straightforward, being largely a question of finding the right property for you, performing careful due diligence, and completing the necessary paperwork and procedures.
However, the laws and common practices are idiosyncratic in certain respects, and may differ significantly from those of your home country. Moreover there are certain pitfalls that may affect the experience of foreign tenants and buyers in Chile.
The purpose of this book is to help you understand the idiosyncrasies and avoid the pitfalls, answering every crucial question you might have. We’ll guide you through the necessary procedures; tell you everything you need to know about your rights and obligations as a tenant or owner; and offer other important information regarding payment, financing, and more.
In the sections that follow, we’ll cover:
Purchasing properties: documentation requirements and the process you must complete before the keys are handed over
Leasing properties as a tenant: documentation requirements; signing the lease contract; and your rights and obligations as a tenant
Leasing properties as a landlord: documentation requirements and your right and obligations as a landlord
Financing: laws, common practices, and important advices
Taxes, fees, and other important considerations
Due diligence: the most important details to consider when ensuring that a property is right for you.
Commercial vs. Residential
As many of the procedures and laws are virtually the same regarding commercial and residential real estate in Chile, we treat them together in the chapters that follow, making note of the slight differences between the two along the way.
In the remainder of this introduction, we’ll tell you what laws and procedures you should be aware of and some basic advice to help you get started toward the right transaction for you.
This book will help you prepare for everything you might face when purchasing or renting real estate in Chile, but it’s not intended to replace the professional expertise of a real estate agency or a lawyer. Such professionals are particularly helpful if you’re purchasing or selling a property, as we’ll see below.
A lawyer who specializes in real estate can be extremely helpful during all phases, especially for performing a due diligence report. In our experience, the extra cost of having a real estate lawyer performing a due diligence report on a property will likely spare you greater costs down the road.
So to the extent that your budget allows it, we suggest that you seek professional expertise. You are welcome to contact LegalFácil for recommendations and advice.
Real Estate Laws
Real estate is strictly regulated under Chilean law. The Chilean Constitution protects ownership rights, and real estate property regulations as well as zoning and land use regulations are contained in several laws, including the Civil Code, the Urban Real Estate Law, the Rural Real Estate Law, the Real Estate Lease Law.
Prices and Payment: The UF
One important idiosyncrasy of the Chilean real estate market and of most businesses and finance-related sectors in Chile, is that the basic monetary unit for the market is not the national currency (pesos), but a unit of account called the unidad de fomento (UF). Prices are given in UFs, not pesos or dollars.
It is beyond the scope of this book to explain the UF in detail but suffice it to say that the UF is a standardized monetary unit that is continually adjusted to inflation and basically allows Chileans to do business without having to worry constantly about inflation’s effect on values.
As of early 2013, one UF was equivalent to approximately 22,800 pesos. You can check the current rate, as well as historical rates, at HYPERLINK “http://valoruf.cl”valoruf.cl or at HYPERLINK “http://www.sii.cl/pagina/valores/uf/uf2013.htm”www.sii.cl/pagina/valores/uf/uf2013.htm
As we’ll see in the next chapter, it is very common for buyers to finance their purchases with loans from Chilean banks. This practice has obvious advantages, allowing buyers to afford properties they can’t pay for in cash. However, it is much more difficult for foreigners to apply for such loans from Chilean banks than it is for Chileans, as Chilean banks do not give loans to non-residents; it’s also difficult for non-residents to open banks accounts in Chile.
We recommend that buyers purchase properties in cash if possible. This is the most common practice for foreign buyers in Chile.
Investment Security in Chile
One of the most attractive features of the Chilean real estate market – and of investing in Chile in general – is that the country has strong, stable laws protecting foreign investment. If you transfer money into the country to be invested in real estate or any other Chilean asset, you will register your investment and the government will ensure that there will be no tax regime modifications for the duration of your investment, and also that, if you choose to take your money outside of Chile, you will be able to do so whenever you want to.
The law protecting foreign investment is called Decreto Ley 600. It applies to both persons and companies.
Registering your investment is a simple procedure that you can do through the bank that carries out your money transfer into Chile and/or with the help of your lawyer.
A Note on Real Estate Zoning and Land Use
The laws and procedures that regulate the purchase and rental of urban and rural real estate are almost the same.
As we’ll discuss in the next chapter, it is extremely important that you determine whether the land you are purchasing is legally eligible for what you aim to do with it. Whether it shall be agriculture, mining, tourism, or simply residing, you must verify that the land is legally apt for that purpose and obtain the appropriate permits. Under Chilean Law, foreign and Chilean buyers are treated the same, with one important exception: foreigners are prohibited from owning land along the Chilean border.