The LegalFácil Guide to Real Estate Law in Chile: Leasing

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The LegalFácil Guide to Real Estate Law in Chile: Leasing

Finding a Property

To locate properties for lease, you can use a real estate agent (from local or international agencies like www.homechile.com), or you can search yourself online (www.portalinmobilario.com). Stepping into a real estate agency (corredor de propiedades) in the desired neighborhood is also a good move.

 

Signing the Lease

To rent a property in Chile, it is not necessary to sign a contract, but we strongly recommend doing so. The lease contract should include all the specific details of your agreement, such as length of the lease, the monthly rent to be paid, the form of payment, the tenant's responsibilities, and the appropriate use of the property. It's also important to make an inventory including a list of all the appliances and fixtures in the property.

We recommend executing the contract by means of public deed, and registering it in the Real Estate Registry (Conservador de Bienes Raíces). These two steps are especially important for tenants: if the property is sold, only if the lease has been granted by means of public deed and duly registered will the tenant the right to stay in the property until the lease is over. Otherwise, the new owner can evict the tenant immediately. The new owner, of course, does not have any obligation to renew the lease.

Landlords often require tenants´ financial documentation, including proof of income for the past three months, as a guarantee that the tenant has the means to pay the rent.

The process is essentially the same for commercial and residential leases. The only differences are that, with commercial leases, the rental agreement can also grant the tenant control of the business located in the property for the term of the lease. This is called derecho de llaves.

 

Duration of Lease Contract

Short-term and long-term leases are both available in Chile. Short-term rentals tend to be much more expensive than long-term rentals and are very common among foreigners who come to Chile for short stays, either on tourist visas or with temporary residency permits. Both furnished and unfurnished properties are usually available, with the former tending to be more expensive.

In Chile, tenants and landlords are free to determine the length of a lease, whether month-to-month, indefinite, or for a fixed term.  However, for urban properties, there are certain rules regulating the length of lease:

For month-to-month and indefinite leases, the landlord must give 60 days' notice to the tenant before terminating the lease and evicting the tenant. This eviction notice (desahucio) may be served in two ways: either the landlord can open eviction proceedings through the court house, which will notify the tenant, or the landlord can request an eviction notice to be sent by a notary public.

For fixed term leases with a duration of up to one year, the landlord (not the tenant) may terminate the lease early by opening eviction proceedings through the courts, which will notify the tenant. Upon receiving the eviction notice, the tenant has 60 days to vacate the property.

For fixed term leases with a duration of more than one year, neither party may terminate the lease prematurely. However, if the tenant is unable to pay the rent or needs to leave the property, she has the right to sublet the property to a third party. If the terms of the lease prohibit subletting, the tenant may request, through the courts, an early termination of the lease.

 

Payment

In Chile, rent is usually paid during the first five days of the month (January´s rent, for example, is paid between January 1 and 5).

According to the terms of the lease, the rent price can be given either in Chilean pesos or in UFs. If the price of rent is defined in pesos, typically the contract will also stipulate a periodic adjustment based on inflation.

Payment is usually made directly to the landlord or, in some cases, through a real estate agent. We recommend that you define in the lease contract the bank account where rent is to be deposited.

 

Security Deposit

When signing the lease contract, the tenant must pay a security deposit equivalent to one month’s rent. If at the end of the lease no repairs are necessary on the property, the landlord must return the security deposit to the tenant. The landlord may not use the security deposit for any other purpose, including as payment for non-payment of rent.

 

Repair Expenses

The tenant is responsible for all repairs required to maintain the property in the condition it was in when the tenant arrived, with the exception of repairs of damage due to normal wear and tear; poor construction quality; or unforeseen circumstances or force majeure, such as earthquakes.

 

Community Maintenance Fees

In addition to paying utility bills, tenants must pay their share of community maintenance fees (gastos comunes). These expenses are always paid for in pesos.

In most cases, community maintenance fees are paid separately from rent, directly to the administrator of the building or community.  In some cases, they'll be paid to the landlord as part of the rent.

Usually renters must pay only the ordinary expenses, which are the usual expenses for maintenance, administration and utility use in common areas.  Tenants should not, however, pay extraordinary expenses, which are expenses for major repairs. The landlord generally covers extraordinary expenses.

Fees are determined every month by the administrator of the building.

 

Tenant’s Use of Property

During the term of the lease, the tenant must use the property for the purpose for which it was rented. For example, if you rented an apartment to live in, you may not install an office there. Changing the purpose without the landlord's consent may result in an early termination of the lease.

 

Termination of the Lease

The tenant is legally required to obey the terms of the contract, and cannot legally opt out of the contract before its end.  If the tenant chooses to leave before the contract expires, the tenant will be legally bound to pay the remaining months' rent.

In practice, a tenant who wants to leave early can usually renegotiate the contract with the landlord, as long as the landlord is given enough notice. We recommend giving as much notice as possible, certainly more than a month.

Once your lease expires, you can potentially renew your lease agreement with a new contract.

 

Eviction

Rental contracts do not always end on good terms, of course. If the tenant doesn't pay the rent or violates other terms of the contract, the landlord might terminate the lease and demand that tenant leave.  In that case, the landlord will officially notify the tenant of the termination of the contract as well as the reason.  If the tenant does not leave, the landlord will initiate an eviction procedure (Juicio de terminación de contrato de arriendo y restitución de la propiedad), an expedited judicial measure by which the tenant will be expelled from the property with the help of the public force. Eviction procedures are designed to be fairly quick, taking less than 6 months, although in some cases there can be significant delays.

 

Renting Out Your Property

Foreign real estate owners may rent out their property. It is important to keep in mind that the landlord must pay annual income taxes on any income from rent paid, as well as the necessary real estate taxes. If a landlord rents out a furnished property, she will also be responsible for paying a special value-added tax (Impuesto al Valor Agregado, IVA), of 19% of the price of rent. Since you will have to pay these taxes as a landlord, you must have a RUT. See the LegalFácil Guide to Tax Law in Chile regarding tax rates, IVA, how to obtain a RUT, and how prepare your tax returns.

If you are renting out property in Chile while living abroad, you can grant a notarized power of attorney (poder general de administración) to another party to collect rent, pay your taxes, and manage your building-related affairs.

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