Land acquisition and use
With the exception of certain specific regulations regarding foreign ownership of rural land, transactions related to land located in areas of national security that are nominated by law as ‘frontier zones’, and local regulations that impose certain requirements that must be addressed by the parties to a certain transaction (eg, surveys), property transactions are generally conducted under a similar legal structure as other kinds of real estate transactions, all of which are regulated by the Civil and Commercial Code (CCC).
After a preliminary negotiation with the seller through selling and purchasing agents (realtors and brokers), the transaction generally starts with the execution of a document called a ‘reserve’, signed and delivered by the purchaser and received by the realtor, by which the buyer offers a certain price and conditions for the acquisition of the land and deposits cash or a cheque with the broker as a guarantee of his or her offer. If the seller accepts the offer, sometimes the parties sign a preliminary sale agreement, a similar document by which the parties agree in detail with all the commercial conditions of the transaction, and the purchaser pays 10 per cent to 30 per cent of the price.
In other cases, the parties agree on signing the purchase deed directly without executing a preliminary sale agreement after a term that usually lasts between 30 and 90 days from the date of the acceptance of the reserve by the seller. If the seller accepts the reserve or executes the preliminary sale agreement, any ‘down payment’ is considered as confirmation of the transaction; however, it is customary to include a clause by which both the buyer and the seller can desist from concluding the transaction. If the buyer desists, the seller is entitled to keep the down payment as a penalty to the buyer. If the seller does not continue with the transaction, then the seller must reimburse the amount of the down payment and an equal amount as a penalty in favour of the buyer.
When the property is owned by a legal entity, the transaction is usually structured through a stock purchase agreement, for tax reasons.
The CCC provides for two requirements upon the acquisition of ownership: the transfer of possession and the title that is the public deed by which the seller transfers ownership to the buyer, which is formalised by a notary public. Then the deed is registered before the property registry of the province in which the land is located.
According to official studies, farmland is typically held by the owners. However, farmers have been increasingly cultivating land under a rural tenancy system. It is common to structure the agricultural production through annual contracts. In addition, farmland is also held, in a smaller proportion, by undivided estates.
Restrictions related to measurements, surveys, fences and rural roads are regulated by each province under their rural codes. For instance, in Buenos Aires, apart from the Rural Code, there are other restrictions imposed by Decree-Law No. 8912/1977 on the use of soil and by Decree-Law No. 3202/2006 on environmental issues, as well as by the Water Law.
Apart from local restrictions, others established in the CCC relate to:
- easement of transit: the owner of a field whose only access to a public road is through other fields may obtain an easement of transit by paying the value of the land and the damages;
- easement of aqueduct: if the construction of an aqueduct is necessary to carry water to other fields for the economic benefit of another property or for a community without water supply; and
- receiving water from other fields if no interference in the water movements were made by man, or in the event that such interference was made, the interference must not have caused any damage.
There is also a regulation in the CCC on the surface right by which an owner grants to a third party the right of planting, foresting or constructing a building on the owner’s land. The maximum period authorised by law for construction is 70 years, and for planting or foresting, it is 50 years.
Non-agricultural land rules
The CCC contains general rules related to hunting activities, although the activity is protected under National Law No. 22,421, regulated by the Decree-Law No. 666/1997, to which provinces can adhere. In provinces that do not adhere to Law No. 22.421, such as Buenos Aires, hunting is regulated by the Rural Code, including regulations on hunting preservation, breeding sites for wild animals and zoos.
Besides those non-agricultural uses, rural land may be used for the establishment of national parks, natural monuments and national reserves, as it is regulated by Law No. 22,351. For these uses, a previous assignment or donation of the land shall be made by a private entity or a province, also considering assignment of jurisdiction, which generally requires a provincial law.
In addition, the provinces have the option of regulating the systems of protected rural areas, access to which can be made by donation from a private entity or via expropriation.
Lending
There are no special norms that regulate loans secured with farmland, so general regulations on loans and guarantees established in the national and general legislation apply.
Nevertheless, the limitations for the acquisition of rural land by foreigners settled under Law No. 26,737 and Decree-Law No. 274/2012, modified by Decree-Law No. 820/2016, must be considered for the acquisition of rural properties by any foreigner as a result of an enforcement or in the context of an insolvency or bankruptcy proceeding.
Provinces might pass agricultural emergency laws under which a temporary stay could be granted – between 90 to 180 days – against judicial or extrajudicial auctions based on debts with public bank entities, and occasionally provinces have issued rules that limit any judicial or extrajudicial auction over real estate or prevent the seizure of agricultural machines that have been offered as collateral security of banks or private loans.
Publicly controlled property
The CCC allows local public authorities to regulate a minimum size for real estate, when its division into smaller sizes means that it is no longer economical.
In case of a condominium, there are regulations in the CCC that entitle any owner of property to request judicial protection to avoid a division of the condominium when the division could be potentially harmful for the owners or for the main use of the property.
Some provinces have enacted regulations that define the concept of economic units (eg, La Pampa and Buenos Aires provinces) and have also established, in some cases, restrictions on the division of a property when its surface unit is lower than the minimum surface unit that is required in those jurisdictions for a rural piece of land to qualify as an economic unit.
Foreign ownership restrictions
Law No. 26,737 (enacted in 2012) imposes restrictions on the acquisition of rural land (farm property) by foreign individuals and foreign entities. This Law was first complemented by Regulatory Decree No. 274/2014 and subsequently by Regulatory Decree No. 820/2016.
Any acquisition, conveyance or assignment of possession rights of rural lands in favour of any foreign individual or foreign entity requires previous authorisation by the Argentine National Registry of Rural Land, irrespective of the purpose, use or location of the rural land. Dispositions 7/2019 and 8/2019 implemented forms to be completed and submitted online to speed up the process of prior authorisation.
For the purpose of this Law, a foreign individual is defined as a person from a foreign country who does not have Argentine citizenship. Some exceptions apply to foreign individuals who at the time of acquisition have:
- resided in Argentina for at least 10 years uninterruptedly, provided that their residence is permanent and accredited;
- Argentine descendants and have resided in Argentina for at least five continuous years, provided their residence is permanent and accredited; or
- been married to an Argentine individual for at least five years, provided it is accredited that both individuals have resided in Argentina for at least five years uninterruptedly and permanently.
A foreign entity is defined as an entity that has been formed under Argentine or international regulations with at least 51 per cent of equity held by foreign individuals, foreign entities, government agencies, constructive association or partnerships, or an entity that allows foreign members (with the appropriate percentage of votes) the right to adopt resolutions of the entity.
The most significant prohibitions under Law No. 26,737 are that:
- foreign persons (whether individuals or entities) are not able to have domain or possession of more than 15 per cent of the rural lands in the whole country (the percentage also applies to each province, municipal department and administrative agency within the country);
- foreign persons (whether individuals or entities) of the same origin are not able to have domain or possession of more than 30 per cent within the total 15 per cent;
- no foreign entity or individual can be in possession of rural land adjacent to or containing perennial bodies of water or pools of water of importance, such as rivers, lakes, streams, brooks and creeks, unless duly authorised to do so;
- no foreign entity or individual can be in possession of rural land located at international borders or security zones without prior authorisation by the government; and
- any single foreign entity or individual can only be in possession of up to 1,000 hectares in main rural areas. This acreage limit could be modified in respect of specific places or locations by a resolution of the Interministerial Council of Rural Lands, an agency created to assure compliance with rural land acquisition regulations.
Finally, any act intended to conceal property vicariously held by a foreign entity or foreign individual under the appearance of being held by an Argentine entity or individual, as well as any act in violation of this Law, is considered fraudulent and is declared by the Law as null and void.
Gonzalo Ballester and John O'Farrell [JP O'Farrell Abogados]
