Bill proposes to tie rent increases to inflation with a cap of 10%
Bill proposes to tie all housing rent increases to inflation, with a cap of 10%

QCOSTARICA – Thursday afternoon legislators approved in first debate the bill to limit to inflation the annual increase in housing rents. The initiative is still pending approval in second debate, which will occur after the Semana Santa recess.

Under the new law, if approved, that applies to all residential housing, if there is no agreement between the landlord and tenant, the increase cannot be greater than the cumulative inflation rate for the 12 months prior to the expiration of the rental contract, to a maximum of 10%.

Today, landlords have the power to increase rents up to 15%. With the projection for this year by the Central Bank inflation not exceed 4%, the tenants could save up to 11% points on the increase in rents.

Exception. In the event inflation is greater than 10%, the Ministerio de Vivienda y Asentamientos Humanos (MIVAH) will be responsible for establishing the additional percentage increase in rental housing.

“Since many tenants do not have the possibility to negotiate annual rent increases with landlords, passage of this bill means a safeguard against unconscionable increases for tens of thousands of families who rent housing in our country,” said the Minister of Housing, Rosendo Pujol.

According to Sergio Alfaro, Ministro de la Presidencia, “Costa Rica has long been in need of an adjustment on the issue of the maximum rates in housing rents.”

The minister explained that “although the current law sets a 15% rent increase, there has been an abuse by many landlords, setting 15% as the only possibility of rent increase when the law sets the maximum when there is no express agreement between the landlord and tenant.”

On his Faceboook page, President Luis Guillermo Solis, said the government will be promoting the approval of the bill in second debate.

The initiative stems from a proposal made in 2013 by the then legislator José María Villalta, of the Frente Amplio party (FA), the final text agreed to unanimously after amendments in the Committee on Legal Affairs.

Inflation will be calculated according to the official Consumer Price Index (CPI) of the National Institute of Statistics and Census (INEC).

According to the Census 2011, in Costa Rica there are 244,000 homes rented, one-fifth of the total. Meanwhile, the study “Wanted for rent housing” by the Interamerican Development Bank (IDB) in April 2014, it indicates that the demand for rental housing grew 33% from 2000 to 2010.

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Editor’s note: To the best of our knowledge the cap on rental increases applies only to rental contracts in Costa Rica currency, colones. Currently, if the rent for housing is agreed in US dollars or other foreign currency, no automaitc yearly increase is allowed. Any increase must be agreed to between the landlord and tenant. This practice is expected to continue.