San José, Costa Rica, since 1956
Housing

Costa Rican lawmakers move forward with bill to lower cap on rent hikes

The Legislative Commission on Legal Affairs unanimously approved a draft bill this week that would decrease the amount landlords are allowed to hike the rent each year for houses and apartments.

According to the country’s current Rent Law, each year landlords can set increases up to 15 percent on monthly rent.

The proposed change in legislation would allow for rent hikes up to the average inflation rate recorded over the past 12 months — the interannual inflation rate — as reported by the National Institute of Statistics and Census (INEC) and Costa Rica’s Central Bank. The bill would also cap rent increases at 10 percent.

As an example, a tenant who ended his yearly contract in February might be subject to a monthly rent increase of 3.53 percent, which is the interannual inflation rate for that month, according to the Central Bank.

Bill #18,067 “Amendment to Article 67 of the Rent Law” was first drafted in 2012 by former Broad Front Party lawmaker and presidential candidate José María Villalta. But the proposal never had enough support to make it to the full Legislative Assembly for discussion.

Now, the bill will move to the Assembly’s main agenda for discussion and possible approval.

According to INEC, in 2014 there were 1,399,271 houses in Costa Rica, of which 265,503 were rentals. More than 850,000 people live in rented homes or apartments here.

Contact L. Arias at larias@ticotimes.net

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John

Thanks for the information, Juan.
I hope the Tico Times will double-check this, and amend the story accordingly if necessary.

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Juan Mayer

“According to the country’s current Rent Law, each year landlords can set increases up to 15 percent on monthly rent.”

THIS IS ALREADY THE MAXIMUM CAP. THEY ARE ALREADY ONLY ALLOWED TO RAISE RENT ACCORDING TO THE CURRENT INFLATION RATE.

See article 67 of the current law:
“Reajuste del precio para vivienda
En los arrendamientos para vivienda, el precio convenido se actualizará al final de
cada año del contrato.
A falta de convenio entre las partes, se estará a las siguientes reglas:
a) Cuando la tasa de inflación acumulada de los doce meses anteriores al
vencimiento de cada año del contrato sea menor o igual al quince por ciento
(15%), el arrendador está facultado, de pleno derecho, para reajustar el alquiler de
la vivienda, en un porcentaje no mayor a esa tasa. La inflación se calculará de
acuerdo con el índice oficial de precios al consumidor, de la Dirección General de
Estadística y Censos.”

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Ken Morris

Surely your Spanish is better than mine, Juan, but I don’t read this as limiting rent increases to the inflation rate. I read it as setting a cap of 15% regardless of a possible higher inflation rate. I also read it as allowing the rental contract to supersede the law.

In any event, actual practice is normal annual rent increases in the 10-15% range. For the life of me, I don’t understand why landlords do this, since it just encourages tenant turnover and costs them money for vacancies. Yet many do it, and because they do, a law explicitly stating that they can’t is important.

In market theory, the law will have the effect of raising rents at the outset by lowering the allowable increases, but I have my suspicions about this being the effect. From what I hear, tenants just move annually and the landlord eats the vacancy only to find a new tenant at the same lower rent.

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