The Surface Right as a bank guarantee

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By virtue of Communication “A” 6297, dated August 11 2017 (hereafter “Communication”), the Central Bank of the Republic of Argentina (hereafter “Central Bank”), adapted its regulation on guarantees by incorporating  the surface right as a bank guarantee.

The surface right is regulated in Title VII of the Argentine Civil and Commercial Code and qualifies as a temporary property right over an own property on foreign land. To guarantee its temporary nature the Civil and Commercial Code contains different maximum periods, namely: (i) 70 years for construction; (ii) 50 years for plantation and forestry.

The purpose of the surface right lies in a property being eligible for forestry, plantation or construction.

The Central Bank’s intention is to give entrepreneurs that do not possess their own property the opportunity to carry out investment projects by means of bank financing, offering as a guarantee the flow of funds of their commercial exploitation.

Thus, it is included in the form of guarantee “Preferred B”, the possibility for the holder of the surface right to create a first mortgage on a real property subject to the surface right, irrespective of its seniority grade provided that the entity is the creditor in all grades.

Additionally, the Communication designates as guarantees “Preferred B” real properties and/or surface rights, over which a fiduciary property has been established, as long as the lending financial entity is granted the highest priority regarding debt collection in comparison to the rest of the creditors, irrespective of the form by which this preferential treatment is being granted.

This publication does not offer a legal opinion on specific topics. If necessary, you should seek specialized legal counsel.

Contact Details

Sebastián Luegmayer
Tel. (5411) 4346-1045
luegmayers@eof.com.ar