Limits on Rural Land Ownership by Foreigners

1. Introduction. Law 26,737, recently passed by the Federal Congress, imposes limits on the ownership or possession of rural land by foreign individuals or legal entities. Specifically, it states that its purpose is to “Control –regarding foreign individuals and legal entities, the limits to rural land ownership and possession, whatever their use or end”.

Law 26,737 hence provides as follows:

1. A fifteen percent (15%) limit to the total amount of “rural lands” in the Argentine territory which may be owned or possessed by foreign individuals or legal entities. This percentage is to be calculated also in relation to the territory of the province or municipality where the relevant lands are located.
2. Foreign individuals or legal entities of a same nationality may not, under any circumstances, hold or possess over thirty percent (30%) of the above-stated fifteen percent (15%).
3. Ownership by the same foreign owner may not exceed one thousand hectares (1,000 Ha) of the “core area,” or the “equivalent surface” to be determined by the enforcement agency according to the location of the land.

Furthermore, foreign individuals may not own rural lands containing or bordering large and permanent water bodies.

2. Main stipulations of the new law.

2.1. The following are subject to Law 26,737:

1. Foreign individuals, whether domiciled in Argentina or not, except those who: (i) have held residence in the country for over ten years; (ii) have Argentine children and have held residence in the country for over five years; and (iii) have been married to Argentine nationals for five years prior to the date of transfer of the rights over the rural lands, and have held residence in the country for over five years.
2. Legal entities incorporated under the laws of Argentina or abroad, when more than fifty one percent (51%) of the capital stock or a portion thereof enough to prevail in corporate decisions is held by foreign individuals or legal entities.

   In addition, the following are also bound by this law:

   1. Legal entities (of any kind) controlled by any corporate or cooperative foreign entity, as defined by the Law, through a percentage over twenty five percent (25%) or the votes required to determine the corporate will, regardless of the stockholding.
   2. Foreign individuals or legal entities who are not formal or registered stockholders or partners of a company but act as such.
   3. Companies which issued negotiable obligations or debentures convertible in stock (bonds), when foreign individuals or entities hold over twenty five percent (25%) of such bonds or enough bonds to determine the corporate will.
   4. When property is transferred to a trust agreement –through any legal instrument available, whose beneficiaries are foreign individuals or legal entities in a percentage over twenty five percent (25%).
   5. Joint ventures (i.e. sociedades de participación, UTE or any business cooperation form of organization to be provided) where foreign individuals or entities participate in a percentage higher than the one permitted by this law.
      
      
3. Foreign public entities (i.e. foreign states).
4. Associations and de facto corporations, when foreign legal entities or individuals participate in excess of the thresholds set forth in item (b) above.

2.2. Further relevant stipulations. The National Registry of Rural Lands, as enforcement agency, has been placed in charge of –among other, the following duties: (i) issue permits for any and all acts by which property or possession over rural lands is transferred; and (ii) enforce this law, with the capacity to plea before government or judicial courts.

A “provisory clause” is included in the law, stipulating that all transactions executed in favor of foreign individuals or legal entities subject to the restrictions described above, as from the enforcement of the law and until its regulation are null.

Lastly, Law 26,737 expressly states that its provisions will not affect “vested Rights.”