PUERTO RICO Law and Practice Contributed by: Antonio Santos, Donald Hull and Paola Canino, Pietrantoni Mendez & Alvarez LLC
6.6 Determination of New Rent Rental increases can be negotiated as pre-determined fixed amounts, or can be calculated, at the time of the increase, on the basis of an established index (such as an inflation or consumer price index). 6.7 Payment of VAT VAT is not payable on rents in Puerto Rico. 6.8 Costs Payable by a Tenant at the Start of a Lease In some cases, landlords of commercial property in Puerto Rico will require the tenant to pay one or two months’ rent in advance and/or a security deposit, typically equivalent to one month’s rent. 6.9 Payment of Maintenance and Repair In multi-tenant properties such as shopping centres and office buildings in Puerto Rico, the cost of the maintenance and repair of common areas is common - ly shared by all of the tenants proportionately (usually calculated on the basis of the proportion that the area leased by each tenant bears to the total leasable area of the property). 6.10 Payment of Utilities and Telecommunications Utility and telecommunications expenses that relate solely to the leased premises are typically paid by the tenant. Such expenses that relate to the common areas of a multi-tenant property are allocated among all of the tenants on a proportionate basis. 6.11 Payment of Property Taxes Tenants are typically required to reimburse the land - lord for a pro rata share of real estate taxes on a pass- through basis in multi-tenant commercial properties. Since failure to pay real estate taxes will result in the imposition of a statutory lien on the leased property, in single-tenant properties the landlord will customarily pay the real estate taxes but include that cost in the rent to be paid by the tenant (with escalations in the rental rate if the tax assessment increases over the lease term). 6.12 Insurance Issues As is the case with real estate taxes, the cost of insur - ance under a lease of commercial property in Puerto
Rico is most often assumed by the tenant. However, in the case of single-tenant properties, the landlord may opt to obtain and pay for insurance directly but include the cost in the rent to be paid by the tenant. 6.13 Restrictions on the Use of Real Estate It is typical in Puerto Rico for the landlord to impose restrictions in the lease agreement as to the uses that can be given to leased property by its tenant. Zoning and land use regulations, as well as unlawful noxious uses, can also serve as limitations. 6.14 Tenant’s Ability to Alter and Improve Real Estate Landlord and tenant are free to stipulate in the lease agreement the applicable conditions that will apply to alterations that the tenant is permitted to undertake in the leased premises. It is most common for a ten - ant to be permitted to make non-structural improve - ments to the property but not structural alterations, although agreements to the contrary are possible. In most cases, the landlord will reserve the right to approve all alterations (structural and non-structural). Conditions as to the types of alterations that a tenant may make vary ‒ usually depending on the type of property involved ‒ but, in all cases, a prudent landlord will require that all alterations and improvements be made in accordance with applicable laws. 6.15 Specific Regulations There are no statutory or regulatory restrictions in Puerto Rico that apply to leases of different catego - ries of real estate. 6.16 Effect of the Tenant’s Insolvency Under Puerto Rico law, the insolvency of the tenant will not have an impact on the validity of the lease, although the parties may provide in the lease agree - ment that a tenant’s bankruptcy or insolvency will be considered as an event of default. However, pursuant to US federal bankruptcy laws applicable in Puerto Rico, a bankruptcy trustee may elect to reject (and, therefore, terminate) or assume a lease of a tenant that has filed for protection under Chapter 11 of the United States Bankruptcy Code. When a defaulting residen - tial tenant is insolvent, the legal process for eviction has certain additional requirements (as discussed in 6.21 Forced Eviction ).
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