PUERTO RICO Law and Practice Contributed by: Antonio Santos, Donald Hull and Paola Canino, Pietrantoni Mendez & Alvarez LLC
6.17 Right to Occupy After Termination or Expiry of a Lease Under Puerto Rican law, a tenant is required to vacate the leased property upon expiration of the stipulat - ed term of the lease. If the tenant does not vacate upon expiration and the landlord does not object to the tenant’s occupancy, the tenant will be deemed to be occupying the leased property on a month-to- month basis under the same terms and conditions of the expired lease. However, knowledgeable land - lords typically include a holdover clause in their lease agreements which provides that the applicable rent will increase considerably if a tenant’s occupancy continues after expiration of the lease term (eg, by 150–200%). This type of provision serves to discour - age holdover tenancies. 6.18 Right to Assign a Leasehold Interest The lease agreement will usually stipulate whether a tenant is permitted to assign the lease or to sublease the leased premises. Landlords typically include pro - visions in the leases requiring their consent for the assignment of the lease (including upon a change of control of tenant) or for the tenant to enter into a sub - lease. 6.19 Right to Terminate a Lease The lease agreement will usually stipulate which ten - ant defaults will permit the landlord to terminate the lease and evict the tenant. Typically, any default by the tenant in complying with any of its obligations set forth in the lease agreement will give the landlord the right to terminate the lease, although the agreement normally provides the tenant with a cure period to remedy a default. Bankruptcy and insolvency are also customarily included as tenant defaults giving rise to landlords’ remedies under a commercial lease, but the landlord’s ability to terminate a lease after a ten - ant files for bankruptcy may be limited by the United States Bankruptcy Code. 6.20 Registration Requirements In Puerto Rico there are no execution formalities for leases. A lease of real property for a term of six years or more is, by exception, recordable in the Registry of the Property of Puerto Rico as an encumbrance affect - ing title to the real property. A lease of real property for a term of less than six years may also be recorded in
the Registry of the Property of Puerto Rico by mutual agreement of the parties. In order to have access to the Registry of the Property, a lease agreement must either be: • executed directly in deed form before a notary public in Puerto Rico; or • set forth in a private document that may be: (a) executed in Puerto Rico and thereafter rati - fied and elevated to deed form before a notary public in Puerto Rico; or (b) executed by the parties before a notary public outside of Puerto Rico and thereafter protocol - ised by a notary public in Puerto Rico. In each of these three methods, the public deed is pre - pared by a Puerto Rico notary public in accordance with the form requirements of the PR Notarial Act. Lease Recordation Costs Stamp taxes The PR Notarial Act requires that Internal Revenue stamps be cancelled on the original and the certi - fied copy of the aforementioned deeds. The Internal Revenue stamp taxes for the original are calculated based on the transaction amount at the rate of USD2 for the first USD1,000 (or fractions thereof) and USD1 for every USD1,000 thereafter. The Internal Revenue stamp taxes for the certified copy are calculated at the rate of USD1 for the first USD1,000 (or fractions thereof) and USD0.50 per USD1,000 thereafter. The transaction amount used to calculate the Internal Rev - enue stamps for a lease agreement is based on the aggregate rent to be paid during the entire term of the lease, including any extension options. Recording fees The fees for recording a deed in the Registry are cal - culated at the rate of USD2 per USD1,000 (or frac - tions thereof) for the first USD25,000 and USD4 per USD1,000 for amounts in excess of USD25,000, plus a filing fee of USD25.50. The amount used to calculate the recording fees for a lease agreement is based on the aggregate rent for only the first 15 years of the lease.
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