PUERTO RICO Law and Practice Contributed by: Antonio J Santos and Donald E Hull, Pietrantoni Mendez & Alvarez LLC
6.14 Specific Regulations There are no statutory or regulatory restrictions in Puerto Rico that apply to leases of different categories of real estate. 6.15 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 agreement that a tenant’s bankruptcy or insolvency will be considered as an event of default. However, pursuant to federal bankrupt - cy laws applicable in Puerto Rico, a bankruptcy trustee may elect to reject (and, therefore, termi - nate) or assume a lease of a tenant that has filed for protection under Chapter 11 of the United States Bankruptcy Code. Additionally, when a defaulting residential tenant is insolvent, the legal process for eviction has certain additional requirements (as discussed in 6.21 Forced Evic- tion ). 6.16 Forms of Security to Protect Against a Failure of the Tenant to Meet Its Obligations The most common type of security offered by tenants under commercial leases in Puerto Rico is a security deposit, usually equivalent to one month’s rent, which is kept by the landlord throughout the term of the lease. In the event that the tenant fails to perform a monetary obli - gation, the landlord uses the deposit to satisfy the tenant’s unpaid obligation. The tenant is typi - cally required to replenish the security deposit if used by the landlord before expiration of the lease term. Tenants may also offer a bond issued by a surety company, or a guaranty from a sol - vent affiliate, in order to guarantee its obligations under the lease.
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 stipulated term of the lease. If the tenant does not vacate upon expiration and the land - lord does not object to the tenant’s occupancy, then the tenant will be deemed to be occupy - ing the leased property on a month-to-month basis under the same terms and conditions of the expired lease. However, knowledgeable landlords typically include a holdover clause in their lease agreements which provides that, if a tenant’s occupancy continues after expiration of the lease term, the applicable rent will increase considerably (eg, by 150–200%). This type of provision serves to discourage holdover tenan - cies. 6.18 Right to Assign a Leasehold Interest The lease agreement will usually stipulate if ten - ant is permitted to assign the lease or to sub - lease the leased premises. Landlords typically include provisions in the leases requiring their consent for the assignment of the lease (includ - ing upon a change of control of tenant) or for tenant to enter into a sublease. 6.19 Right to Terminate a Lease The lease agreement will usually stipulate which tenant defaults will permit the landlord to termi - nate 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 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 land - lord’s remedies under a commercial lease, but the landlord’s ability to terminate a lease after a
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