PUERTO RICO Law and Practice Contributed by: Antonio Santos, Donald Hull and Paola Canino, Pietrantoni Mendez & Alvarez LLC
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). Con - ditions as to the types of alterations that a ten - ant 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 categories 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 agreement that a tenant’s bankruptcy or insolvency will be considered as an event of default. However, pursuant to US federal bank - ruptcy laws applicable in Puerto Rico, a bank - ruptcy 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 Unit - ed States Bankruptcy Code. When a defaulting residential tenant is insolvent, the legal process for eviction has certain additional requirements (as discussed in 6.21 Forced Eviction ). 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 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 discourage holdover ten - ancies. 6.18 Right to Assign a Leasehold Interest The lease agreement will usually stipulate if a tenant 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 the 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 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 land - lords’ remedies under a commercial lease, but the landlord’s ability to terminate a lease after a tenant 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 affecting title to the real property. A lease of real property for a term of less than
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