Real Estate Law in Uruguay

Uruguay has a well-established regulatory framework for real estate transactions, aimed at ensuring transparency, protecting property rights, and fostering investments in the sector. The country has no restrictions on foreign ownership of real estate, allowing both residents and non-residents to freely purchase property. However, all real estate transactions must be conducted through public deeds signed by a notary public, and properties must be registered in the public land registry, which guarantees ownership and provides a secure legal basis for property transactions.

In addition to these general rules, Uruguay’s real estate market is regulated by laws that provide specific protections for both buyers and sellers. These include tax obligations, such as property transfer taxes and ongoing real estate taxes, which must be complied with to ensure the legality of transactions. Furthermore, real estate projects and developments are often subject to local municipal regulations, zoning laws, and environmental impact assessments, which ensure sustainable urban development while protecting property values and community interests.

In Uruguay, the most commonly used acquisition structure in real estate transactions involves the direct purchase of property by the buyer through a public deed signed before a notary. This process ensures the legal validity of the transaction and the protection of the buyer’s rights. In many cases, transactions include a prior verification of the property’s title, the existence of encumbrances, and compliance with urban and tax regulations, which is advisable to carry out with the assistance of attorneys specialized in the matter.

As for restrictions, Uruguay does not impose significant limitations on the acquisition of real estate by foreigners. Both residents and non-residents can acquire property under the same conditions as Uruguayan citizens

Uruguay has a robust real estate registry system designed to ensure legal certainty and transparency in property transactions. All real estate properties must be registered in the National Real Estate Registry, which is responsible for recording property ownership, transfers, and any encumbrances or liens that may affect the property. This system provides an official and public record of all real estate transactions, ensuring that property titles are clear and reliable.

The registry system is vital for both buyers and sellers, as it offers protection by preventing fraudulent sales and ensuring that the buyer acquires a legally valid title. Before any real estate transaction is finalized, a notary must conduct a thorough search of the registry to confirm that the property is free of encumbrances or other legal issues. This process guarantees the accuracy of the ownership and any potential claims on the property, making the system a cornerstone of the country's real estate legal framework.

In real estate transactions in Uruguay, the seller assumes various legal responsibilities related to contractual representations and warranties provided to the buyer. These obligations aim to ensure transparency and legal security throughout the purchase process, protecting both buyers and sellers while preventing potential future disputes.

Among other, the seller is obligated to guarantee that they are the legitimate owner of the property and that there are no liens, encumbrances, or pending legal actions that may affect the title. This guarantee is crucial, as the buyer relies on the assurance that the property is free from any legal burdens. In Uruguay, the notarization process requires a notary to verify these aspects before finalizing the transaction, which reinforces legal security.

In Uruguay, mortgages are one of the most common forms of guaranteeing financing in real estate purchases. A mortgage is a real right granted by the buyer to the lender as a guarantee for fulfilling payment obligations. In case of the debtor's default, the lender has the right to enforce the mortgage, allowing them to recover the loaned amount through the sale of the property.

In addition to mortgages, there are other common guarantees used in asset financing in Uruguay. These include pledges, generally applied to movable property, and trust guarantees, where assets are transferred to a trust to secure a debt. These forms of guarantees provide additional security to lenders and allow the debtor to access better financing conditions.

In Uruguay, the leasing of real estate is a common practice regulated by the Civil Code and the Urban Lease Law. This type of contract allows one party (the lessee) to use a property owned by another (the lessor) in exchange for a monthly payment. Lease agreements can cover both residential and commercial properties, and they are subject to specific regulations, such as minimum contract duration, renewal clauses, and the rights and obligations of both parties. Additionally, the law provides protection to the lessee in situations involving renewal or eviction, ensuring a balanced legal framework for both parties.

In Uruguay, construction or restructuring of real estate requires obtaining various administrative permits, which are essential to ensure compliance with urban planning and safety regulations. The process begins with applying for a construction permit from the corresponding municipal government, which must approve the plans and verify that the project complies with local building and zoning codes. This permit is mandatory for both new constructions and significant structural modifications to existing properties.

In addition to the construction permit, other specific permits may be required, such as environmental or heritage authorizations, depending on the location of the project and its impact. For example, if the construction is located in a historic or protected area, additional permits from competent authorities will be necessary to preserve the cultural heritage. Furthermore, regulations mandate inspections during and after the construction to ensure compliance with approved conditions and that the property is safe and habitable upon completion.

In Uruguay, environmental and energy regulations have gained significant importance, aligning with global trends towards sustainability and social responsibility. The country has a range of laws and regulations aimed at mitigating the environmental impact of real estate projects and promoting the efficient use of energy resources. These regulations include environmental impact assessments for certain developments, requirements to meet energy efficiency standards, and the preservation of protected natural areas.

In Uruguay, the sale of real estate is subject to several direct taxes that must be paid by the parties involved in the transaction. One of the main applicable taxes is the personal income tax (IRPF) or the corporate income tax (IRAE), depending on whether the seller is an individual or a legal entity. This tax is levied on capital gains from the sale of the property, calculated as the difference between the selling price and the inflation-adjusted acquisition value.

Another relevant tax is the property transfer tax (ITP), which is typically paid by both the buyer and the seller and is calculated as a percentage of the property’s fiscal value. Additionally, other municipal or departmental taxes, such as the property contribution tax, must be up to date in order to proceed with the sale. These taxes ensure that transactions are conducted legally and transparently, guaranteeing compliance with fiscal obligations.

Chapter authors and key jurisdiction contacts: Javier Domínguez | Deloitte Legal | Uruguay

Download: Handbook for Real Estate Transactions