In the last five years, the possibility of donating a property, a practice that had always been common from parents to children, it was very limited by the modifications that were made to the regime regulated by the Civil and Commercial Code in 2015. This had caused the donated properties to be left in an “observable” legal situation, since they could later be claimed by heirs in the framework of a succession, and they lost their commercial value or were no longer suitable to be taken as bank guarantee.
Last week it was published in the Official Gazette Law 27,587, which modified three articles of the Civil Code that referred to the donations regime. The big change with the sanction of the new rule is that donations of real estate from parents to children or third parties can no longer be legally observable and they will not have obstacles to be sold or used as bank guarantees. This change, according to market sources, will have a positive impact on the real estate sector, with more properties available for sale.
During these years, nobody wanted to buy anything that came from a donation. The property was unavailable and that stopped many operations and impacted the real estate market
“It goes back to the previous system, from Vélez Sarsfield, where donations to third parties only have an ‘action of reduction’ (claim of heirs on the property) if they affect the so-called ‘legitimate’ inheritance. If the recipient of the donation had sold the property to a third party in good faith, the act is cleared. The legislator protects those who want to buy a good that was donated, “he explained. Ricardo Blanco Lara, deputy secretary of the College of Notaries of the city of Buenos Aires, which was one of the organizations that promoted the enactment of the law.
The legislator protects those who want to buy a good that was donated (Ricardo Blanco Lara)
“During these years, nobody wanted to buy anything that came from a donation. Those titles were ‘observable’ for 10 yearss from the donation or five years from the donor’s death. The good was unavailable and nobody wanted to buy it. That slowed down many operations and impacted the real estate market, ”said Blanco Lara.
With the modification, the forced heirs will continue to be protected, only now if there is a donation that affects their rights, other mechanisms can be used upon the death of the donor. The other heirs may compensate the affected heir with securities, through the “collation action” instead of the “reduction action” that directly impacted on the donated property, even if it had been sold. The rights of third parties who have acquired donated goods are also protected, if they are in good faith and for consideration.
Another benefit is that performing a living gift is less expensive than inheritance. “Donations are cheaper. They are contracts entered into by living people who may or may not be from the same family. Successions are judicial processes where the judge determines who will succeed. It is a post-mortem transfer of assets, ”explained Ricardo Blanco Lara, deputy secretary of the College of Notaries of the city of Buenos Aires, which was one of the organizations that promoted the enactment of the law.
Donations of real estate from parents to children or third parties may no longer be legally observable and will not have obstacles to be sold or used as bank guarantees.
The big change with the sanction of the new law – which modifies three articles of the Civil and Commercial Code – is that donations of real estate from parents to children or third parties will no longer be legally observable and will not have obstacles to be sold or used as guarantees banking.
“With this modification, Argentines can calmly resume the deep-rooted and well-valued custom of property donations from parents to children,” he explained. Marta Liotto, vice president of the Professional Real Estate Association of the city of Buenos Aires. “For professionals in the sector it represents excellent news, since It will allow the unlocking of numerous operations that until now were held back by the complications derived from the previous articles of the code sanctioned in 2015”, He added.
“This is good news. In this way, many properties that previously had an obstacle to be sold because they are observable titles, now do not have that restriction. It is extremely positive for the market. Many operations in the past have been frustrated by this obstacle ”, agreed Soledad Balayan, real estate market analyst. The sale of properties in the city of Buenos Aires has been falling for 29 months year-on-year. So far this year, from January to October, operations are down 52.5 percent.
Tax benefits
The change in donations also has a tax impact. Within tax planning, a person can donate their assets so that they have less pesos in what they must pay in taxes, as is the case of Personal Assets. “Before a donation was not recommended, because the title would stain the title. Now it has been solved, but it does not change the issue of usufruct. If the donor reserves the usufruct of that asset, Personal Assets must be declared and there it has no impact ”, explained the taxpayer Sebastian Dominguez.
The change in donations also has a tax impact. Within tax planning, a person can donate their assets so that they have less pesos in what they must pay in taxes
An important piece of information for those who analyze this possibility in their tax planning: in the province of Buenos Aires, there is a tax on the free transfer of goods, which is usually very burdensome and according to the specialists warn in some cases it makes you have to go back with an operation.
“Change simplifies and improves. The above was not directly feasible. Nobody made a donation of real estate, for the imperfect title. It did not make sense. But it is important to consider the inheritance part when making a donation. Because if you exceed the percentage that you can have according to the law, which was previously 20% and now a third, it can become a problem for those who receive the donation in the future ”, he warned Ezequiel Passarelli, socio de SCI Group.
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