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Apr 21, 2022

Chile | New Real Estate Co-Ownership Law

On April 13, 2022, the new Law No. 21,442 on Real Estate Co-Ownership (hereinafter, the “New Law”) was published in the Official Gazette, expressly repealing the previous Law No. 19,537 on the matter (hereinafter, the “Old Law”) in force in Chile since 1997.

The New Law is applicable even to those condominiums that, having accepted the real estate co-ownership regime, do not transfer their units to third parties, as is the case of residential or multifamily rentals.

Thus, and from the date of its publication, the communities of co-owners that have taken advantage of the Old Law and those created subsequently originating in a community that does not mean co-ownership in the terms of the New Law are subject to its provisions and will have the period of one year to adjust (or create) its co-ownership regulations to it, being in charge of the Executive Secretariat of Condominiums of the Ministry of Housing and Urban Planning, the exercise of supervision functions of the new regulations and of keeping the so-called updated Registry of Housing Condominiums and National Registry of Condominium Administrators, among other tasks such as the preparation of the “Type” Co-ownership Regulation.

The New Law maintains most of the rules of the Old Law in force, but restructuring and ordering its provisions. Fundamentally, it addresses issues such as (i) the classification of condominiums, (ii) contents of the co-ownership regulations, (iii) formulas for conflict resolution, (iv) changes regarding the quorums to make agreements in the assemblies, (v ) relaxation of certain rules regarding the payment of owed common expenses, (vi) urban construction requirements, (vii) the creation of a national registry of condominium administrators, (viii) clear and precise sanctions for those who do not comply with the rules .

In other aspects:

• Establishes that projects under the real estate co-ownership regime (condominiums) correspond to a special form of ownership over the different units into which a building is divided and/or the land on which they coexist; in such a way that they grant their owners, simultaneously, (i) an exclusive property right and (ii) a common domain right with respect to the assets necessary for the existence, security, conservation and operation of the condominium.
• Eliminates the distinction between horizontal and vertical condominiums, which is replaced by 2 types of condominiums: (i) Type A or Condominium of units on common land and (ii) Type B or Condominium of developed sites.

• It also defines the concept of “economic obligation” as any monetary payment that the co-owner must make to cover ordinary common expenses, extraordinary common expenses or the common reserve fund, initial operating fund, fines, interest, insurance premiums or others, as determined by the respective co-ownership regulations. The importance of this definition lies in the fact that the status of “capable co-owners” is granted to those who are up to date in the payment of all financial obligations to the condominium, and not only those who are up to date in common expenses; Also allowing the condominium administrator, with the approval of the administration committee, “payment agreements” with those co-owners who are delinquent or behind in the payment of three or more installments of common expenses.
• Makes clarifications that the respective co-ownership regulations must contemplate, such as, for example, (i) they may not contain rules that violate the Law against Discrimination; (ii) the possession of pets and companion animals by co-owners, tenants or occupants of the condominium may not be prohibited within the respective units, without prejudice to the use of common spaces being limited; and (iii) it must contain the conduct that constitutes violations of the co-ownership regulations and the respective applicable fines or sanctions, which may be classified according to their severity.

• Updates and simplifies the regulations associated with the internal administration of condominiums and the adoption of agreements by co-owners, promoting better conditions for the maintenance and use of common property, as well as the appropriate relationship and coexistence between co-owners and residents. For the purposes of the administration of the condominium, the following bodies will be considered: (i) assembly of co-owners, (ii) administration committee, (iii) administrator and (iv) sub-administrator, indicating their functions, quorum powers and integration.

• The jurisdiction of local police courts, arbitration or extrajudicial resolution by the Municipality is established as a conflict resolution formula.

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