ACQUIRING REAL ESTATE IN URUGUAY
Once the land or housting to be acquired has been selected and the main conditions of the deal have been agreed with the seller, a Preliminar Agreement (Boleto de Reserva) is executed stating the price to be paid, installments, initial payment and an amount paid to guarantee the operation (usually 10% of the price), term for the closing, the conditions in which the real estate must have and penalties for non-compliance.
This Preliminary Agreement (Boleto de Reserva) is the most important document that will be signed during the deal, because it has the main conditions both parties will be subject to. We have seen many cases in which they are executed without the necessary legal and public notary advice and very negative consequences can be generated.
In order to close the deal, two options exist. One is to go directly to the closing of the deal and title, when the public notary verifies all formalities are in place.
The second alternative is to execute a Promise to acquire the land, paying part of the price and taking possession of the land, until de closing and title can be done.
There are two issues which are very relevant when acquiring land or a house in Uruguay. These are compliance of formalities regarding the constructions documents and drawings and the social security contributions for the workers that performed the construction in the housing. These two issues must be controlled in detail to avoid future claims.
When a real estate broker is hired to search for the land or housing, their commission is usually 3% plus VAT.
Both Seller and Buyer must pay a Tax on Real Estate Transmission which is 2% of the value of the asset, according to value in the Governments record, which usually is much less than the market value.
Seller must pay income tax when, when there is a capital gain due to the sale at the applicable rate of 1,8% of the sales price, but this must be analyzed in each situation because it may vary.
In Uruguay, the buyer of the land is the party that will designate the public notary that will assist him in the formalities to close the deal. We usually also recommend that the seller of land, also have a public notary assisting him with the closing.