Argentina Renewable Energy Projects: the Surface Right in Deal-Structuring and Financing

Renewable energy outlook

Argentina has exceptional solar resources in most of the north west of its territory, from Mendoza to Jujuy, with an average annual global horizontal irradiance of more than 2,600KWh/m², well above the averages in the world’s leading solar energy markets such as Germany and Spain.

Also, more than two-thirds of Argentina’s territory enjoys wind regimes with average speeds between 6m/s and 10m/s, which ensures the country’s suitability for harbour high-yield wind power projects.

With the aim of attracting foreign investment and increasing the energy generation infrastructure, the government of Argentina has set an aggressive target to reach 20 per cent renewable energy by 2025, a tenfold increase from the current 2 per cent of power supply through renewable energy.

With the enactment of laws No. 27,191 and No. 26,190, Argentina launched a national regime for the promotion of renewable sources of energy for power production, which includes anticipated value added tax returns, accelerated amortisation and extended tax carry-forward periods, exemption from import duties, minimum deemed income tax and dividend tax under certain conditions, tax deductions for financial expenses, tax credits of local capital expenditures and the creation of a fund to provide diverse subsidies for photovoltaic producers, as well as for biogas, biomass, geothermal, hydro and wind energy projects.

This renewable energy programme is expected to generate up to US$5 billion in Argentina’s photovoltaic energy sector alone over the next five years.

Along with this renewed impetus for foreign investment in infrastructure projects like these, Argentina’s new Civil and Commercial Code, in force since 1 August 2015, introduced a new type of real property that offers great flexibility for project-structuring and financing, and may become an essential tool for infrastructure projects such as windmills and solar farms (and, with the appropriate regulatory framework, pipeline transportation, industrial plant constructions and commercial real estate projects), reducing costs of acquisition and creating new types security interest for long-term lending, such as surface mortgages or securitisation of surface assets.

The surface right

Under the new Civil and Commercial Code of the Republic of Argentina, the surface right is a real property right whereby its owner is entitled to build or plant on the surface of a third party’s land, and to use, exploit and dispose of such right. It is a real property, separate and coexisting with the land property right. A surface right can also be mortgaged or otherwise encumbered as a guarantee. It may be created by contract, for a period of up to 70 years (50 in the case of plantation surface right), over both private and public real estate.

Historical background

The right over the surface existed in Roman law, where it was used mainly to allow private citizens to build in-state property; thus, in its origin, it was a right of public law contract. The Roman surface right could be perpetual or long-term. Improvement of public land was the duty of the populus or the municipium, or the private landowner in the case of a private plot of land, by application of the principle of accession to the land (superficie solo cedit). In both cases, the rights of the surface owner were subject to the payment of a ground rent.

In the Middle Ages, the surface right was extended to plantations, which may be considered an early form of project structuring, and in certain cases the principle of accession was segregated from the landowner during the term of the surface right. Thereafter, the Napoleonic Code of 1804 completely disregarded the surface right, as one of France’s intentions was to promote private property without restrictions, limitations or terms of duration.

Similar to various 19th century civil codes influenced by the Napoleonic Code, the Argentine Civil Code of 1869 deliberately omitted the surface right, as acknowledged by its author in an annotation to the Code stating that there was no place for the surface right in that Code, as it was viewed as detrimental to real estate in general and a potential source of conflict between landowner and surface owner.

In Germany, the surface right was introduced in 1919 in order to facilitate the reconstruction of cities devastated by World War I. Notably, the surface right in that case was perpetual, without a time limit, but used only for public buildings.

The surface right currently exists in similar forms in other legislations, including, among various jurisdictions, Belgium, France, Italy, Japan, Peru, Portugal, Spain and Switzerland. In 2001, pursuant to a special law, No. 25,509, Argentina created a type of surface right limited to forestry projects only, which has now been abrogated and replaced by the provisions of the new Civil and Commercial Code.

Term of duration

The surface right may be established for a period of up to 70 years in the case of construction surface rights, and 50 years in the case of forestry or plantation surface rights. This is a maximum term that may not be extended. However, a surface right established for a shorter period may be renewed successively until the maximum applicable term is met. Also, if the surface right title does not specify a term of duration, it will be deemed to last for the maximum legal term.


The surface right is a real right that derives from the property right. It is therefore granted or created by the landowner through a public deed and registered in the competent local (provincial) property registry. It may be made and acquired for a price or gratuitously, for no consideration. A surface right may not be created by mandate in a will; however, the heirs of the surface owner may acquire an existing surface right by operation of Argentina’s inheritance rules.

It may be created on a vacant, clear, surface of land, or on existing constructions, installations, plantations or forests. Thus, an existing infrastructure project, such as a photovoltaic power station or wind farm, may be transferred to a third party through the creation of a surface right, and subsequently mortgaged or conveyed into trust for financing or guaranty purposes (without affecting the landowner right over the residual property not subject to surface right).

Extent of the surface rights

The surface right may be established over the surface, subsoil and air of an entire plot of land or a section of the same. Thus, various surface rights may be created simultaneously or subsequently on a same-land unit, provided that the surface assigned to each surface right is separate and does not overlap with the other surface rights. Moreover, the coexistence of two or more surface rights in a same plot of land must be compatible in relation to their purposes. Therefore, a second surface right may not be created if its purpose is incompatible or interferes with the object of the pre-existing surface right. This may enhance the possibility for financing different projects or constructions on a same plot of land, by isolating two or more coexisting projects with different financing terms and amortisation periods.


The creation or transfer of a surface right over a private land is perfected with the signature of the deed of surface right, and such right becomes enforceable with regard to third parties upon its registration in the corresponding local (provincial) property registry. However, in the case of surface rights over public (state) land, such registration is necessary for its perfection of the surface right. The same criteria apply to the transfer of conveyance of surface rights. The creation of a mortgage is always subject to registration in the corresponding local (provincial) registry.

Registration requirements may vary from jurisdiction to jurisdiction. For example, while the city of Buenos Aires requires that the registration include a cadastral survey or plan issued by a licences cadastral engineer, the registry of the Province of Buenos Aires accepts a simple plan of the surface subject to the surface right, thus resulting in a lower cost of registration.


During the term of the surface right, the surface owner is the sole owner of any building, installation, infrastructure or plantation made or existing on the land, subject to the surface right.

The surface owner is entitled to use, enjoy, exploit and transfer the surface right and its construction and plantation, and create security interests over the surface right, such as a mortgage. The surface owner may exercise its rights over the surface of the land assigned to it, as well as its subsoil and air space, but only to the extent necessary for the exercise of the purposes of the surface right.

The surface owner may also convey the surface right into a trust under Argentine law, in which case the trustee shall become the fiduciary owner of the surface right and so is registered in the corresponding local (provincial) property registry.


The surface right terminates upon: (i) the expiration of its contractual term or the maximum legal term (70 years for construction surface rights); (ii) the occurrence of a condition subsequent agreed by the parties; (iii) the waiver of right by the surface owner; (iv) consolidation of landowner and surface owner; (v) the use of the surface right for purposes other than those contemplated in the deed of surface right; and (vi) the absence of use of the surface right during a statutory grace period (10 years for construction projects, five years for plantation surfaces). The surface rights revert to the landowner free and clear of any encumbrance only in the case of a termination by elapsing of its term. In all other cases, any lease, mortgage or other right imposed on the surface right shall continue to be in force in accordance with its terms. In such cases, the surface right and the property right will continue to exist only for the purposes of fulfilling such surviving rights or security interests, until all such third-party rights are extinguished or terminated in accordance with their own terms and conditions.

The statutory grace period for the mandatory use of the surface land is another legal provision that provides great flexibility for proper structuring and financing of any project. Long before becoming legally required to use the surface right or commence construction or plantation, a surface right owner may transfer its real property title, contribute it in kind, convey it into a trust, mortgage the surface title and create other security interests over the surface right.

Unless otherwise agreed by the landowner and the surface owner in the deed of surface right, the surface right is not extinguished or terminated in case of destruction of the construction or plantation, if the surface owner rebuilds the construction within a period of six years (three years for plantations). This obligation, as well as the obligation to use the surface right, are inherent to the surface right title; thus, the grace periods for use or reconstruction will continue to lapse in case of transfer of title to a third party or trust, mortgage or other security interest.

Upon termination of the surface right, the surface owner shall be entitled to compensation payment from the landowner for the value of the construction or plantation received. The parties may agree on the amount to be paid or criteria for its valuation, including the transfer of such construction or plantation without compensation to the surface owner. In the absence of any such contractual arrangement, the law provides that the payment to be made to the surface owner is the amount of any additions made to the surface during the last two years of the surface right term, minus depreciation. This is another flexible provision of the Civil and Commercial Code, as it allows the parties to agree to any terms, including its absence, in relation to indemnification in favour of the surface owner.


Due to the novelty of this real property right, federal and provincial tax laws have not legislated expressly on taxable events involving surface rights. As a matter of interpretation, taxes in Argentina may not be applied by analogy. Nevertheless, the parties will be subject to federal income tax for any income derived from the transactions involving a surface right, such as the payment of compensation to the landlord or an indemnification to the surface owner. Also, by application of the general rules of Argentine federal income tax, if the creation or transfer of the surface rights constitutes an isolated act of the landowner, any income derived from such transaction shall not be subject to Argentine income tax.

Tax on transfer of real estate has not been modified to include the creation and transfer of surface rights. This is a tax payable by the ‘seller’ of the real estate, but since taxation may not be applied by analogy, it is, at the time of writing, not applicable to transactions involving surface rights.

With respect to stamp tax (a local tax that is levied on written documents containing a contract or transaction with economic value), its application shall be analysed on a case-by-case basis, because each province of Argentina issues its own stamp tax law. The City of Buenos Aires has, nevertheless, confirmed to the Board of Notaries that stamp tax at the rate of 1 per cent shall apply to the creation of surface rights.


The surface right contemplated in Argentina’s new Civil and Commercial Code constitutes a legal tool that may be used in all type of investment and infrastructure transactions involving real property. Argentina’s surface right regulations are broad and flexible, affording the parties room for negotiation in significant terms and conditions, including extensive terms of duration, conditions for construction and termination, consideration and indemnification upon expiration, as well as the creation of security interest over the constructed infrastructure. In spite of its novelty, it is likely to become a tool for the structuring of projects that rely on the use of third-party real estate surface, such as solar and wind energy projects.

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