Real Estate 2026 Comparisons

In Ecuador, real estate law is a multi-layered framework encompassing civil law, administrative law and regulatory provisions. The primary sources are:

• the Constitution of Ecuador – guarantees the right to private property and the right to a safe and healthy habitat;
• the Civil Code – governing property rights, possession, ownership transfers and security interests;
• the Organic Code of Territorial Organization – granting municipalities the authority to regulate land use, zoning and construction permits through the Land Use and Management Plan (Plan de Uso y Gestión del Suelo – PUGS); and
• the Horizontal Property Law – regulating the development and administration of multi-unit buildings and gated communities.

The Ecuadorian market has been characterised by a shift towards efficiency and diversification:

• there is a significant increase in projects seeking Excellence in Design for Greater Efficiencies (EDGE) or Leadership in Energy and Environmental Design (LEED) certifications, driven by municipal tax incentives and a growing demand for energy-efficient assets;
• investors are moving away from single-purpose buildings towards “live-work-play” ecosystems that integrate residential units, retail spaces and health services; and
• driven by e-commerce and export needs, the logistics sector has seen robust demand for “last-mile” facilities and specialised warehouses near major ports and airports.

Over the past 12 months, the most notable activity has occurred in:

• large-scale acquisitions and developments of retail centres in secondary cities, signalling a decentralisation of investment;
• significant investments in “banded residences” and boutique hotel projects along the Pacific coast and in the Galápagos region; and
• expansion of specialised storage facilities in the Guayas and Pichincha provinces to support the agro-export sector.

Since Ecuador is a dollarised economy, the real estate market is highly sensitive to global macroeconomic fluctuations and the monetary policies of the United States Federal Reserve. Rising global inflation has impacted the supply chain, increasing direct construction costs, particularly regarding imported materials.

Currently, the real estate regulatory framework in Ecuador – particularly within the Metropolitan District of Quito (DMQ) – is undergoing a phase of regulatory adjustments focused on reactivating the construction sector, attracting private investment and streamlining urban bureaucracy. The main ongoing proposals and reforms are as follows.

Updates to PUGS and Eco-efficiency Regulations (Municipal Level - DMQ)

Proposal

There is an ongoing review and reform proposals within the Metropolitan Council of Quito aimed at making territorial intervention zones more flexible.

Probability and enforcement

it is highly probable and that the proposal will be auctioned, subject to progressive implementation. Metropolitan resolutions adjusting these parameters are debated and updated annually, with strong pressure from the construction sector to transition the approval processes from several months to an automated approval system under the responsibility of a professional.

Consolidation and Expansion of Tax Incentives

Proposal

Following the recent implementation of economic efficiency laws that reduced VAT to 5% for certain construction materials and allowed VAT refunds for real estate developers, there are proposals from industry guilds to elevate these incentives into long-term state policies.

Probability and enforcement

It is very probable that the proposal will be auctioned. The central government considers the construction sector a pillar for job creation; therefore, Internal Revenue Service (Servicio de Rentas Internas – SRI) resolutions to expedite these refunds are being continuously adjusted in the short term.

In the Ecuadorian jurisdiction, real estate rights are strictly regulated by the Civil Code (Book II) under a numerous clauses principle. The main categories are as follows.

• Ownership: The absolute right to enjoy and dispose of a property, provided it does not contravene the law or the rights of others.
• Mortgage: The most common security interest in commercial and residential markets. It grants the creditor the right to pursue the asset, sell it at public auction and be paid with the proceeds in case of default.
• Usufruct: A right to use and enjoy a third party’s property while preserving its form and substance. It divides ownership into bare ownership and usufruct (right to rent and use).
• Easements: Charges imposed on a property for the benefit of another. Common examples include transit, aqueduct and utility easements.
• Trusts: Though regulated by the Stock Market Law, this is the preferred vehicle for large-scale developments.

The transfer of real estate is a formal and solemn process regulated uniformly across the country.

• The Civil Code: Governs the “title and mode” theory. The title (sale, exchange, donation) must be executed via public deed before a notary.
• The Law of Registry: Establishes that property transfer is only perfected and opposable to third parties once the deed is recorded in the Land Registry of the canton.
• The Organic Code of Territorial Organization: Regulates municipal taxes (alcabalas and plusvalía) and empowers Municipalities to manage urban planning and land use.
• Special considerations: While the transfer process is identical for all asset types, specific laws may apply:
1. the Horizontal Property Law – requires a “no-debt” certificate from the condo administration for units in buildings or shopping centres; and
2. the Organic Law on Rural Lands – imposes restrictions on the concentration of agricultural land and requires state authorisation for transfers in border or national security zones.

Transferring title in Ecuador is strictly formalistic.

• Public Registry: All formal real estate is registered. Registration has a constitutive effect; ownership does not legally pass to the buyer until the Land Registry records the deed.
• Process: Includes (i) payment of municipal taxes, (ii) execution of the Public Deed before a Notary and (iii) filing with the Land Registry.
• Title insurance: This is not used in Ecuador. Legal certainty relies on the principle of public registry faith. Buyers mitigate risk through exhaustive legal due diligence.

Buyers usually carry out real estate due diligence, which is typically led by legal counsel in Ecuador and involves:

• analysing the Encumbrance Certificate for at least the last 15 years to ensure a clear chain of title and the absence of liens, lawsuits or prohibitions to sell;
• reviewing the local Land Use Certificate to verify permitted uses, maximum buildability and potential public work affectations;
• confirming that property taxes and special improvement contributions are fully paid; and
• for industrial or commercial assets, verifying the existence of environmental licences and municipal operation permits.

Commercial real estate transactions are governed by the Civil Code, which provides a foundational layer of protection that operates independently of any specific contractual language.

• Statutory warranties: The Civil Code provides for warranty against eviction and redhibitory vices.
• Typical clauses: Sellers represent that they are the lawful owners, that taxes have been paid and that the asset is free of litigation.
• Remedies: Buyers can seek the redhibitory action or the quanti minoris action (price reduction).
• Survival and caps: Statutory claims for hidden defects expire after one year for real estate. Liability is typically capped at the purchase price.
• R&W insurance: Virtually non-existent in the local market.

When purchasing real estate in Ecuador, an investor must navigate a multi-disciplinary legal landscape. The most critical areas are:

• civil and registry law;
• urban and municipal law;
• tax law;
• environmental law; and
• corporate law.

In Ecuador, the legal framework regarding environmental liability is governed by the principle of objective liability, as established in the Constitution and the Organic Environmental Code.

• Owner liability: The current owner of a real estate asset is responsible before the State for the remediation of environmental damage or soil contamination found on the property, regardless of whether the buyer caused the pollution.
• Right of recourse: While the buyer must assume the immediate cost or obligation to remediate before the environmental authorities, they retain a civil right of recourse against the seller or the actual party responsible for the contamination. To succeed, the buyer must prove that the damage existed prior to the transfer and was not disclosed.
• Mitigation: This underscores the vital importance of conducting Phase I and Phase II environmental site assessments during the due diligence process, especially for industrial or brownfield assets.

Determining the permitted uses and development potential of real estate in Ecuador requires a detailed analysis of local municipal regulations and urban planning instruments. Zoning is a dynamic system that allows for negotiation and enhancement through specific agreements with local governments, rather than a static set of rules.

One of the primary mechanisms for project enhancement is the onerous concession of rights (concessão onerosa de direitos – COD). In major cities, developers can enter into agreements with the municipality to increase building density or height beyond the base zoning. In exchange, the developer provides “compensation” to the city, which can take the form of cash payments, land for public use or the execution of specific urban infrastructure projects. As of 2026, the application of the COD has been further refined under the Organic Law on Land Use and Management (Ley Orgánica de Ordenamiento Territorial, Uso y Gestión de Suelo – LOOTUGS) framework to provide clearer guidelines for municipal implementation.

For larger developments, investors can utilise special development zones. These allow for the negotiation of specific intervention plans or partial plans, facilitating customised zoning and infrastructure co-ordination between the private developer and the local government. Additionally, public-private partnerships (PPPs), while traditionally focused on large-scale infrastructure, are being used for urban renewal projects where the public authority provides land or regulatory ease in exchange for the private sector developing facilities of public interest.

The Ecuadorian government can apply expropriation for public utility or social interest. However, it must undergo a legal process to do so:

• formal declaration of public utility by the government entity;
• negotiation phase based on the municipal appraisal; and
• if no agreement is reached, deposition by the entity of the appraised value in court to take possession, with the final “fair price” litigated in a judicial process.

Real estate acquisitions in Ecuador are structured as either asset deals (direct property transfer) or share deals (transfer of equity in the holding entity), each with distinct fiscal outcomes.

In an asset deal, the buyer typically pays the transfer tax (alcabala) and registration fees, totalling approximately 1–2% of the property value. The seller is responsible for the capital gains tax (plusvalía), which is generally 10% of the profit. Conversely, a share deal avoids these municipal taxes because the legal titleholder remains unchanged. In this scenario, the seller instead pays 10% income tax on the capital gains from the share disposal. Notably, a change of control via a share deal does not require updating the Land Registry, offering a more discreet and administratively simpler transition for large portfolios.       

Ecuador grants national treatment to foreign investors, with two critical exceptions:

• national security zones – foreigners are constitutionally prohibited from owning land in border areas or designated national security zones; and
• agricultural land – foreign entities or local companies controlled by foreigners require prior authorisation from the National Agrarian Authority to acquire rural land for agricultural or forestry projects to prevent land concentration.

The commercial real estate financing ecosystem in Ecuador has evolved through a combination of traditional banking, capital markets and private equity. Standard acquisitions are typically funded via commercial loans, where private and public banks finance up to 80% of property value based on construction progress. In the social and public interest housing segments – social interest housing (vivienda de interés social – VIS)/priority interest housing (vivienda de interés público – VIP) – financing can reach up to 95% of the value. The family income limit is set at approximately USD3,055 (unified basic salary (salario básico unificado – SBU)6.34) as of 2026 (supported by government-subsidised rates of 4.99% and trust structures).

For large-scale portfolios, developers extensively utilise real estate mercantile trusts. This structure manages capital from pre-sales and private equity, providing a layer of legal protection and financial transparency without necessarily issuing direct debt. For stabilised assets, securitisation trusts are common, allowing owners to raise capital on the Quito or Guayaquil Stock Exchanges by issuing securities backed by future cash flows. This diversified approach ensures that high-impact projects remain viable despite fluctuations in traditional banking liquidity.

There are three common sorts of securities that are typically created by a commercial real estate investor who is borrowing funds to acquire or develop real estate, which have distinct purposes and requirements.

• Mortgage: The most traditional security. It must be granted via public deed and registered in the Land Registry. It typically covers the land and all future industrial or commercial improvements.
• Trust: This is the preferred structure for high-value commercial projects. The borrower transfers the title of the property to an autonomous patrimony managed by a trust company.
• Pledge: Used for movable assets within the property, such as industrial machinery or specialised equipment.

There are no general restrictions on granting mortgages or trusts to foreign financial institutions in Ecuador. However, if the property is in a national security zone, foreign lenders may face hurdles in taking direct title upon foreclosure.

Repayments

There are no restrictions on making repayments abroad, but they are subject to the currency outflow tax (impuesto a la salida de divisas – ISD). As of 2026, it is vital to check the current rate (which has fluctuated between 0% and 5%). Loans from international multilateral organisations or for specific productive sectors may be exempt from this tax if registered with the central bank.

The constitution and enforcement of real estate collateral in Ecuador involve transactional costs primarily centred on notarisation and public registration. While the legal system does not impose stamp duties or documentary taxes per se, it requires the payment of specific regulated fees and contributions: notary fees, registration fees, loan origination taxes and enforcement costs.

Directors must ensure that granting security serves the company’s interest. While financial assistance rules (a company lending money for the purchase of its own shares) are not as strictly codified as in the UK or EU, the principle of corporate purpose must be respected.

A formal resolution from the shareholders’ meeting is generally required to encumber the company’s main productive assets.

In Ecuador, real estate security enforcement depends on the chosen legal instrument. Mortgages require a judicial special executive proceeding, a slow process that typically takes 18–36 months to reach a public auction. In contrast, guarantee trusts allow for extrajudicial enforcement, where a trustee follows private contractual procedures – such as independent appraisals – to liquidate the asset in only 6–10 months.

As of 2026, all pandemic-era foreclosure stays have been lifted. While lenders are actively enforcing guarantees, they often prefer restructuring operational assets like hotels and malls to avoid holding illiquid real estate. Additionally, a nascent secondary market for non-performing loans (NPLs) has begun to emerge, offering new entry points for distressed debt investors.

In Ecuador, it is possible for existing secured debt to become subordinated to newly created debt.

• By agreement: Through inter-creditor agreements where a first-rank mortgagee agrees to step down to a second rank to allow for “fresh money” or new construction financing. This requires a public deed and a marginal note in the Land Registry.
• By law: Under insolvency proceedings, certain labour and tax claims have statutory priority over secured creditors, regardless of when the mortgage was recorded.

Lenders’ liability under environmental law is influenced by mortgage acquisition. As a general rule, as long as the lender only holds a mortgage, it is not liable.

Foreclosure Risk

Liability arises if the lender forecloses and takes title to the property. As the new owner, the lender becomes objectively liable before the state for any existing contamination (as discussed in previous sections regarding objective liability). This is why environmental due diligence is now a standard requirement for banks before approving large commercial loans.

Security interests granted within the “period of suspicion” (usually six months to one year prior to the formal declaration of insolvency) can be voided if it is proven they were granted to defraud other creditors or to give an unfair preference without receiving equivalent value.

Ordinary Course

Mortgages granted for new loans in the ordinary course of business are generally respected and maintain their priority.

There are no current national proposals to create stamp taxes for mortgages. However, investors should monitor municipal ordinances, as cantons (like Quito or Guayaquil) frequently update their tables for registration fees.

Digitalisation

There is a nationwide push to fully digitalise the Land Registries, which is expected to reduce the time for recording security interests but may involve new administrative service fees.

The regulation of land use and construction in Ecuador is based on a balance between national standards and municipal autonomy. At the legal apex are the Constitution and LOOTUGS, which establish mandatory national guidelines. On a technical level, the Ministry of Urban Development and Housing (Ministerio de Desarrollo Urbano y Vivienda – MIDUVI) issues the Ecuadorian Construction Standard (Ecuatoriana de la Construcción – NEC) to ensure structural safety and seismic resistance across the country.

At the local level, each municipality exercises its authority through the PUGS, which defines zoning, building densities and permitted uses. The Secretariats of Territory are responsible for technical reviews and the issuance of licences, while specialised agencies in cities like Quito and Guayaquil handle inspections and sanctions. Recently, the process has been streamlined by allowing private “collaborating entities” to certify the technical compliance of projects before permits are granted.

The acquisition of development rights in Ecuador begins with verifying land-use compatibility via a formal zoning certificate. Subsequently, developers must obtain an urbanistic licence by submitting architectural, structural and environmental plans for validation by the municipality or accredited collaborating entities. High-impact projects may utilise the onerous concession of rights, allowing for increased density or height in exchange for compensatory payments or public infrastructure works.

While the legal system provides avenues for third-party objections, these are most effective during the initial planning phases. Nevertheless, affected parties may file administrative complaints against specific permits. Under LOOTUGS and the Organic Code of Territorial Organisation, Autonomy and Decentralisation (Código Orgánico de Organización Territorial, Autonomía y Descentralización – COOTAD), municipal acts can be challenged through an administrative appeal or, if exhausted, through judicial review before contentious-administrative courts, which may suspend or annul non-compliant permits.

Enforcement is driven by the municipality’s power of “administrative self-protection”. Authorities conduct inspections to ensure adherence to approved licences. Violations empower the municipality to take immediate corrective actions, including the sealing of construction sites, the imposition of monetary fines based on the infraction’s scale and the potential revocation of the building licence.

The Ecuadorian legal system offers diverse structures for real estate investment, with the simplified stock company (sociedad por acciones simplificada – SAS) emerging as the preferred vehicle for acquisitions since 2020. Its popularity stems from high flexibility, including the ability to be formed by a single shareholder via private documents and the absence of a minimum capital requirement. While the SAS is ideal for private equity-backed developments, traditional corporations (sociedad anónima – SA) remain the choice for entities planning to list on local stock exchanges.

For institutional-grade and large-scale commercial projects, the real estate mercantile trust is the most sophisticated tool. It creates an autonomous patrimony that ensures bankruptcy remoteness, shielding assets from the individual liabilities of the parties involved. Additionally, for stabilised, rent-generating assets, investors utilise securitisation trusts, which function as a local REIT equivalent by issuing participation certificates traded in the capital markets, providing high liquidity and professional oversight.

SAS

This can be constituted through a private document registered with the Superintendence of Companies (Superintendencia de Compañías, Valores y Seguros – SCVS). It allows for personalised by-laws, different classes of shares and a simplified management structure.

SA and Limited Liability Company (Compañía Limitada – Cía Ltda)

These require a public deed granted before a notary public and subsequent registration in the Mercantile Registry. Their by-laws are more standardised and governed strictly by the Companies Law.

Mercantile Trust

This is constituted via public deed. The settlor transfers the title of the real estate to the trust. The trust is governed by a trust agreement, which defines the specific purpose (eg, construction, management or guarantee) and the rights of the beneficiaries.

Standard Companies

These pay 25% corporate income tax on profits. Dividends distributed to local individuals are taxed, but distributions to foreign entities in non-tax haven jurisdictions may benefit from double taxation treaties.

Tax Transparency in Trusts

Mercantile trusts are generally tax-transparent. If the trust is for administration or guarantee, the tax obligation resides with the beneficiaries. For construction trusts, the vehicle itself pays income tax, but it can act as a shield for project-specific accounting.

VAT Benefits

Real estate developers (often operating through trusts or companies) are eligible for a VAT refund on purchases of goods and services used in the construction of housing projects.

Incentives

New investments in specific sectors may qualify for income tax reductions or exemptions under the Organic Law for Economic Efficiency.

While the term “REIT” is not explicitly used in Ecuadorian statutes, its functional equivalent is the real estate securitisation trust, widely used for managing income-generating assets like industrial parks and Class A offices. These vehicles exist in both public and private forms; public trusts are registered with the SCVS and traded on local stock exchanges to provide liquidity, while private versions cater to closed groups of sophisticated investors. They are fully accessible to foreign investors and offer significant tax efficiency, as distributions are often exempt from further income tax if the trust fulfils its obligations at the source.

To qualify as a public vehicle under the Securities Market Law, the trust must obtain formal authorisation from the SCVS, secure a risk rating and comply with periodic financial disclosure requirements. Statutorily, the trust’s assets must be segregated from the manager’s balance sheet to ensure investor protection. To attract institutional capital, such as pension funds, the trust must demonstrate stable projected cash flows and maintain a diversified tenant base, adhering to the investment limits established by the Monetary and Financial Regulatory Board.

The financial requirements for establishing an investment vehicle in Ecuador vary significantly depending on the chosen legal structure, following a trend towards reducing barriers to entry for new capital. Under the current regulatory framework, the SAS stands out as the most accessible option, as it requires no statutory minimum capital. This characteristic, coupled with the ability to form the entity through a private document, has positioned the SAS as the primary choice for SPVs and real estate holding companies. In contrast, traditional corporate structures maintain specific capital thresholds: the SA requires a minimum initial capital of USD800, while the Cía Ltda requires USD400. In both cases, at least a portion of the capital must be paid in at the time of constitution, and the contributions can be made in cash or through the appraisal of real estate assets.

Regarding more sophisticated structures, such as the mercantile trust, the concept of “minimum capital” is replaced by the initial contribution of assets to the autonomous patrimony. There is no legally mandated minimum amount to establish a trust; however, the viability of the vehicle is determined by the value of the real estate or the liquid funds transferred by the settlor to fulfil the trust’s specific purpose. For public investment vehicles, such as real estate securitisation trusts, the fund and trust manager responsible for its oversight must comply with substantial equity requirements set by the SCVS to ensure institutional stability and investor protection.

Ecuadorian real estate governance is overseen by the SCVS and SRI. While traditional corporations require a formal management structure, the SAS offers flexibility, allowing investors to customise by-laws. A cornerstone of this regime is the mandatory ultimate beneficial owner (UBO) disclosure for all entities and trusts to ensure fiscal transparency.

For US investors, these requirements intersect with the Corporate Transparency Act (CTA). American entities investing in Ecuador must report beneficial ownership to FinCEN, creating a dual-layer obligation. Investors must satisfy both local UBO filings and US federal duties to avoid penalties, ensuring capital flows remain under rigorous cross-border scrutiny.

The annual cost of maintaining a real estate vehicle in Ecuador varies by structure and transaction volume. For standard entities like a SAS or SA, maintenance costs typically range from USD2,500 to USD5,000 USD. This covers accounting, tax filings and mandatory reporting to the SCVS and SRI, including the UBO annex. Additionally, all companies pay an annual supervisory fee to the SCVS, which generally does not exceed 0.1% of total assets.

In contrast, a real estate mercantile trust involves higher costs, with annual management fees between USD4,000 and USD12,000 for a licensed institutional manager. This premium is justified for large-scale projects by the fiduciary’s responsibility for asset segregation and enhanced financial transparency. For entities or trusts involved in the stock exchange, investors must also budget for specialised external audits and quarterly risk ratings, further increasing annual compliance expenditure.

The Ecuadorian legal system provides several mechanisms to utilise real estate without full ownership. The most prevalent is the lease agreement, a consensual contract governed by the Civil Code and the Tenancy Law, where a lessor grants temporary use in exchange for rent. Beyond standard leases, the usufruct is a formal “real right” that must be granted via public deed and recorded in the Land Registry. Unlike a lease, it allows the holder to both occupy the property and perceive its “fruits” for a fixed term – or for life.

For gratuitous use, the commodatum serves as a “loan for use” without rent, commonly employed between related corporate entities or in PPPs. Finally, modern commercial hubs often utilise right of use or space schemes. These arrangements combine lease elements with service-level agreements, offering high operational flexibility and shared common area management while avoiding the rigidities of traditional tenancy regulations.

Legally, there is a distinction based on the location and purpose:

• urban leases – governed by the Tenancy Law, this applies to most offices and retail spaces;
• rural leases – governed by the Civil Code and agrarian regulations, specifically for agricultural or industrial land outside urban perimeters; and
• commercial/business leases – while not a separate “legal category” in the Code, they are treated as urban leases but with broader contractual freedom for corporate parties.

In Ecuador, rents or lease terms are usually freely negotiable. However, the Tenancy Law establishes a statutory minimum of two years for all leases, which the tenant can waive – but the landlord must respect unless a legal cause for termination exists.

Rents

In theory, the Tenancy Law limits the annual rent to 10% of the municipal appraisal of the property. In practice, for commercial, office and high-end retail, parties freely negotiate market prices, often bypassing the statutory limit through “service” or “maintenance” additions.

In the Ecuadorian commercial real estate market, lease terms for business premises are structured to balance operational stability for the tenant with asset protection for the landlord. These agreements typically follow standardised industry practices regarding duration, maintenance responsibilities and payment cycles.

• Length: Typically three to five years for offices and retail, often with renewal options.
• Maintenance: The landlord is responsible for structural repairs and keeping the property fit for its intended use. The tenant is responsible for “locative repairs” (minor wear and tear and damage caused by daily use).
• Frequency: Rent is almost exclusively paid monthly, usually within the first five days of the month.

Rent stability in Ecuador is governed by contractual freedom within the framework of the Tenancy Law. While rent is presumed fixed for the duration of a lease, adjustments are permitted if explicitly stipulated in the written agreement. Consequently, it is standard practice to include annual escalation clauses to counteract inflation or market review provisions for long-term institutional leases, ensuring the rent reflects fair market value through formal appraisals.

The legal framework also distinguishes between fixed terms and indefinite extensions. If a tenant remains after a lease expires with the landlord’s tacit consent, the arrangement converts into an indefinite term, which can complicate future rent increases without a new contract. In the high-end retail sector, landlords often mitigate this by using a variable rent model, combining a base rent with a percentage of gross sales to ensure income remains directly correlated to the property’s commercial success.

In the case of rent being either changed or increased, the new value is usually determined by:

• a fixed percentage (commonly between 3% and 5% annually);
• the consumer price index (índice de precios al consumidor) of Ecuador; and
• market review clauses for long-term leases (over five years).

Under Ecuadorian Law, commercial, office and industrial leases are subject to 12% VAT (or the current rate, which is 15% in 2026). Residential leases are exempt from VAT.

Other than rent, there are costs that are applicable to a tenant at the start of a lease. These include:

• security deposit – usually equivalent to two months of rent;
• first month’s rent paid in advance; and
• legal/notary fees – for the recognition of signatures or registration of the contract.

Concerning the need for maintenance and repair of areas used by several tenants, the law states that these costs are covered by the condominium fees. While the landlord is legally responsible for these as the owner, commercial leases typically transfer this cost to the tenant as an additional monthly payment.

Utilities and telecommunications that serve a property occupied by several tenants are paid either by individual services or common areas:

• individual services – electricity, water and internet are usually paid directly by the tenant through individual meters; and
• common areas – electricity and water for common areas are included in the condominium fees.

Under Ecuadorian law, the landlord is legally responsible for paying the real estate tax and any other taxes related to the ownership of the property.

Commercial Practice

In commercial, industrial or retail leases, it is common to include a contractual clause where the tenant agrees to reimburse the landlord for the cost of the property tax as part of the “additional rent” or “service charges”. However, before the tax authority (municipality), the landlord remains the sole debtor.

In the Ecuadorian commercial leasing market, the standard practice is for the landlord to maintain an “all-risk” property insurance policy, the cost of which is typically passed through to the tenant via common area maintenance fees or direct reimbursement. These local policies provide comprehensive coverage including fire, lightning and natural disasters, such as earthquakes or volcanic eruptions, as well as specific protections against strikes and civil commotion. It is also customary for lease agreements to mandate that tenants maintain their own third-party liability insurance and separate coverage for their specific inventory and interior improvements.

Regarding business interruption and rent recovery during the pandemic, the experience in Ecuador was significantly restricted, as most standard policies require physical damage to the property as a trigger for coverage. Although some larger corporations attempted to claim under infectious disease extensions, insurers generally denied these claims by citing global exclusions or arguing that government-mandated closures did not constitute physical damage. As of 2026, while the pandemic is no longer a driver for active claims, its legacy has led to the inclusion of much more precise pandemic exclusion or inclusion clauses in new commercial contracts to provide clarity for future events.

Under the principle of freedom of contract in the Civil Code, a landlord can explicitly define and restrict the use of the property. Any use contrary to the contract constitutes a breach and a legal ground for termination.

• Zoning and municipal restrictions: Regardless of the contract, the municipality imposes land-use restrictions through the PUGS. A tenant cannot use a residential property for industrial purposes even if the landlord agrees, as this requires a Unified Economic Activity Licence (Licencia Única de Actividades Económicas – LUAE).
• Condominium regulations: If the property is part of a building or complex, the Internal Co-ownership Regulation may impose further restrictions, such as on noise, operating hours or the types of commercial activities allowed.

Under the Tenancy Law, subleasing or assigning the lease is prohibited unless the landlord provides express written authorisation. Most commercial contracts include a strict “no-sublease” clause.

Real estate leases in Ecuador are categorised by use, balancing the Tenancy Law’s rigid protections for residential housing – such as mandatory two-year terms – with the greater contractual freedom afforded to commercial and industrial assets. While office and retail leases often utilise complex hybrid models under the Commerce Code, industrial “built-to-suit” arrangements are primarily governed by the Civil Code, allowing for sophisticated negotiations on infrastructure and liability.

Specialised sectors like hotels fall under the Tourism Law, which treats occupancy as a commercial service to facilitate expedited evictions. As of 2026, the temporary pandemic-era protections of the Humanitarian Support Law have fully expired, restoring the standard legal framework and ensuring predictable enforcement across all property classes.

Most commercial leases in Ecuador include a default clause stating that the filing for insolvency, bankruptcy or liquidation by the tenant is a ground for automatic termination or allows the landlord to terminate the lease unilaterally.

Under the Companies Law and the Civil Code, the following applies:

• stay of executions – if a tenant enters a formal reorganisation (concordato), there may be a temporary stay on eviction proceedings to allow the company to survive;
• preference of credits – unpaid rents have a certain level of priority (fourth-class credits), but they rank below labour claims and taxes; and
• trust advantage – if the lease is managed through a mercantile trust, the asset is shielded, but the cash flow would still be part of the tenant’s estate if they are the ones paying.

Practical Outcome

In practice, landlords often seek to terminate the lease as soon as signs of insolvency appear to avoid the property being locked in a lengthy liquidation process.

Insolvency does not automatically terminate a lease. However, the bankruptcy of the tenant is a legal cause for the landlord to request termination of the contract under the Tenancy Law. The landlord becomes a “privileged creditor” for unpaid rents.

The legal framework for leasehold alienation in Ecuador is primarily defined by the Tenancy Law, which establishes a restrictive default position regarding the transfer of leasehold interests. Unlike jurisdictions that allow free assignment unless specifically prohibited, Ecuadorian law requires express authorisation to protect the landlord’s right to control who occupies their property. Consequently, the validity of a sublease or assignment hinges on formal written consent, the absence of which constitutes a material breach of the agreement.

• Tacit relocation: If the term expires and the tenant stays with the landlord’s consent, the lease becomes indefinite.
• Eviction notice: To ensure a tenant leaves, the landlord must serve an official notice at least 90 days before the expiration date. Failure to do so automatically renews the lease for a period of two years under the Tenancy Law.

Under the Ecuadorian legal system, the termination of a lease agreement is governed by the principle of contractual autonomy, as limited by the Tenancy Law and the Civil Code. While parties are free to stipulate specific conditions for dissolution, the law provides a set of non-derogable grounds that allow either party to unilaterally seek termination of the relationship.

Landlord’s rights (under the Tenancy Law and Civil Code) relate to the following:

• non-payment of rent – usually after two consecutive months of default;
• unauthorised subletting or assignment – transferring the lease without written consent;
• unapproved alterations – making structural changes without authorisation;
• Illegal use – using the property for purposes other than those agreed upon; and
• damage to property – causing significant destruction beyond normal wear and tear.

Tenant’s rights relate to:

• failure to maintain habitability – if the landlord fails to perform necessary structural repairs that make the premises unusable for the agreed purpose;
• breach of “quiet enjoyment” – if the landlord or a third party with a better right disturbs the tenant’s peaceful possession; and
• hidden defects – discovery of structural flaws that were not apparent at the time of signing.

When establishing a lease in Ecuador, both landlords and tenants must adhere to specific registration requirements and legal formalities to ensure the validity and enforceability of the agreement. These processes are essential for defining the rights and obligations of each party, and for providing a structured framework in the event of future disputes.

• Execution formalities: Most commercial leases are executed via recognition of signatures before a notary public.
• Registration:
1. land registry – only leases granted via public deed for a term of more than ten years are typically recorded in the land records to ensure they are opposable to future owners in case of a sale; and
2. tenancy office – all urban leases must technically be registered with the local tenancy office/municipal council for tax and statistical purposes, although in practice many corporate parties rely solely on the notarised contract.
• Costs: Recording a lease in the Land Registry involves a fee based on the total value of the lease. These fees are customarily paid by the tenant, unless otherwise negotiated.

In Ecuadorian Law, a landlord can initiate an eviction lawsuit in the event of default prior to the date originally agreed.

• Timeline: In the Ecuadorian judicial system, an eviction typically takes 6–12 months, depending on the court’s workload and the tenant’s opposition.
• Coronavirus restrictions: As of 2026, there are no active eviction moratoriums or pandemic-related restrictions in place. All emergency measures from the 2020–22 period have expired, and the courts have returned to standard procedural timelines.

Under the Ecuadorian legal system, lease stability is subject to the state’s power of eminent domain and municipal authority over public safety. Private contracts are generally robust but can be unilaterally superseded if a property is declared a public utility or poses a documented risk to the community. In such instances, the termination process follows a regulated administrative path that prioritises public interest over private tenure, often triggered by expropriation or sanitary and safety orders issued by the municipality or fire department.

While the expropriation process typically takes three to eight months for the government to take possession, the compensation framework differs significantly for each party. The landlord is entitled to receive a “fair price” for the property from the government. Conversely, the tenant generally does not receive direct government compensation unless they have registered specific improvements in the Land Registry. Consequently, a tenant’s primary remedy is usually limited to a claim against the landlord for early termination, the success of which depends heavily on the specific force majeure protections stipulated in the lease agreement.

In the event of a tenant breach, a landlord’s ability to collect damages is governed by both statutory limits and customary practice. Beyond unpaid rent and eviction, landlords may recover late interest – capped by the Central Bank of Ecuador – and proven physical damages to the property. While it is standard to include a penalty clause equivalent to one or two months’ rent for early termination, judges under the Civil Code maintain the authority to reduce these penalties if they are deemed excessive. Furthermore, claiming “lost profits” for the remainder of a lease term is challenging and typically requires a specific contractual provision, as courts generally only grant rent up to the date the tenant vacates.

Regarding the security of these obligations, the customary practice in Ecuador involves a cash deposit equivalent to two months’ rent. However, in large-scale industrial or retail sectors, corporate practice has shifted towards the use of bank guarantees or insurance bonds. This transition offers superior liquidity for the tenant while providing the landlord with a more secure and professional mechanism for recovery in the event of a default.

In the Ecuadorian private sector, the most common structures used to price construction projects are as follows.

• Fixed price: The contractor agrees to complete the project for a total fixed amount. This is the standard for residential and office developments, as it provides budget certainty for the developer/owner.
• Unit price: The project is priced based on estimated quantities of work items. The final price depends on the actual quantities executed. This is common in infrastructure and earth-moving projects.
• Cost plus: The owner pays the actual cost of materials and labour plus a fixed fee or percentage to the contractor. This is used for high-end residential or complex renovations where the scope is difficult to define upfront.

The allocation of design and construction responsibilities in Ecuador is primarily governed by the chosen contractual model, which determines the risk transfer and the central point of liability. Under the traditional method, the owner maintains separate contracts with an architect for design and a contractor for execution, splitting liability between technical flaws in the plans and defects in construction. Alternatively, the design-build model is gaining popularity in industrial and energy projects as it centralises responsibility within a single entity, effectively reducing co-ordination gaps and streamlining liability for the owner.

For more complex developments, owners often utilise project management firms to oversee both the design and construction phases. While liability for specific defects remains with the individual architects or contractors, the project manager assumes a distinct duty of care regarding the overall co-ordination and supervision of the project. This oversight ensures that the various actors align with the owner’s strategic goals while maintaining a structured approach to risk mitigation throughout the development life cycle.

Construction risk management in Ecuador is governed by a combination of statutory liabilities and contractual safeguards rooted in civil law. While parties maintain the freedom to allocate commercial risks through indemnification clauses and liability caps, the legal framework imposes non-derogable obligations, such as the decennial liability, which holds contractors and architects liable for structural collapse for ten years under the Civil Code.

Contracts typically feature liquidated damages in the form of fixed daily penalties for delays, provided they remain “reasonable”, to avoid judicial intervention. Although sophisticated parties frequently negotiate limitations of liability to cap damages at a specific percentage of the contract, these provisions cannot waive accountability for gross negligence or wilful misconduct, as these protections are considered matters of public policy and remain strictly enforceable under national law.

The management of temporal risk in Ecuadorian construction projects is primarily governed by contractual autonomy, where parties establish clear timelines and financial consequences for non-compliance. These agreements utilise standardised scheduling tools and liquidated damages equivalents to ensure that delays are quantified and compensated without the need for extensive litigation.

• Management: Risk is managed through detailed work schedules approved at the start.
• Monetary compensation: It is standard to include penalty clauses for missing milestones or the final delivery date. These are typically calculated as a percentage of the contract value per day of delay.
• Force majeure: Contractors are excused from delays caused by an “act of God” or force majeure (eg, extreme weather, social strikes or pandemics), provided they give timely notice.

In the Ecuadorian construction sector, project owners typically mitigate performance risks through a combination of insurance-backed instruments and contractual liquidity retention. Given that judicial processes for breach of contract can be lengthy, these “first-demand” or liquid securities are essential for ensuring that funds are immediately available to remedy defaults or cover unamortised advances. The reliance on these instruments provides a standardised layer of financial protection that is recognised by local banks and the national judicial system alike.

• Performance bonds: In Ecuador, the most common form of security is the insurance policy or a bank guarantee.
• Advance payment bond: If the owner provides an upfront payment (typically 20% to 30%), the contractor must provide a bond covering 100% of that advance.
• Retention money: It is customary for the owner to withhold 5% to 10% from each progress payment as a “good-quality fund”, which is returned after final acceptance of the work.
• Parent guarantees: These are used mainly when dealing with local subsidiaries of multinational construction firms.

The protection of construction and design fees does not follow the automatic lien model common in common-law jurisdictions. Instead, securing a debt against a property requires formal judicial intervention, ensuring that any encumbrance is backed by a court order rather than a unilateral filing. This framework balances the rights of service providers to secure payment with the property owner’s right to clear title, requiring specific procedural steps for both the imposition and the removal of such measures.

• Lien rights: Unlike in mechanic’s lien jurisdictions (like the USA), contractors in Ecuador cannot automatically record a lien on the property in the Land Registry for non-payment.
• Judicial recourse: To encumber the property, the contractor must file a lawsuit and request a precautionary measure from a judge. This is only granted if the debt is proven and there is a risk of the owner becoming insolvent.
• Removal: The owner can remove the encumbrance by:
1. paying the debt and presenting the discharge to the judge; or
2. providing an alternative guarantee that covers the disputed amount while the litigation continues.

Ecuadorian law, primarily through LOOTUGS and municipal ordinances, strictly prohibits the habitation or use of any building until it has received an official clearance. Once construction is complete, developers must obtain a Certificate of Habitability, which is issued only after a final inspection verifies strict compliance with approved architectural plans, fire department safety standards and proper utility connections.

For multi-unit developments such as malls or offices, the property cannot be legally subdivided under the horizontal property regime until the building is substantially complete and compliant with municipal regulations. Occupying a structure without these proper certifications can lead to severe consequences, including significant administrative fines, the suspension of commercial licences and the potential disconnection of public utility services.

In Ecuador, the sale and purchase of real estate (land and buildings) is exempt from VAT. It is considered a transfer of a capital asset, not a service or a movable good. While the sale of the finished asset is exempt, the construction services and materials used to build it are subject to VAT (currently at 15%, though some materials have a reduced rate of 5%).

VAT Refund

A significant incentive exists for developers: they can apply for a VAT refund on all purchases of goods and services used in the construction of housing projects, which improves the project internal rate of return (IRR).

The acquisition of significant real estate portfolios in Ecuador requires strategic fiscal planning to mitigate the impact of indirect taxes and municipal levies. Investors frequently utilise share deals as a primary mitigation strategy; by purchasing the shares of the entity owning the property rather than the asset itself, they avoid transfer tax and capital gains tax since the legal titleholder remains unchanged.

Furthermore, contributing real estate to a mercantile trust can be structured as a non-taxable event when intended for collective investment or development, provided there is no immediate shift in beneficial ownership. Similarly, corporate reorganisations such as mergers and spin-offs are generally neutral for transfer tax purposes in Ecuador. These mechanisms allow for the efficient consolidation or restructuring of large portfolios without triggering the standard 1% tax, offering a sophisticated route for institutional investors to optimise their entry and hold costs.

Commercial and industrial operations in Ecuador are subject to a series of municipal levies and safety contributions that are mandatory for any entity maintaining physical premises. These localised obligations ensure compliance with urban planning and public safety standards while funding essential municipal services. While these costs are typically standard, significant exemptions exist for strategic investments and specialised economic zones aimed at fostering industrial growth.

• LUAE: Any person or company occupying a premise for commercial purposes must pay an annual municipal licence fee. The cost varies depending on the type of activity and the size of the premises.
• Fire department fee: An annual fee for fire safety inspection is mandatory for all commercial buildings.
• Property tax: This is paid annually by the owner. However, in commercial leases, it is common to pass this cost to the tenant.
• Exemptions: New businesses in certain special economic development zones or those aligned with specific productive investment laws may receive temporary exemptions from these local fees.

The Ecuadorian tax regime distinguishes between the operational generation of income and the eventual liquidation of assets, applying specific withholding and reporting obligations to both residents and non-residents.

Rental Income

Rental income is considered taxable income. Local entities pay the standard 25% corporate income tax. Foreign investors are subject to a 25% withholding tax on the gross rental income if paid from Ecuador.

Capital Gains (Disposition)

Here, the following applies.

• Asset deal: The seller pays a municipal plusvalía tax (10% on the gain). Additionally, for corporate sellers, this gain is part of their taxable income, but the municipal tax paid is usually deductible.
• Share deal: The seller of the shares pays capital gains tax to the national government on the profit from the sale of shares, with a progressive rate up to 10%.
• Dividends: If the investment is held through a local company, dividends sent abroad to a non-resident are generally exempt from further withholding, provided the local company already paid its 25% corporate tax.

In the Ecuadorian legal framework, real estate ownership and development are incentivised through a structured series of fiscal benefits designed to encourage capital investment and urban sustainability.

Depreciation

Owners of corporate real estate can deduct depreciation as an expense. Under Ecuadorian tax law, the standard depreciation rate for buildings is 5% per year (a 20-year useful life).

Interest Deduction

Interest paid on loans used to acquire or develop real estate is tax-deductible, subject to thin capitalisation rules.

Eco-Efficiency Incentives

In cities like Quito, buildings with certified eco-efficiency can receive a reduction in property taxes for several years.

Special Deductions

For 2026, certain “new investments” under the Organic Law for Economic Efficiency may allow for an additional deduction or a reduction of several points in the corporate income tax rate for a fixed period.