Lawmakers in Costa Rica’s Legislative Assembly on Tuesday passed into law a reform that limits landlords’ ability to increase rent paid by tenants to that of the rate of inflation. 

Until now, landlords who rent properties in colones were allowed to raise a tenant’s rent by 15 percent each year.

Under the reform, rent can only be increased during the term of a lease by a percentage equal to or less than the cumulative inflation rate of the previous twelve months as calculated by the National Institute of Statistics and Census (INEC)’s Consumer Price Index.  Should inflation be higher than 12 percent, the Housing Mortgage Bank (Banhvi) will define the increase.

If the rent is priced in a foreign currency, such as US Dollars, rent cannot be increased for the entire term of the contract (normally 3 years), which for residential leases is already the case.

The effective rate of inflation in 2015 was actually zero, while Costa Rica’s Central Bank expects that inflation will not exceed 4 percent this year.

The law will go into effect after receiving the signature of the Executive and publication in the official La Gaceta.