Contents
How is a land option built under Chilean law?
The Civil Code does not regulate an option contract. A land option, which Chilean owners often call a reserva, can be drafted in two ways.
- Promise agreement (promesa). It binds only if it is in writing, the promised lease is not one the law declares ineffective, it sets a term or condition for signing the lease, and it specifies the lease so fully that only its formalities remain (Civil Code, art. 1554). In practice, the lease text is agreed and attached when the option is signed.
- Irrevocable offer. The owner offers the lease and commits to wait for an answer, or not to dispose of the land, until a deadline. With that commitment, the offer cannot be withdrawn before then (Commercial Code, art. 99).
Some contracts skip the separate option and sign one lease with an initial study phase. For the under-construction declaration, the CNE accepts title to the land or a promise agreement relating to its tenure or use (DS 125/2017, art. 19). Whether a given option qualifies depends on its drafting, so your counsel should confirm it before your schedule relies on it.
What should the option contain?
- A public deed and a recorded prohibition. A prohibition on encumbering and transferring the optioned area, recorded in the Conservador's Register of Interdictions and Prohibitions, shows on the parcel's certificate (Ley del Registro Conservatorio, arts. 31, 32 and 53). An unrecorded private agreement does not.
- Option payments from signing, paid periodically until the option is exercised or lapses.
- A term that covers permitting and your interconnection schedule. The Coordinador can revoke a connection approval if the filings for the under-construction declaration come late (DS 37/2019, art. 25).
- An area larger than the final layout, with the right to release what the project does not use when the option is exercised.
- Access for studies: survey, soil pits, environmental baseline and, for wind, a met mast or lidar unit.
- The owner's signatures for permits. Under the SAG's procedure, the owner files the request for the rural construction approval (Art. 55 LGUC), so the option obliges the owner to sign it.
How do option payments convert to rent?
Option payments run while you measure, permit and request interconnection. When you exercise the option, the lease takes over. Some contracts add an intermediate rent during construction, and the full rent starts with operation.
Rent is usually expressed in UF, Chile's inflation-indexed unit of account, so it adjusts without a separate escalation clause. The lease states whether option payments are credited against future rent, the minimum rent, and any variable component tied to production or revenue. Its term covers construction, operation and removal of the plant, plus any extensions you negotiate.
What makes the lease hold against buyers and lenders?
The lease is granted by escritura pública, a public deed executed before a notary, and recorded with the Conservador de Bienes Raíces. A lease by public deed binds anyone who buys the land. It binds a mortgagee only if it was recorded before the mortgage, and the tenant may request that recording on its own (Civil Code, art. 1962). On rural land, a new owner must also keep the lease on its existing terms (DL 993, art. 10).
Rural leases have two more rules. The lease must be granted by public deed, or by private deed before two witnesses, and state the landlord's tax regime; without that statement it cannot be used before the authorities (DL 993, art. 5). The tenant cannot assign, sublease or make improvements without the owner's prior written consent (art. 7). Whether a given energy lease falls under the decree-law is decided case by case, so we draft every rural lease to comply with both articles.
Who has to sign besides the owner of record?
Heirs can dispose of land only after the grant of heirship and the special recordings (Civil Code, art. 688), and an owner married under community property needs his wife's authorization to lease marital rural land for more than eight years (art. 1749). Co-owners all sign. Our article on title due diligence in Chile covers how each case shows up in the title study.
What do lenders' counsel look for in the lease?
Lenders have their Chilean counsel review the land contracts before close. The lease therefore carries provisions written for them: assignment to the project company and to the lenders, the right to cure a default by the tenant before the owner terminates, and the right to grant security over the lease. Those provisions protect the lender, and they can be negotiated.
Where the parcel already has a mortgage, the lease will not bind that mortgagee unless it was recorded first, so its consent is negotiated before close. The other instruments a site needs, from easements to state land concessions, are in our article on how to secure land for a solar, wind or BESS project in Chile.
What is negotiated at each stage?
- Option: payments from signing, a maximum term, and lapse if the project does not move forward.
- Area: release of the land optioned and not used.
- Rent: indexation in UF, a minimum rent and, where agreed, a variable component.
- Assignment: notice to the owner and the solvency of the assignee.
- End of the lease: removal of the facilities, backed by decommissioning security.
If you own land in Chile and have been offered an option, see how we review offers in our advice for landowners.
Sources
- Código Civil (Civil Code), arts. 688, 1554, 1749 and 1962, at the Library of the National Congress of Chile (bcn.cl)
- Código de Comercio (Commercial Code), art. 99
- Ley del Registro Conservatorio de Bienes Raíces, arts. 31, 32 and 53
- Decree-Law 993 of 1975 (rural leases), arts. 5, 7 and 10
- DS 37/2019, Ministry of Energy, Transmission Systems Regulation, art. 25
- DS 125/2017, Ministry of Energy, Coordination and Operation Regulation, art. 19
- SAG, rural construction approval procedure (Informe de Factibilidad para Construcciones, IFC)
This guide is general information and does not replace legal advice on your case. The laws cited may change; check their current text at the Library of the National Congress of Chile.