New Tenancy law vetoed by Correa

Ecuadorean President, Rafael Correa, vetoed the proposed Tenancy Law in it's entirety saying that "the bill has been poorly designed"

The proposed bill consisted in setting limits for the amount of rent to be charged by the landlord and its based on the municipal assessed value of the property.

If the assessed value of a property is $100,000, then the 10% of its value equals to $10,000, you divide this amount by 12 months, which equals to $833. This is the maximum monthly rent allowed according to this bill.

The other controversial part of this bill had to do with the warranty deposit. The norm has been the equivalent of up to two months of rent.
The proposed bill stated that the maximum deposit to collect shall be equal to up to two months of rent and shall not exceed $159 per month, or $318 for the maximum deposit. So, if we use the previous example of $833 per month, your maximum deposit allowed by the bill would be $318 which in fact, is based on the minimum monthly salary, giving a big disadvantage to owners of high end rental properties. This refundable deposit is destined to cover property damages in case the tenant refuses to repair damages to the property. But what if the damages exceed the set value?

According to the new bill, the warranty amount shall not go to the landlord, but to a municipal bank account assigned by the Banco Nacional de Fomento ( a state bank). The intention about this account is good in my personal opinion, because it protects the renter from dishonest landlords and landlords of dishonest tenants as well. The part I don't like is that of the deposit has to be given to the Municipality. In my opinion, The Municipality of Quito's bureaucracy will be the greatest obstacle for either landlord or tenant whenever is time to get such deposits back! This public entity is known for turning a simple process into a nightmare! However, the creation of an entity designed to withhold these deposits combining mediation services in case of disputes is vital. An escrow account company well regulated by the Superintendency of Banks and not just for rental deposits, but security deposits for purchasing real estate as well... Otherwise, we will see cases like Union Constructora over and over again!

In other countries like some states in the United States, Real Estate practices are well regulated. When it comes to purchase a property, the buyer leaves a deposit. The broker's obligation is to deposit the money into an escrow account. It is against the law to deposit this money in the broker's personal account. If for any reason the transaction ceases and after a mediation process then, and only then, the escrow company will distribute the monies to the affected party, including the broker if necessary.