A reform that was passed into law late last month by lawmakers in Costa Rica’s Legislative Assembly that limits landlords’ ability to increase rent paid by tenants to that of the rate of inflation came into effect on Wednesday after receiving the signature of Costa Rican president, Luis Guillermo Solis.

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

As of Wednesday, April 20th, rent can now 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.

Editor’s note: The law only affects rent increases during an active lease; landlords can of course, adjust their asking price for rent by any amount they choose between leases.