Client Alert: Puerto Rico Municipal Code Updates – Including Abandoned and Public Nuisance Properties

Puerto Rico recently approved Act 97-2026, making several changes to the Puerto Rico Municipal Code (Act 107-2020). These updates affect how municipalities operate, including their authority over abandoned and nuisance properties, budgeting, internal audits, contracting, planning, and municipal license taxes.

For businesses, property owners, developers, municipal contractors, financial institutions, and regulated entities operating in Puerto Rico, the law presents both opportunities and compliance risks. In particular, the amendments expand municipal tools to address properties declared public nuisances while also creating new procedural, fiscal, and due process considerations.

Understanding Key Changes in the New Municipal Code

• Expanded municipal authority over nuisance properties. Municipalities appear to receive clearer and potentially faster mechanisms to address, acquire, clean, transfer, or expropriate properties declared public nuisances.
• Potential housing and redevelopment opportunities. Where a property can be rehabilitated for residential use, the law prioritizes certain buyers who may have difficulty accessing the traditional housing market and restricts transfers to investors during the initial statutory period.
• Increased procedural urgency for owners and heirs. Property owners, heirs, and parties with informal or unresolved title interests may need to respond quickly to municipal notices, publications, or proceedings involving nuisance property determinations.
• Possible due process and compensation risks. Accelerated expropriation and title transfer procedures may create disputes involving notice, ownership, inheritance rights, just compensation, and the preservation of claims.
• Municipal governance and fiscal impact. The law also affects municipal administration, including internal audit functions, budget procedures, contracting authority, and certain municipal license tax matters.
• Contracting implications. Businesses contracting with municipalities should review municipal authority, compliance representations, nullity provisions, tax allocation, and related contractual risk controls.

Impact and Analysis of the New Code

Act 97-2026 is best understood as a municipal modernization measure with significant operational consequences. Its most immediate practical impact is likely to be in the treatment of abandoned, deteriorated, or underutilized properties. Municipalities may now have more flexible tools to address properties that affect public health, safety, housing availability, or community development.

For the private sector, the law may create opportunities to participate in rehabilitation, redevelopment, affordable housing, municipal services, and public-private initiatives. At the same time, those opportunities will require careful diligence. Parties should confirm title status, municipal procedures, notice compliance, statutory waiting periods, priority purchaser rules, and any restrictions on transfers to investors.

The law also has governance and compliance implications for entities doing business with municipalities. Municipal contracts should be reviewed in light of changes affecting municipal authority, contract validity, internal controls, audit oversight, and license tax treatment. Companies should also consider whether their municipal-facing operations, real estate portfolios, development plans, or public procurement strategies are affected.

Recommended Next Steps:

1. Review municipal real estate exposure. Identify any owned, leased, financed, or targeted properties that could be characterized as abandoned, deteriorated, unsafe, or a public nuisance.
2. Monitor municipal notices and publications. Property owners, lenders, heirs, and titleholders should implement a process to monitor notices involving nuisance property determinations, cleanup charges, liens, expropriation, or title transfer.
3. Update due diligence protocols. Developers, investors, and lenders should add Act 97-2026 review items to title, permitting, municipal tax, zoning, and acquisition checklists.
4. Evaluate investor restrictions. Parties interested in acquiring rehabilitable residential properties should assess whether statutory priority periods or buyer-preference rules limit investor participation.
5. Review municipal contracts. Businesses contracting with municipalities should review authority, approvals, audit rights, nullity risk, tax provisions, termination rights, and compliance obligations.
6. Coordinate with local counsel early. Transactions involving municipal property, nuisance determinations, expropriation risk, or Puerto Rico municipal contracts should be reviewed before commitments are made.
7. Assess internal compliance impact. Companies with recurring municipal interactions should update compliance, procurement, real estate, and government affairs protocols to reflect the new statutory framework.

Act 97-2026 creates meaningful opportunities for municipal redevelopment and housing rehabilitation, but it also introduces new procedural and compliance risks for owners, investors, contractors, and other stakeholders. Businesses operating in Puerto Rico should evaluate their exposure now and adjust their real estate, contracting, and municipal compliance strategies accordingly.

Please contact Neyla Lee Ortiz, Esq. at nortiz@estrellallc.com with any questions regarding the potential impact of Act 97-2026 on your operations, transactions, or municipal engagements.

This alert is provided for informational purposes only and does not constitute legal advice. Clients should consult with their Estrella LLC advisor regarding their specific circumstances.