Bill seeks to strengthen oversight of tourist residence projects
The Puerto Rico House of Representatives is weighing a sweeping reform to the island’s Tourist Residences Act that would modernize the rules governing the construction, sale and management of tourist residence projects.
House Bill 970 proposes amendments to more than 20 articles of Act 181 of 2009, repeals several provisions and creates a new section to regulate referral compensation agreements between developers and third parties.
According to the bill’s mission statement, the rapid expansion of tourist residences over the past 15 years — fueled by tax incentives and large-scale resort investments — has made it necessary to update the law to reflect how the global luxury and vacation-rental markets now operate.
The measure’s stated goal is to “ensure that [the act] continues to promote the growth of the tourism and residential sector of Puerto Rico” by aligning it with modern development, financing and marketing practices.
A central change would transfer key regulatory authority from the Puerto Rico Tourism Co. to the Department of Consumer Affairs (DACO, in Spanish). Under the amendments, DACO would become the primary regulator of tourist residences, empowered to “issue, deny, suspend, revoke and renew licenses,” investigate developers, issue cease-and-desist orders and supervise the handling of buyer deposits through escrow accounts.
DACO could act in cases where violations “cause or may cause immediate serious harm to the Buyers” and suspend a developer’s license for failing to return deposits within required timeframes.
The bill also redefines reservation, purchase and special deposit agreements. Reservation contracts must guarantee deposit refunds “within a term not exceeding 20 calendar days,” while purchase agreements must follow a model contract approved by DACO.
Developers would be barred from accepting deposits without proper permits, and a violation would be deemed “undesirable practice” subject to administrative action.
Another new provision explicitly regulates referral compensation. Developers would be allowed to pay referral incentives to any person through private written agreements, with such compensation “not subject to the provisions of Act 10” and exempt from disclosure to DACO or buyers.
Licensing rules would also be strengthened. Developers would face new disclosure requirements, and DACO could demand fidelity bonds to protect deposits or revoke licenses for fraud, misrepresentation or violations in other jurisdictions.
The bill emphasizes that consumer protection remains a priority, citing the need to curb practices that “misrepresent or exaggerate the terms under which Units may be acquired.”
If enacted, the updated law would apply to new tourist residence projects and to existing ones that have not yet entered into reservation or purchase agreements. It would take effect immediately upon approval.
House Speaker Johnny Méndez introduced the measure, which has been referred to the House Tourism Committee for review.
