Guarantors - the Fiador and Fianza
Information about the required fiador and fianza that may be required when renting a property, and how to submit an offer once a property is found…
Most landlords require tenants to provide a third party guarantor (fiador - sometimes referred to as an aval) or an insurance policy (fianza) to pay the rent if the tenant defaults.
The Guarantor (Fiador)
Essentially, the guarantor acts as a co-signer to the rental agreement.
The fiador must own property in the same state as the rental property, which can serve as collateral. If a company (for example the employer) acts as a fiador, the value of the business serves as collateral. Depending on the terms of the rental contract, the landlord can sue the fiador for outstanding rents without first suing the renter.
Some landlords may require that the fiador’s property be free of any debts (libre de gravamenes). The landlord may decide not to accept a fiador if they consider that inadequate protection is provided; for example, the value of the property owned by the fiador may not be accepted as sufficient.
Newcomers without a sponsoring employer may find it difficult to obtain a fiador and for this reason, a fianza may need to be obtained instead.
A fianza is an insurance policy taken out by the tenant and is available through insurance companies, or from specialist financial institutions (afianzadoras). Insurance premiums of approximately 10 percent of the annual rent are the norm. Applicants should expect to provide documents proving their financial situation, as well as bank statements, credit history, work history, or other documents.
In rare cases the landlord may accept a letter (carta) from the applicant’s employer confirming salary and duration of employment, or advance payment of a year’s rent in lieu of a fiador or fianza.
Submitting an Offer
Once a property has been chosen a written offer must be made to the landlord. The offer may be for a different rent amount than that listed, and there may be multiple offers on a property. Landlords may accept a lower rent for extended rental periods. The final rental amount may be determined after a series of offers and counter-offers. The offer should also specify a rental period, generally no less than one year.
The written offer may also include information about pets as well as any diplomatic clauses (for government employees) or exit clauses (for employees). These clauses specify a fixed penalty for leaving before the rental period expires and generally stipulates one or two months’ rent. Subletting is permitted only with the owner’s permission, and a clause specifying the grounds for a refusal will be useful to anyone contemplating subletting.
Offers are not binding until a contract is signed, at which time the first month’s rent and deposit is paid. For this reason, landlords may request a deposit at the time of the offer (or an applicant may offer one) in order to remove the property from the market. If the offer is withdrawn by the applicant, this deposit may or may not be returned.
The following documents must be included with the offer:
- Details of the fiador (with proof of identity) or of the fianza
- Deed of incorporation (acta constitutiva) and proof of ID of the legal representative, if the fiador is a company
- Copies of the applicant’s ID – for foreigners, a copy of the passport and any immigration documents
Bank statements to confirm the applicant’s ability to pay the rent may also be requested.
Landlords may want to meet prospective tenants before accepting an offer.
In addition to payment of the first month’s rent, a deposit equal to one to two months' rent is required. This is a deposit for any damages and is returned (in whole or in part) to the tenant on leaving the property. Tenants must ensure that this deposit remains equal to the rent as it increases year to year. Therefore the landlord or their agent will usually require a “top-up” of the deposit each year when the rent is increased. Interest gained on the deposit is not paid back to the tenant at the end of the rental period.
The process of renting a property is regulated at a state level in Mexico. While some procedures may be identical in all states, others may differ. This section aims to give an overview of what is involved in renting a property in Mexico, prepared by a real estate expert in the Mexico City property market. It should be noted that for particular practices and requirements in areas other than Mexico City, advice should be sought from a professional familiar with the property market in that state.