The Lease Agreement
Understand what to expect from the rental agreement when renting a property in Mexico...
Once an offer is accepted, a formal written rental agreement is signed by both parties (it is not necessary to have the agreement notarized). The rental agreement is a private legal contract which grants the tenant temporary use of the property in exchange for a specified amount of rent. Rent is usually paid on a monthly basis, unless specified otherwise in the contract. It is advisable to have the contract reviewed by a lawyer to ensure that its terms do not violate the Civil Code. Estate agents generally ensure that this is done.
What is Included in the Rental Agreement?
The contract must include the names of all parties involved, including the fiador or fianza. Only the actual owner (or a person who has power of attorney on behalf of the owner) may rent out a property. Co-owners of a property may only rent their share of the property – if an entire co-owned property is rented, all co-owners must be in agreement. Before signing a rental agreement, the tenant or agent should check the landlord’s or the person with power of attorney’s (poder) ID, the property deed specifying ownership, and the statement of property taxes (predial).
Also included in the contract are the location and description of the property, the permitted use, and any other terms and conditions to which the parties have agreed (such as an exit or diplomatic clause, or terms of subletting). The contract almost always includes the signature of a guarantor in addition to that of the landlord and tenant.
According to the Illegal Activity Waiver, the Government of Mexico may take possession of any property used to conduct illegal activity. A clause exempting the owner from any responsibility for such activities is a standard addition to rental agreements.
Rental agreements are usually for one year, although different periods may be agreed upon. The law establishes tacit renewal for rental agreements – after the contract expires, the tenant may continue to occupy the property and pay rent under the same terms and conditions as agreed to in the original contract. However, tenants may be asked to sign a new contract at the end of the original agreement, which should be reviewed carefully before signing.
If no time period was specified in the rental agreement, either party may end the agreement at any time, but must provide 30 days’ notice. If the time period is specified, the tenant or landlords must provide 30 days’ notice before the contract’s expiry.
If the property is sold during the period of the rental agreement, the tenant continues to pay rent to the new owner for the duration of the contract. However, the new owner may terminate the contract with 30 days’ notice.
A penalty for breaking a rental agreement is applicable unless there is an exit or diplomatic clause in the contract. This amount is equal to half the amount due for the remaining months. For example, if 10 months remain before the expiry date, five months’ rental amount would apply. The Civil Code lays out circumstances in which tenants may leave or withhold rent, for example if landlords fail to meet the obligations outlined in the contract.
Note: subletting is only permitted with the owner’s permission.
The Deposit and Inventory
The deposit is usually paid at the time of signing. A thorough inventory of the property is advisable in order to document any pre-existing damage. This inventory and supporting photographs may be included in the contract. Tenants have 30 days following the signature of the rental agreement to report any significant pre-existing damage to the landlord.
The landlord must return the deposit within 30 days of the tenant leaving the property unless a different time frame has been agreed to, and as long as the property is in good condition. At the end of the contract, tenants can request a letter from the landlord confirming that the obligations of all parties under the contract are discharged.
Rights and Obligations
According to the Civil Code, the following rights and obligations apply:
- provide use of the rented property to the tenant
- maintain the property in good condition so that the tenant may use it
- pay for major repairs for example, structural repairs and maintenance of the property’s common areas
- pay for improvements to the property
- guarantee the peaceful use of the property, particularly in the case where another party sues, arguing a superior right to use the property. If such a suit is brought, the landlord must protect the tenant, and compensate the tenant if necessary
- be responsible for hidden defects on the property
- return any balance owing to the tenant within 30 days after the contract expires unless specified otherwise in the contract
- offer right of first refusal to tenants of more than three years in good standing if the property is put up for sale
- pay rent according to the terms of the contract; the law specifies certain extraordinary circumstances in which payment of rent may be suspended
- maintain the property in good condition, and undertake minor repairs resulting from damage caused by normal use
- use the property only as stated in the agreement
- notify the landlord if major repairs are necessary
- pay any balance owing to the landlord within 30 days after the contract expires unless a different time is specified in the contract
Provisions concerning rental agreements in Mexico City are contained in the Civil Code of Mexico’s Federal District (PDF in Spanish). Tenants elsewhere in Mexico should consult the Civil Code for the state in which they are renting.
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.