MEXICO Law and Practice Contributed by: Roberto Cannizzo, Carlo Cannizzo, Stefano Amato and Mauricio Moreno-Rey, Cannizzo
for more than two months, the tenant may request termination of the agreement. Similar provisions are included in the Civil Codes of the various states of Mexico. Some states recognise the “unforeseeability theory”, which aims to balance obligations if extraordinary, unpredictable national events make one party’s obli - gations excessively burdensome. Under specific con - ditions, the affected party may seek adjustments to Normally, the length of a lease term is freely nego - tiable; however, it must be taken into account that Civil Codes may contain provisions for minimum and maximum terms. For example, the minimum term of a residential lease agreement, pursuant to the Civil Code for Mexico City, is one year for both parties, and may be extended according to the tenant’s will for up to one more year under certain circumstances. Lease of real properties destined for commerce and indus - try, under the same Code, cannot exceed 20 years. Landlords and tenants may freely determine whether a term is binding and may even agree on penalties to be paid if the binding term is breached by any party. General Rules Federal and state Civil Codes hold landlords liable for property defects that hinder its use, unless caused by tenant negligence. Tenants handle minor repairs, while landlords maintain the structure and perform major maintenance. Tenants are typically responsible for ordinary upkeep and must return the property in its original state, allowing for normal wear and tear, though maintenance terms can be negotiated. Rental payments are flexible, with monthly payments being Mexican civil law allows parties to negotiate rent - al updates freely, without mandatory or automatic increases. Typically, rent is updated annually – based on the National Consumer Price Index published by the National Institute of Statistics and Geography – in the Federal Official Gazette, sometimes with addi - tional points. In shopping centre leases, tenants may restore fairness in the contract. 6.4 Typical Terms of a Lease Length the most common. 6.5 Rent Variation
pay variable rent, alongside or instead of fixed rent, usually as a percentage of net sales. 6.6 Determination of New Rent Rental increases or changes are negotiable between parties. The standard practice involves applying an agreed-upon percentage increase to the existing monthly rent at the end of a specified period, typically on an annual basis. Semi-annual increases are less common but still possible. In the case of new devel - opments, such as shopping centres, rent increases might also be tied to the number of stores open or the centre’s capacity. 6.7 Payment of VAT VAT is 16% and is payable on the rent of real estate used for commercial purposes. Rents payable under lease agreements for residential purposes are not subject to VAT, unless the leased premises include furniture. 6.8 Costs Payable by a Tenant at the Start of a Lease It is customary for tenants to pay the first month’s rent in advance, plus a security deposit, typically equiva - lent to one or two months’ rent. The deposit is held by the landlord as a guarantee to ensure the tenant fulfils their obligations under the agreement. In commercial leases (shopping centres), the landlord (or previous tenant) may also request a one-time payment, referred to as goodwill or key money, the amount of which usually depends on the standards and success of the shopping centre. 6.9 Payment of Maintenance and Repair Maintenance and repair costs for common areas are typically covered by tenants through “condominium quotas” or common area maintenance fees, paid to the landlord, building manager or shopping centre manager. Regulations determine how these costs are shared. Shopping centre leases may also include advertising/marketing fees, calculated as a fixed amount or rent percentage and usually paid monthly.
447 CHAMBERS.COM
Powered by FlippingBook