MEXICO Law and Practice Contributed by: Roberto Cannizzo, Carlo Cannizzo, Stefano Amato and Mauricio Moreno-Rey, Cannizzo
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 speci - fied period, typically on an annual basis. Semi- annual increases are less common but still pos - sible. In the case of new developments, 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 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 prem - ises 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, typi - cally equivalent 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 usu - ally depends on the standards and success of the shopping centre. 6.9 Payment of Maintenance and Repair Costs and expenses associated with main - tenance and repair of common areas used by several tenants are usually charged to and paid by those same tenants to the landlord, build- ing manager or shopping centre manager, as “condominium quotas” or common area main - tenance fees. Condominium or shopping centre regulations usually establish how such quotas
required from the use of the leased property. Standard provisions stipulate that the landlord must maintain the structure of the property and perform extraordinary maintenance, while the ordinary maintenance is usually the responsibil - ity of the tenant, who must reinstate the property to its original pre-let state, accounting for ordi - nary wear and tear from usage. However, the parties may negotiate and agree on the alloca - tion of maintenance responsibilities. Rental payment frequency is flexible and deter - mined by both parties, with monthly payments being the most common arrangement. Regarding COVID-19 issues, refer to 6.3 Regula- tion of Rents or Lease Terms . Lastly, regarding construction build-out or sup - ply chain issues, there are no specific provisions under the law, so these matters should be nego - tiated and agreed upon by the parties. 6.5 Rent Variation Mexican civil law allows for flexible negotia - tion of rental updates between parties, without imposing binding or automatic updates. The standard practice is to update rent annually by applying the same percentage increase as the National Consumer Price Index, published in the Federal Official Gazette by the National Institute of Statistics and Geography. In some cases, additional points may be added to this percent - age. For lease agreements involving premises in shopping centres, it is possible for the tenant to pay a variable rent, either in addition to or as a replacement for the fixed monthly rent. This vari - able rent is typically calculated as a percentage of the tenant’s net sales.
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