What is your preferred investment modality? While some of the most popular ones, such as Stocks, funds and bonds promise good short-term returns, in some cases investing in real estate provides more security and liquidity for your future. Within the real estate industry there are several mechanisms for investing in properties to obtain returns, one of the most common in Mexico is leasing. That is why today we will tell you more about the lease contract; the most important clauses and characteristics that you should know for its elaboration.
What is a lease in Mexico?
We have previously created specialized content on contracts of sale and purchaseWe invite you to take a look at it. Now, in the real estate world, A lease is a legal instrument that formalizes the relationship between the parties involved, in this case, between the lessor and the lessee. The lease contract establishes the rights and obligations to be followed, as well as the penalties in case the parties do not comply with the initial conditions.
What is a lease agreement for?
In Mexico, a lease agreement serves to enforce the rights and commitments of both parties with respect to the use of real estate and thus avoid conflicts in the future. By having a written agreement, both parties have a clear and objective reference of what was agreed at the beginning, which reduces the risk of misinterpretation.
Broadly speaking, the lease is also important because it specifies different types of responsibilities, such as maintenance and repair of the property. It also establishes the terms of payments and penalties in case the tenant fails to comply with the terms of the lease.
What are the most important characteristics and clauses that make up a lease contract?
A lease agreement in Mexico may have an indeterminate number of clauses and characteristics. Here are some of them that should not be missing in your lease contract:
- Identification of the parties involved (landlord and tenant): It is essential that the landlord and tenant are correctly identified with full names and contact details.
- Property Description: A clear and detailed description of the property to be leased is required. Therefore, it is necessary to specify the number of bedrooms and bathrooms, as well as the dimensions of the house or apartment and its location.
- Duration of the contract: This clause establishes the duration of the lease of the property.
- Form of payment and agreed amount: Here the rental price or rent is specified, as well as the form and date on which the payments will be made, in addition to the penalties for non-payment or late payment.
- Security Deposit: The security deposit is important to ensure compliance with the contract and to be able to make repairs to the property at the end of the lease (if necessary).
- Obligations of the parties: The obligations of the parties dictate the manner in which the tenant and the lessee will meet the extra maintenance expenses generated by the use of the real estate. Such as maintenance, utility and tax payments.
- Renewal and cancellation policies: this section specifies the conditions under which the lease agreement will be renewed, as well as the cancellation policies and the corresponding penalties in the event of failure to comply with the term agreed upon by either party.
What other clauses may be included in the lease?
While the above clauses are the most relevant to the lease, there are other types of special clauses which are intended to further specify the use of the property.
- Pets: this clause establishes the conditions under which pets are allowed on the property, and in another scenario, establishes if they are not allowed.
- Improvements to the property: It must be specified whether or not improvements to the property can be made by the tenant, and whether or not the tenant must be consulted beforehand.
- Commercial use of the property: This clause serves to specify whether the real estate may be used for a commercial purpose and under what conditions, or otherwise establishes that the property may not be used for such purpose.
- Repairs and maintenance: a clause can be included specifying who is responsible for repairs and maintenance of the property.
What is the duration of a lease contract?
The Federal Civil Code in Mexico establishes that the lease of a property must have a term of at least 1 year. However, both the lessor and the lessee may establish a longer term or for an indefinite period of time.
It is essential to specify the dates or period of time that the property will be leased, as well as the conditions for renewal. Likewise, deadlines should be added for notifying any change in the agreement, whether to renew, cancel and change conditions.
In the event that the terms of the lease change, such as the agreed price, it is necessary to add an addendum or make a new contract where both parties agree to the adjustments made.
Who must pay for the costs of a lease and the expenses generated by the use of the property?
The costs for the payment of a lease, in general, must be covered by the lessor in the case of requesting the services of a lawyer specialized in real estate law for the preparation of the document. Unless this payment is agreed to by both parties, in which case the costs for legal advice are usually split.
How much does it cost to make a contract?
In most cases there are standardized lease contract formats, which are usually very low cost or may even be available on digital platforms for free.
On the other hand, if a specialized contract is required, whose practice is highly recommended to avoid misunderstandings, the cost is determined by the specialist attorney according to his hourly or service fees.
Real estate projects for investment that you should know about
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