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rent paid in pesos, what's the law?


Lexy

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Does a landlord of rental property (house) here have the right to demand monthly rent payment in US dollars?

If landlord wants pesos but based on a rent quoted in USD, does landlord have the right to insist on payment tied to the current USD/MXN exchange rate. I'm seeing what to me is an unfair trend in the rental market now with landlords asking payments equal to the current exchange rate, which means they get more money each month.

Please tell me if you know for sure what the Mexican law is on this, if such a law exists.

To my way of thinking, with the current exchange rate rising rapidly, rentals should be negotiated these days, so that the renter has a fair monthly rent to pay. Not a rent that keeps going up each month in favor of the landlord.

Lexy

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The person making the payment always has the right to pay in pesos at "the current daily exchange rate ". The actual lease itself can be denominated in any currency both parties had agreed to. So if the lease is in US$ there has been no increase but if yo choose to pay in pesos you do need more of those.

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If you have a lease that is denominated in US$ but states that the rent must be paid to the owner in Pesos, something is rotten in Denmark. The only reason for that would be the owner is using you to launder the rent money that he/she is receiving and is not reporting it as income or paying taxes on it. I would suggest a trip to a lawyer or just drop a dime on this tax cheat.

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If the rent is tied to USD, that means the rent can increase every month if paid in pesos. Under Jalisco Landlord Tenant law, the landlord can only raise the rent a maximum of 10% with a new lease. If the rent is floating that would violate the law.

A contract must be specific and cannot have the price changing during the contract.

I remember reading in the Jalisco Financial or Commerce Code a few years ago that contracts must be in pesos, not any other currency.

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I have always had a rental contract (whether thru a local agency or direct with the landlord) that states the rent in US dollars. I think (just my opinion) this is because the US dollar over the years has been considered more stable than the peso, and I imagine this sort of arrangement is only at Lakeside. Since my retirement income is in US dollars, the current fluctuation in relative value is not a problem for me. I agree it is certainly possible to negotiate paying the rent in pesos when you sign a new lease. This assumes you have a lease!

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Any currency both parties agree to is legal with the person who is paying able to make those payments in pesos at the current x-rate.

All contracts must be what the law says they must be, not what people agree to. If the law is silent on types of currency, then it can be in rubles. But in every country, the home country's currency is demanded in contracts.

Mexico wants its currency respected and prices pesos. Landlords want dollars because with the peso falling they get more money every month.

In the Mexico state, the law states rents must be in pesos and I am sure Jalisco is the same.

http://www.globalpropertyguide.com/Latin-America/Mexico/Landlord-and-Tenant

" Rents must be determined in Mexican currency (pesos)."

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Another legal opinion of contracts in pesos:

http://www.osunalegal.com/articles/invalid_mexican_real_estate_contracts

"V. Specify the amounts that are to be paid in Mexican Pesos, though the contract may also include the price in a foreign currency;

VI. A Description of the object of the contract;"

From Rolly:

http://rollybrook.com/finding_renting.htm

"Rent is payable in pesos. A lease clause requiring payment in some other currency is invalid. It is not uncommon for landlords to want payment in dollars, especially in tourist areas. Sometimes this is a tax avoidance scam which, in theory, could come back to haunt the renter for participating by paying in dollars.

It is customary to pay a security deposit, usually equal to one month's rent. Leases usually contain a clause saying this deposit cannot be applied to the last month's rent. Common experience says it is unlikely you will ever recover this deposit, or if you do get it back, it may be up to a year later. Unlike common practice in the USA, Mexican leases usually do not require a last's month rent deposit. Rent is payable in advance each month."

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Gracias Sonia

"

  • Pesos Payment and Rental Receipts: pesos are the only legal currency in Mexico. If your rent contract is in USD, your landlord must accept payment in pesos at the exchange rate posted daily in the Official Journal of the Federation (Diario Oficial de la Federación) found by clicking the green button. It is illegal not to accept pesos in payment anywhere in Mexico. "

If your lease is in dollars why would anyone care that they have to hand over more pesos other than it might be difficult to find an ATM with that many pesos in it.

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Thanks for some very useful and informative responses.

I just got off the phone with a man with several homes to rent. He said, "I do not write a contract in pesos. I want payment in USD." He, like many landlords these days, is able to cash the $$ rent check for pesos and thus get an ever-increasing monthly rental payment, since the exchange rate, as most of us know, is at an unprecedented 18% and rising.

There's something wrong with this picture. I'm not talking about just my experience in renting. Others I know are also questioning the same problem that favors the landlord disproportionately.

Consider the landlord who asks payment of, say, $700 USD. This month he'll get approximately 12,600 in pesos. Next month, if the exchange rate goes to 19, he'll get 13,300 p, and so on. And that's on a property that not so long ago brought in maybe 9000 pesos every month for the duration of the lease.

Anyhow--I'm all for paying a fair price for what I'm getting. Fair to the landlord. Fair to me.

Thank you all for your input. Much of it very useful.

Lexy

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When this couple came to rent my place in 2012, they wanted their rent quoted in US$ because « they said » that they did not want their rent to vary every month, meaning that they always wanted to know how much US$ they would have to pay. They wanted a fix rate. They were not concerned about the exchange then (even if they paid in pesos) as long as their US rate was always the same.

So, in 2012, their rent was fixed at $900 US which gave me $12,500 pesos. Keep in mind that they did not want $12,500 pesos written in their lease but $900 US with the understand that they would pay me in pesos at whatever exchange it was that day.

During the year, I received less than $12,500 (it varied between $11,500 and $12,000). But the tenant was always paying $900 US—so, for him, it was the same. He did not complain.

Now, his rent is still at $900 US, but I receive $15,500. Should the tenant be annoyed about this?

Should he expect to pay less than $900 US because the exchange rate has changed (in the landlord's favor)? Does it affect him?

We have in Mexico an unstable pesos so things are different than they are in Canada and the US.

If some of you believe it’s an abuse from the landlord, you are missing something.

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It's like everywhere in Mexico even in Guad. My dentist quoted me $10,000 for a crown. Three months later, I went and the cost was $12,000. He said that he bought his material in US and the exchange cost him more. After another two months, my husband had to pay $13,000 for the same job.

What can we do? As Koko said, Mexico has a unstable currency and Mexicans, or people who do business here, don't want to lose on it. Check the prices in the store. They will reflect the exchange rate.

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When this couple came to rent my place in 2012, they wanted their rent quoted in US$ because « they said » that they did not want their rent to vary every month, meaning that they always wanted to know how much US$ they would have to pay. They wanted a fix rate. They were not concerned about the exchange then (even if they paid in pesos) as long as their US rate was always the same.

So, in 2012, their rent was fixed at $900 US which gave me $12,500 pesos. Keep in mind that they did not want $12,500 pesos written in their lease but $900 US with the understand that they would pay me in pesos at whatever exchange it was that day.

During the year, I received less than $12,500 (it varied between $11,500 and $12,000). But the tenant was always paying $900 US—so, for him, it was the same. He did not complain.

Now, his rent is still at $900 US, but I receive $15,500. Should the tenant be annoyed about this?

Should he expect to pay less than $900 US because the exchange rate has changed (in the landlord's favor)? Does it affect him?

We have in Mexico an unstable pesos so things are different than they are in Canada and the US.

If some of you believe it’s an abuse from the landlord, you are missing something.

Why? You are in Mexico and whatever the peso is, it is.

If you are in the U.S., and the Euro is more stable, can someone ask to pay in Euros? No. That is illegal in a U.S. contract.

Your property maintenance, taxes and everything else is in Mexico.

Having a contract in pesos is the law, not a landlord choice. By accepting pesos that are tied to the dollar, you raised their rent an illegal amount.

You also keep Mexicans from renting property that is rented in dollars. Is that fair or legal?

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The solution for folks who want their lease to be in pesos is to find a landlord who also wants it that way and then it's a win/win.

Having the lease in pesos is also the law. If a landlord goes to court to defend a lease that is in dollars, the landlord will lose, the lease is illegal.

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Lexie, sorry can't answer your question about the law; but, I have a couple of rental properties. I have an agreement, not contractual, that I want X usd monthly. Payment can be in either currency but it would be the usd rate to peso conversion on the day of payment.

We shake hands on the deal and we both expect each other to abide by their word. If they don't like it they don't have to rent the house.

Just how I do it and sayin you know the deal when you agree on the rental.

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It's like everywhere in Mexico even in Guad. My dentist quoted me $10,000 for a crown. Three months later, I went and the cost was $12,000. He said that he bought his material in US and the exchange cost him more. After another two months, my husband had to pay $13,000 for the same job.

What can we do? As Koko said, Mexico has a unstable currency and Mexicans, or people who do business here, don't want to lose on it. Check the prices in the store. They will reflect the exchange rate.

I bet your dentist is getting his supplies in Mexico and his price is the same. He upped the price to make your cost the same in dollars. I would get another dentist.

$10,000 for a crown is a U.S. price anyway, and a whole lot more than any Mexican dentist would normally charge.

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When we rented, the rent was $300 USD. Since I could not take out USD from the ATM, I asked to pay the equivalent in pesos, which was not a problem. Over the years, the number of pesos has increased. The landlord sends this rent to his family in the US, $300 each month. If I quit paying more pesos when the rate increases, then he could only send less to his family, and they would lose money. So, we continued, and neither lost, nor won.

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I do understand that local businesses--restaurants, dentists, etc.--must raise their prices when their costs go up. Also, merchants or proprietors see much of the foreign community enjoying an exchange rate very much in their favor. The merchants think these people can afford to pay somewhat higher prices, for a steak dinner these days, for example. (And if they don't want to pay more, they'll stay home.) But these merchants aren't raising their prices every month.

My concern is that a landlord who insists on rent paid in US dollars and then enjoys an ever-increasing monthly peso income on a USD contract is taking an unfair advantage. I am questioning the legality and fairness.

Lexy

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I rented a house a few years ago. The rent was$5,000 MX, then 400 USD. If I was still living in that house my rent would be almost $8,000 pesos if I was paying US in pesos equivalent. I buy gasoline, food, clothes, pet food, pay doctors, etc in pesos and would have almost 4,000 less of them every month. Nothing else in my world has almost doubled in cost. so, how would this rent paid in pesos equivalent of US dollars not be costing me anything?

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I guess the US auto manufacturers had some crystal ball when they decided to move significant manufacturing plants to Mexico. Whilst they may be losing on some some of their initial brick and mortar investment , they are now producing cars for significantly less money and there is more employment for Mexicans

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I rented a house a few years ago. The rent was$5,000 MX, then 400 USD. If I was still living in that house my rent would be almost $8,000 pesos if I was paying US in pesos equivalent. I buy gasoline, food, clothes, pet food, pay doctors, etc in pesos and would have almost 4,000 less of them every month. Nothing else in my world has almost doubled in cost. so, how would this rent paid in pesos equivalent of US dollars not be costing me anything?[/quot

Easy. Assuming your pension or whatever is in US$ and the rent was actually $400, not $5000 pesos. Your $400 bought and still buys how many ever pesos that you then hand to the landlord, who cares if that number is 10 or 10,000? You still have the dollars that you spend for the other things you mentioned and when you convert that to pesos you get more pesos than you used to. If your income is not in US$ and your rent was actually $5000 pesos and increased to $8000 pesos then you surely have fallen behind.

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