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Lexy

rent paid in pesos, what's the law?

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Joco you are making some good points. I hope Spencer or another lawyer can comment. When there were large fluctuations in exchange rates in the past and an offer to purchase was accepted, by the time of closing the purchaser using pesos owed significantly more than at time of offer acceptance.

And if correct, then as you say the rent which nearly all agree can be paid in pesos would stay constant in pesos for the term of the lease / agreement.

I am not sure the amount owed on say rent is the official exchange rate when each months payment is due or when contract is signed. Every one I know has used the official exchange rate when each month's rent payment is due.

http://dof.gob.mx/indicadores.php

saludos

Sonia

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Sonia

The law and the opinion of the attorney that I posted, state the value of the exchange is what the Bank of Mexico has posted the day the lease is signed. It cannot fluctuate month to month. That devalues the reason to have the amount of rent stated in the lease if the rent amount changes every month. Why bother with a lease?

Other payments are based on the Bank of Mexico rate the day a payment (without a lease) is due.

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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.

Not a crown on an implant, which is double than a regular crown--for many reasons.. Haro and Barrgan were even more expensive and did the same--up the cost to go with inflation due to the US$

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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

Most landlords are not asking US $ but asking the equivalent in pesos. If you have a US debit card and withdraw $900 from the ATM, you get so many pesos. And that's what most landlords require if the lease was determined in US or CDN when you signed the agreement. Most foreigners prefer that as they have problems to deal with pesos in the first place and like to know how much they pay in US$ or CDN$.

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The law on rent in clear. A lease cannot increase the rent more than 10% on a new lease. It certainly cannot increase the rent during the term of the lease. If a lease is based on dollars and paying the equivalent in pesos, that increases the rent each month recently. It certainly keeps out Mexican renters who are paid in pesos which is obviously illegal.

The pesos looks the same to Mexicans if they are not buying U.S. products. If someone is not spending money to buy U.S. products, his pesos buy the same in Mexico.

Why should a landlord in Mexico get more pesos because the currency in another country is getting a better rate?

A lease must follow the law, not to want people agree. That means if two people agreed to an illegal act, the act is legal because they agreed and ignored the law. You cannot agree to violate the law.

If that is illegal, then all the car dealers in Guadalajara are OPENLY doing something illegal. In the last few years, they quote their cars in pesos BUT their peso price increases every month.

Coming back to my previous example of $900 US paid in 2012 (equivalent to $12,600) which dropped the following year. (then the landlord's loss).

If It had been quoted in pesos ($12,600) for the first year with an increase of 10% every year, his rent would now be $18,500 pesos (MAS O MENOS) instead of $16,500 at today's exchange. BUT within the years because the exchange was lower, the tenant would have been paying more if slapped with 10% increase each year.

What is the different to the tenant: $900US is still $900 US even if the exchange rate changes (up or down). It's just that he cannot accept that the landlord recuperates his loss because of inflation and the insecurity of his pesos. The peso is weak--period.

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What Joco is saying is if you signed a lease for a year March 2015 for $1000 US a month when the exchange rate was 15-to-1 your rent then and today would be 15,000 pesos. Similarly, once lease is signed if in my example the rate went 13-to-1 you would still pay 15,000 pesos rent until end of lease assuming no increase is stated.

This is totally different than buying a car and the price goes up. Ditto no relationship to bank machine withdrawal, cost of dentistry, etc. Joco is refering to agreements / contracts / leases.

Similarly, if you signed a contract on buying a home for $200,000 US when rate was 15-to-1 the amount you owed was 3,000,000 pesos even it you close 3 months later when the rate was 18-to-1.

Joco quoted one lawyer but I would love to see other legal experts (lawyer or notario) comment and if someone called a government agency and talked in Spanish.

Joco comments make sense to me. if true a lot of buyers could ask for substantial returns on past sales.

At same time the lawyer she quotes states when translated: "the payment obligations in foreign currency shall be solved in Mexico delivering the equivalent in national currency, the exchange rate in the place and date of the payment to be made".

I would have thought the wording would refer to the date the contract / lease, etc is signed as I can also interpret the above to be when each monthly payment is made.

best

Sonia

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What about this as a similar problem? Talking about the LAW????

We bought a house on the coast in Mexico, and the builder quoted us in US. We had to wire the payment to his registered US account in the States (all legal). When came the time to prepare our deed, the notary required the equivalent amount in pesos. It means that, throughout the year, every time we made a payment in US, as a deposit, the amount was later calculated in pesos (on paper) according to the exchange rate of the day of our payments. Four different payments were made during the year and the average was used to come up with a peso amount.

The original amount at the signing of the offer was not showing in pesos at all. Our notary did not make a big deal out of this. He simply added all the payments we made (in peso) and that’s what appeared in the deed. The government and the municipality need the amount in peso. It did not cost us more or less in US but the value was increasing (on paper) as the exchange rate was changing.

Is this legal? We are in Mexico!!!! Those are acceptable practices (according to our notary). He deals in a touristic area and with many foreigners.

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Just my two centavos and I could very well be wrong but when I see prices quoted in dollars my first impression is that they are overpriced.

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If that is illegal, then all the car dealers in Guadalajara are OPENLY doing something illegal. In the last few years, they quote their cars in pesos BUT their peso price increases every month.

Coming back to my previous example of $900 US paid in 2012 (equivalent to $12,600) which dropped the following year. (then the landlord's loss).

If It had been quoted in pesos ($12,600) for the first year with an increase of 10% every year, his rent would now be $18,500 pesos (MAS O MENOS) instead of $16,500 at today's exchange. BUT within the years because the exchange was lower, the tenant would have been paying more if slapped with 10% increase each year.

What is the different to the tenant: $900US is still $900 US even if the exchange rate changes (up or down). It's just that he cannot accept that the landlord recuperates his loss because of inflation and the insecurity of his pesos. The peso is weak--period.

How are car dealers violating the law? Vendors can raise their prices. Nothing about the MX Monetary law states that a car dealer cannot raise his prices.

It states that if someone is asking that a price be based on the dollar then the exchange rate to use is the Bank of Mexico posted exchange rate the day of the transaction. If you are basing a car price on dollars (which I cannot imagine) then the price in pesos is the exchange rate the day you sign the contract.

A lease CANNOT INCREASE more than 10% a year. It doesn't need to increase at all, but the increase cannot be more than 10%. I don't know what that has to do with exchanging dollars for pesos either.

Say your rent is $100 in dollars. When you resign a year later it is $110 USD. When you signed the lease your rent in pesos was $1200 pesos. Now it is $2033 a month in pesos. If you had kept the lease in pesos frozen at $1200 MXP you would have saved a lot of money.

I can't understand where you get that the rent won't go up 10% if you pay in dollars. You can pay in Euros and the rent can still increase 10% a year under the law.

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When I paid US dollars every month to my Mexican landlord/prop. mgr., (it was what was expected) I often wondered what they did with it...for example, did they have a bank account in the US, to avoid having to pay Mexican income taxes on it? If I were a landlord/owner in the US and renting to a Mexican, would I accept pesos, which would mean the rent amount collected might change every month when I exchanged them for US dollars? and could I get away with,somehow, sending those pesos to Mexico to my bank account in Mexico? It's all a little strange to me. If the rent here is 6000 pesos per month, then that is what I expect to pay for the length of my rental contract. I have found, however, that some of the more popular rental agencies here in Ajijic require the collection of US dollars for rent, and send it directly to their US bank accounts, and I was always curious how that worked within the framework of the Mexican tax laws.

One real-estate/property management company was caught by customs mailing over $10,000 USD in checks to the U.S. a few years ago. That company was in a lot of trouble.

They collect the rent in checks and mail the checks to the home owners in the U.S. to avoid anyone knowing about the income, IRS or the Mexican IRS (Hacienda.)

The hammer fell on them for awhile. Property managers are paying the IVA taxes out of the rent now or most are.

I don't know if the rental income is being reported to IRS or the Hacienda.

Making the rent based on dollars clearly excludes Mexicans from renting. The Mexican must get dollars and pay the fees attached to that exchange. Their pesos don't increase every month to buy the dollars and right now their rent would have doubled from a few years ago.

That alone is a reason to stop basing rent on dollars because it discriminates. It should be reported.

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That alone is a reason to stop basing rent on dollars because it discriminates. It should be reported.

Except some people want to lock in their costs based on their savings/cash flow being in USD. Which can be a good thing to do to avoid an unpleasant surprise.

Illustration. In your next lease, you agree to pay 6000 pesos per month. Right now, that's about USD330 per month. Six months from now, the exchange rate falls back to 15:1. Now to pay your rent, you'll pony up USD400 to buy the needed pesos.

Guess in this case it would be "wrong/unfair" that your rent has risen by USD70? You want a contract that gives you the best of both worlds?

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Every year Banorte, which holds my bank trust, quotes me the bank trust fee in pesos (at whatever their conversion rate is that day). Every year I point out that my fideicomiso states that the fee is "$450 US or the equivalent in pesos", meaning that legally they have no right to demand that I pay in pesos. Every year they immediately back down and say that I can pay in US$. What a silly game, and anyone who didn't stand their ground, as I do, would be taken advantage of.

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It does not appear that they would be taking advantage of you. They give you the option of paying in either pesos or dollars at that day‘s exchange rate. By law, they could demand payment in pesos, but that would not change the dollar amount, which is the reference point in your contract.

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Every year Banorte, which holds my bank trust, quotes me the bank trust fee in pesos (at whatever their conversion rate is that day). Every year I point out that my fideicomiso states that the fee is "$450 US or the equivalent in pesos", meaning that legally they have no right to demand that I pay in pesos. Every year they immediately back down and say that I can pay in US$. What a silly game, and anyone who didn't stand their ground, as I do, would be taken advantage of.

What is this "bank trust" you speak of? Is that the real estate ownership vehicle?

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Except some people want to lock in their costs based on their savings/cash flow being in USD. Which can be a good thing to do to avoid an unpleasant surprise.

Illustration. In your next lease, you agree to pay 6000 pesos per month. Right now, that's about USD330 per month. Six months from now, the exchange rate falls back to 15:1. Now to pay your rent, you'll pony up USD400 to buy the needed pesos.

Guess in this case it would be "wrong/unfair" that your rent has risen by USD70? You want a contract that gives you the best of both worlds?

The laws in Mexico are not written to benefit foreign landlords. If you want to be sure of how much rental income you will receive, stay in the U.S. and rent your property there. Mexico is not sympathetic about your investments and neither are the tenants.

Leases are for a minimum one year. Any lease shorter than that is illegal.

The exchange rate is based on what it is the day the lease is signed. It will not go up or down during the term of the lease. If rent is paid using the exchange rate the day the rent is due, that violates the Landlord Tenant Code because rent cannot be increased more than 10% a year. The exchange rate must be the exchange rate the day the lease is signed, not monthly.

If you are moving to Mexico to become a landlord, be sure you have permission to earn money in Mexico, that you pay the 17% tax on the rent you receive and you report your income to IRS or the Hacienda.

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Every year Banorte, which holds my bank trust, quotes me the bank trust fee in pesos (at whatever their conversion rate is that day). Every year I point out that my fideicomiso states that the fee is "$450 US or the equivalent in pesos", meaning that legally they have no right to demand that I pay in pesos. Every year they immediately back down and say that I can pay in US$. What a silly game, and anyone who didn't stand their ground, as I do, would be taken advantage of.

I do not see that you have an issue, the contract states "either or"...what surprises me is that folks still have bank trusts (unless you are at the beach etc)

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It does not appear that they would be taking advantage of you. They give you the option of paying in either pesos or dollars at that day‘s exchange rate. By law, they could demand payment in pesos, but that would not change the dollar amount, which is the reference point in your contract.

Exactly ..I thought BT were "expensive" things of the past unless you own property at the beach etc.,

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Leases are for a minimum one year. Any lease shorter than that is illegal.

I've visited numerous websites that mention rentals being available month-to-month, or for, "the season." Everyone's breaking the law?

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This site says contracts must be in pesos and not be in dollars but if it is, it must specify the dollars amount to be paid in pesos at the exchange rate when the contract is signed. The exchange rate cannot float.

http://derecho.jorgemafud.com/2009/08/23/como-establecer-obligaciones-en-dolares/

Establecer obligaciones de pago en dólares de los Estados Unidos de América es de lo más común en México pero, cuáles son sus implicaciones? En principio, tomemos en cuenta que los dólares no son moneda “válida” en México y es por eso que, al redactar contratos donde el precio se pacte en dólares es importante ser precisos para no caer en situaciones que nos puedan complicar su cobro.
La Ley Monetaria de los Estados Unidos Mexicanos (la “Ley Monetaria”) establece, entre otras cosas, que la unidad del sistema monetario en México es el peso y que las únicas monedas circulantes serán (a) los billetes del Banco de México, S. A., ( B) las monedas metálicas de 50, 20, 10, 5, 2 y 1 pesos, y de 50, 20, 10, y 5 centavos © las monedas metálicas conmemorativas de acontecimientos de importancia nacional, en platino, en oro, en plata o en metales industriales y (d) las monedas metálicas, acuñadas en oro y en plata.
Más adelante, la Ley Monetaria establece que la moneda extranjera no tendrá curso legal en la República, con algunas excepciones, por lo que las obligaciones de pago en moneda extranjera se solventarán en México entregando el equivalente en moneda nacional, al tipo de cambio vigente en el lugar y fecha en que deba hacerse el pago. Lo anterior nos trae como problema el poder definir con exactitud cuál será el “tipo de cambio” al que deben pagarse dichas obligaciones en moneda extranjera.
Considerando lo anterior, cuando en algún contrato o documento tengo que redactar una obligación de pago en dólares de los Estados Unidos de América o en cualquier otro tipo de moneda extranjera, lo recomendable es establecer algo similar a esto:
“El Comprador se obliga a pagar al Vendedor la cantidad de USD $100,000.00 (cien mil dólares de los Estados Unidos de América 00/100), los cuales serán pagaderos en pesos, moneda nacional, al tipo de cambio “Fix” publicado por el Banco de México en el Diario Oficial de la Federación el día anterior a la fecha en la que se realice el pago.”
Podrás notar que mencioné el tipo de cambio “fix” publicado por el Banco de México…. Cual es este tipo de cambio? Si entramos a la página de Internet del Banco de México veremos en la página principal que uno de los “principales indicadores” es el FIX (pesos por dólar) determinado en cierto día. También nos dice dicha página que el tipo de cambio Fix es:
“…el tipo de cambio que determina el Banco de México para solventar obligaciones denominadas en dólares de los EE.UU.AA., pagaderas en la República Mexicana.” “…es determinado por el Banco de México los días hábiles bancarios con base en un promedio de las cotizaciones del mercado de cambios al mayoreo para operaciones liquidables el segundo día hábil bancario siguiente.” “El tipo de cambio que se debe de utilizar el día de hoy para calcular el equivalente en pesos del monto de las obligaciones de pago denominadas en dólares de los EE.UU.A. para ser cumplidas en la República Mexicana, debe de ser el publicado por el Banco de México en el Diario Oficial de la Federación el día hábil bancario inmediato anterior.”
Como siempre, estoy a tus órdenes para apoyarte en el (81) 8399-0579… llámame. Te recuerdo que puedes suscribirte al Newsletter de Mafud Abogados también. Saludos.
Google bad translate:
Establish payment obligations in dollars of the United States of America is most common in Mexico but, what are its implications? In principle, take into account that the dollars are not currency "valid" in Mexico and that is why, when drafting contracts where the price is agreed in dollars is important to be precise to avoid falling into situations that may complicate his recovery.
The Monetary Law of the United Mexican States (the "Monetary Law") provides inter alia that the unit of the monetary system in Mexico is the weight and the only circulating coins will be (a) the notes of the Bank of Mexico, SA ( B) the coins of 50, 20, 10, 5, 2 and 1 pesos, and 50, 20, 10, and 5 cents © commemorative coins of events of national importance, platinum, gold , silver or industrial metals and (d) the coins, minted in gold and silver.
Later, the Monetary Law provides that foreign currency will not be legal tender in the Republic, with some exceptions, so the payment obligations in foreign currency shall be solved in Mexico delivering the equivalent in national currency, the exchange rate in the place and date of the payment to be made. This brings us to define the problem as exactly what the "exchange rate" to those obligations payable in foreign currency.
Considering the above, when a contract or document have to draft a payment obligation in dollars of the United States of America or any other foreign currency, it is advisable to establish something like this:
"The Buyer agrees to pay the Seller the amount of USD $ 100,000.00 (one hundred thousand dollars of the United States of America 00/100), which shall be payable in pesos, the national currency exchange rate" Fix "published by the Bank of Mexico in the Official Gazette on the day preceding the date on which payment is made. "
You'll notice I mentioned the exchange rate "fix" published by the Bank of Mexico .... What is this rate? If we go to the website of the Bank of Mexico will see on the front page that one of the "leading indicators" is the FIX (pesos per dollar) determined on a certain day. That page also tells us that the exchange rate is Fix:
"... The exchange rate determines the Bank of Mexico to settle liabilities denominated in dollars EE.UU.AA. payable in Mexico." "... Is determined by the Banco de Mexico bank business day based on an average of the market price of wholesale changes to operations settled the second banking day following. "" The exchange rate to be using today to calculate the equivalent amount in pesos denominated payment obligations in dollars EE.UU.A. to be fulfilled in Mexico, it must be published by Banco de Mexico in the Official Gazette the banking business day immediately preceding. "
As always, I am at your service to support you in the (81) 8399-0579 ... call me. I remind you that you can subscribe to newsletter Mafud lawyers too. Regards.

I know you are hung up on what the law says vs what really happens, But even the municipal goverenment dowsn't care what the law says. The law is that seniors who own houses get a 50% discount on their property tax. When do you suppose Chapala actually did that? Not in my 18 years here. If you don't like what a lease requires then don't sign that lease.

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Sonia and Joco are correct. The rental price is fixed, and should be in pesos by law. We are in Mexico, not USA. There has long been a custom here to ask for and receive US dollars, but it still isn't the law. I too, rent, and have avoided any rentals that are priced in US dollars. I looked for a rental originally and solely priced in pesos, not something that fluctuates tied to the USA dollar. Unfortunately, this area has many goods and services that are based on what US citizens will pay. And prices have become higher and higher than other areas as a result. We aren't all Americans with US dollars to spend. Rents originally in US dollars, and then converted to pesos based on the US dollar are ridiculous in Mexico, not to mention impractical for many people.

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There are so many errors in these posts, by pretty much the same two people insisting they are right when they are not. This whole thread has gone so far off track with misinformation that there is no way to even begin to correct the many, many errors which have been misstated as fact.

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I know you are hung up on what the law says vs what really happens, But even the municipal goverenment dowsn't care what the law says. The law is that seniors who own houses get a 50% discount on their property tax. When do you suppose Chapala actually did that? Not in my 18 years here. If you don't like what a lease requires then don't sign that lease.

If I go to court over a contract, the judge rules on what the law states, not custom.

I know in Joco, seniors get a discount on property taxes. Did you look up Chapala's ordinance on property taxes? Maybe it isn't offered to all seniors.

Of course I am not going to sign a lease if I don't like it, but thank you for pointing out the obvious.

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There are so many errors in these posts, by pretty much the same two people insisting they are right when they are not. This whole thread has gone so far off track with misinformation that there is no way to even begin to correct the many, many errors which have been misstated as fact.

What errors? How has it gotten off the original topic of paying dollars instead of pesos for rent?

If you think something is misstated or wrong, please post your answer.

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