Mexico’s Real Estate Law: Key Developments and Challenges

Introduction
Over the past year, Mexico’s real estate law has undergone significant changes due to factors such as the COVID-19 pandemic, structural damages caused by natural disasters, and regulatory reforms in key markets like Mexico City. These shifts have impacted contractual provisions in real estate transactions, the development of coastal projects, the regulation of short-term rental platforms, and new rules governing lease agreements.

This article analyzes the most relevant legal developments and their implications for developers, investors, and operators in the real estate sector.

Force Majeure Clauses and Unforeseen Circumstances in Real Estate Contracts

One of the most critical aspects of real estate contracts in Mexico today is the regulation of unforeseen changes in circumstances and force majeure events. Traditionally, these clauses were drafted in a generic manner; however, the effects of the pandemic and recent earthquakes have demonstrated the need for more precise documentation.

Under Mexican law, parties may agree to modify or exclude force majeure provisions through mutual written consent. This means that a creditor in a contractual relationship may attempt to exclude pandemics from the definition of force majeure, while a debtor may seek express exceptions to its contractual obligations or negotiate intermediate contractual structures to balance the interests of both parties. Well-drafted clauses in this area can help reduce future litigation and provide greater certainty to real estate transactions.

Federal Concessions and Archaeological Site Protections

For real estate developments in coastal or historically significant areas, it is essential to conduct thorough due diligence on the applicable permits and restrictions.

Federal Concessions

Federal concessions in Mexico are commonly granted for the use of beachfront areas adjacent to private property or for the extraction and use of specific water volumes from wells. However, these concessions:

• Are not transferable between private parties.
• Must be requested again by the new property owner or investor, with no guarantee that the government will approve the request.
• Do not allow construction within the concession area, and violations can result in fines and asset confiscation.

Archaeological Site Restrictions

The presence of archaeological findings within a property’s boundaries can halt any real estate development. Mexican authorities have the power to intervene, assess the historical significance of the site, and determine whether construction can proceed. Early identification of such risks is crucial to prevent costly project delays or legal disputes.

Regulation of Short-Term Rental Platforms in Mexico City

In response to the rapid growth of short-term rental platforms and their impact on housing availability, Mexico City has implemented new regulatory measures through amendments to the Tourism Law. These include:

• The creation of a Registry for Digital Platforms, requiring all companies operating in the sector to register.
• A Host Registration System, mandating that individual property owners offering short-term rentals comply with new reporting requirements.
• A 50% cap on total annual rental nights for properties used as short-term rentals; exceeding this limit will result in registration renewal denial.
• A requirement to obtain a commercial permit for operating four or more properties as short-term rentals.

These measures aim to regulate massive, unregulated tourist accommodations and mitigate gentrification effects in Mexico City. However, they also introduce new operational and compliance challenges for property owners and rental platform operators.

New Lease Agreement Regulations in Mexico City

Recent amendments to the Mexico City Civil Code and the Mexico City Housing Law have introduced new rules for residential lease agreements, including:

• A cap on annual rent increases, which cannot exceed the inflation rate reported by Mexico’s Central Bank for the previous year.
• The creation of a Lease Agreement Registry, requiring landlords to register new lease agreements within 30 days of execution and existing contracts within 90 days after the publication of the registry guidelines.

These provisions seek to enhance tenant protections and promote housing stability. However, they also impose additional administrative and legal obligations on landlords and real estate investors.

Conclusion

The recent changes in Mexico’s real estate law reflect a growing trend toward increased regulation and oversight. Key issues such as the drafting of force majeure clauses, the proper handling of federal concessions and archaeological site restrictions, and compliance with new short-term rental and lease regulations will be crucial for the success of real estate projects in the country.

Given this evolving legal landscape, it is essential for developers, investors, and real estate operators to conduct comprehensive legal due diligence before engaging in any transaction, ensuring regulatory compliance and minimizing legal and financial risks.

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