Guarantors and Fianzas

Most landlords require tenants to provide a third party guarantor (fiador or aval) or an insurance policy (fianza) to pay the rent if the tenant defaults.

The Guarantor (Fiador)

Essentially, the guarantor acts as a co-signer to the rental agreement.

The fiador must own property in the same state as the rental property, which can serve as collateral. If a company (for example the employer) acts as a guarantor, it is known as aval or aval de empresa, the value of the business serves as collateral. Depending on the terms of the rental contract, the landlord can sue the fiador or aval for outstanding rents without first suing the renter.

Some landlords may require that the fiador’s property be free of any debts or liens (libre de gravámenes). The landlord may decide not to accept a fiador if they consider that inadequate protection is provided; for example, the value of the property owned by the fiador may not be accepted as sufficient.

Newcomers without a sponsoring employer may find it difficult to obtain a fiador and for this reason many use an aval, some others present employment letters that should include the full name, position and yearly salary of the tenant, as well as their 3 most recent bank statements and some others offer advance payment of rent that may vary between 3 and 12 months of advanced rental fees. If these possibilities are not available to a potential tenant a fianza may need to be obtained instead.

The Fianza

A fianza is an insurance policy (surety bond) taken out by the tenant and is available through insurance companies, or from specialist financial institutions (afianzadoras). Insurance premiums of approximately 10 percent of the annual rent are the norm. Applicants should expect to provide documents proving their financial situation, as well as bank statements, credit history, work history, or other documents.

In rare cases the landlord may accept a letter (carta) from the applicant’s employer confirming salary and duration of employment, as well as their 3 most recent bank statements or advance payment of a year’s rent in lieu of a fiador or fianza.

The Póliza Jurídica para Arrendamiento (Rental Legal Insurance for landlords)

Another very popular guarantee among foreigners without “traditional” guarantors in recent years is the Póliza Jurídica para Arrendamiento (Póliza Jurídica) It essentially is a document provided by Law firms that specialize in these services that investigate the financial and legal background of a potential tenant. They do the due diligence process to validate the information provided by potential tenants to their landlords. The Póliza Jurídica also guarantees the eviction of tenants who are not fulfilling their obligations under their contracts and write the lease contracts. In some cases they include Pagarés (Promisory Notes that are legally binding) as part of the contracts. Reputable Póliza Jurídica Companies can be recommended by Realtors. The cost of the Póliza Jurídica depends on the amount of the rent, but it is usually around 25-30% of a month´s rent.

Be aware that since the Póliza Jurídica is relatively new and it doesn´t guarantee the continuity of payment not every landlord is willing to accept this form of guarantee.

The process of buying, selling or renting any type of property or land is regulated at a state level in Mexico. While some procedures in the property purchase process may be identical in all states, others may differ. This page gives an overview of what is involved in buying a property in Mexico, prepared by certified real estate agents who are experts in the Mexico City property market. It contains advice that should not be considered a legal document nor should it imply any liability for its authors in case there are some discrepancies with the processes involved for the sale or rental of a property. It should also be noted that for particular practices and requirements in areas other than Mexico City, advice should be sought from professionals familiar with the property market in that state.

Information provided by Carmella Peters-Romero, Vanessa Kerr and Hector Romero of Peters & Romero Bienes Raíces, Tel: 55 3713 0985 / 55 6708 4772 / 55 4341 3131