Proposed Reform in the area of real estate leasing for housing

At the request of housing rights associations and activists, on July 8, 2020, two deputies of the Parliamentary Group of MORENA presented to the Congress of Mexico City, the “Initiative with Draft Decree by which various Provisions of the Civil Code for the Federal District are Reformed and Added in Matters of Leasing to Guarantee the Right to Housing in the Face of the Pandemic” (the “Initiative”).

The Initiative, according to its Statement of Motives, is based on the following:

• The health crisis resulting from the COVID-19 virus has caused tenants to default on their rent payments due to economic and social hardships such as loss of employment, reduced wages, and commercial inactivity.
• Failure to pay rents can lead to the displacement of families with roots in neighborhoods, towns and villages, evictions and leaving many people on the streets.
• The civil legislation on real estate leasing in Mexico City does not grant housing tenants due legal guarantees, as it contravenes the principles of affordability, bearable expenses and legal security of tenure, all components of the human right to housing.
• It is necessary to balance the relationship between the parties to a lease in order to guarantee the right to adequate housing, which is recognized in articles 4 of the Federal Constitution[1] and 9 of the Political Constitution of Mexico City[2].

It is highlighted that the Statement of Motives of the Initiative cites the guidelines issued during the month of April 2020 by the then Special Rapporteur on adequate housing of the United Nations Organization, in which the need to take measures to guarantee the right to housing of people is mentioned, such as: (i) the remission, reduction and/or deferral of payments, and (ii) the implementation of support and soft loans for homeowners.

On the other hand, the Initiative highlights the figure of mediation provided for in the Alternative Justice Law of the Superior Court of Justice for the Federal District, as an effective remedy to resolve conflicts arising from housing leases.

Specifically, the Initiative proposes to amend the Civil Code for Mexico City, in accordance with the following:

• Amendment to Article 2398.

1. A housing lease contract is defined as “one that contributes to the fulfillment of the human right to housing of the lessee in exchange for a certain price in favor of the lessor”.
2. Said contract shall be subject to a mandatory term of three years, except as otherwise provided by the lessee.

• Addition of two paragraphs to article 2406.

1. The eviction lawsuit will be inadmissible if the lessor does not present a written lease agreement, even if such lawsuit is based on the non-payment of rents.
2. The lessor will lose the right to keep the deposit in the event of termination of the housing lease, or of an equivalent amount in the event of “temporary termination” of such agreement of wills.

• Addition of Articles 2406 BIS, 2425 BIS and 2431 BIS.

1. In the absence of a written contract, it will be presumed that there is a lease of housing in the event of proof of the consented occupation of one’s own property by a third party, in exchange for the payment of a certain price.
2. In order to exercise any action derived from the breach of the essential clauses of the agreement of wills, an affirmation under oath that a lease relationship exists will suffice, and the parties must prove their assertions in court.

• These are established as rights of the tenant of a dwelling: a) not to request more than one month’s advance payment, (b) not to require a bond or any real estate guarantee, (c) not be subject to “arbitrary, illegal and/or forced evictions”, (d) give notice of the court order to vacate two months prior to the date of the proceeding, (e) presence of personnel from specialized institutions in the eviction process to provide assistance to vulnerable people such as children, women victims of violence, indigenous people, immigrants, etc.., (f) access available measures to avoid leaving people on the street, such as temporary shelters and incorporation into housing programs, and (g) in the event of unforeseen circumstances, resort to alternative means of dispute resolution to modify the terms of the contract.

1. In cases of national emergency, natural disasters, declarations of environmental, natural or sanitary emergency, or any other situations of force majeure that paralyze economic activities and prevent the lessee from complying with the contract, the lessee may request the transitory or definitive renegotiation of the lease, in terms of the provisions of article 1796 of the Civil Code.

The Initiative has been strongly criticized on the grounds that, if approved in its terms, it would infringe on contractual freedom, would allow tenants to stop paying rents, and would violate the rights of landlords, such as the right to property, thus discouraging investment in the real estate sector. For their part, the activists who participated in the drafting of the initiative emphasized the need to encourage lease contracts to be in writing in order to provide legal certainty to tenants.

We hope that the discussion of the Initiative in the Mexico City Congress will be carried out through a deep and measured debate, and without biases. In addition, it should consider the participation of litigants and justice providers and other sectors, in order to avoid deficiencies that could have negative repercussions in the practical field. Likewise, we propose to include in the discussion the feasibility of implementing support such as those referred to by the Special Rapporteur of the United Nations, both for homeowners and tenants.

[1] Article 4. (…)

Every family has the right to enjoy decent and dignified housing. The Law will establish the necessary instruments and support to achieve this objective.

[2] Article 9. (…)

1. Right to housing
2. Everyone has the right to adequate housing for himself and his family, adapted to his needs.
3. The authorities will take measures to ensure that housing meets the conditions of accessibility, affordability, habitability, cultural adaptation, sufficient size, safe design and location with basic infrastructure and services of potable water, sanitation, energy and civil protection services.
4. Accessible financing plans will be promoted, as well as measures to ensure affordable expenses and legal security in housing tenure.
5. Measures shall be taken, in accordance with the law, against arbitrary and illegal eviction of the occupants of the dwelling.