The Plenary of the Supreme Court of Justice of the Nation (Suprema Corte de Justicia de la Nación) (“SCJN”) determined, on February 18th, the constitutionality of the cap on the annual increase for residential properties in Mexico City.
In August 2024, several real estate–related amendments were published in Mexico City, particularly to the Civil Code for Mexico City (Código Civil para el Distrito Federal) and to the Housing Law for Mexico City (Ley de la Vivienda para la Ciudad de México), pursuant to which it was established, among other matters, that the annual increase of rent for residential properties may not exceed the inflation rate reported for the immediately preceding year. Additionally, such amendments introduced the obligation to register lease agreements in a digital system administered by the Government of Mexico City.
These modifications were aimed at addressing the sustained increase in residential rental prices in Mexico City and mitigating residential displacement phenomena associated with real estate market pressures, seeking to balance property rights and freedom of contract with the human right to adequate housing.
By unanimous decision, the SCJN determined that the Congress of Mexico City acted within its constitutional authority in establishing that annual rent increases may not exceed the inflation rate reported in the prior year. The SCNJ held that the measure constitutes a valid regulation in civil and lease matters within the scope of local legislative powers and that it pursues a constitutionally legitimate objective related to the protection of the right to housing.
The Court emphasized that the measure does not freeze rents nor impose price controls, but rather solely limits the maximum percentage for annual adjustments, thereby allowing the real value of rent to be preserved in light of inflation. In this regard, it concluded that the provision does not eliminate the parties’ freedom of contract — who retain the authority to freely agree upon the initial rent amount — nor does it constitute a disproportionate restriction on property rights.
The Plenary further recognized that property rights may be subject to modalities imposed for reasons of public interest and that, in contexts of real estate market pressure and accelerated increases in urban land prices, the legislature may adopt measures aimed at balancing such rights with effective access to adequate housing.
It was also acknowledged that the regulation is grounded in Article 4 of the Mexican Constitution (right to housing), as well as in international standards concerning economic, social, and cultural rights.
With respect to Article 2448-F of the Civil Code for the Federal District, concerning the digital registry of lease agreements, the Supreme Court postponed the vote on its constitutionality in light of concerns raised regarding personal data protection and the scope of the information required.
As of this date, the digital registry provided for in the 2024 reform has not been implemented, as it is subject to the issuance of guidelines and the enablement of the corresponding digital platform by the Government of Mexico City.
If you have any questions, comments, or would like to obtain more details on how these reforms may affect your operations or to receive additional advice, the Mijares real estate practice team is at your complete disposal. Our goal is to help you adapt to regulatory changes and maximize opportun.
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