On April 4, 2024, various reforms to the Tourism Law of Mexico City ("Tourism Law") were published in the Official Gazette of Mexico City, which came into effect one day after their publication. The objective of these reforms is to address various issues associated with the growth of tourism in the city and ensure harmonious coexistence between residents and visitors.

The significant increase in the popularity of short-term vacation rental technology platforms, such as Airbnb, has posed a series of urban challenges in cities around the world, including Mexico City. The rapid expansion of these platforms has contributed to gentrification, rising rents, and legal uncertainty for users, property owners, and platforms offering vacation rental services.

To address these challenges, the Government of Mexico City has taken a proactive approach by implementing regulatory reforms aimed at establishing fair conditions in the hotel sector and ensuring that local communities are not negatively affected by new economic dynamics.

Among the main provisions of the reforms are:

I. Creation of a Host Registry: Individuals and legal entities offering short-term tourist stays are required to register in a Host Registry. This registration will be valid for two years and must be renewed 30 days before its expiration.

II. Reporting of Indicators and Tax Compliance: Hosts will be required to report usage and occupancy indicators, as well as comply with their tax obligations. This includes payment of Value Added Tax (VAT) and Income Tax (ISR).

III. Information to Neighbors and Compliance with Regulations: Hosts must inform neighbors about the tourist use of the properties offered and comply with local regulations, providing detailed information to tenants.

IV. Social Responsibility Insurance: Hosts must have social responsibility insurance for each real estate asset to cover possible risks related to the provision of services.

V. Limit of Properties per Host: Each property added to the registry will receive a certificate and corresponding folio. This folio must be registered on the platform(s) where the property is offered. The registration is valid for one year and must be renewed within 30 natural days before its expiration. From the fourth property registered, hosts must comply with additional requirements. In addition to those established in the Tourism Law, they must register the merchant establishment key granted by the Electronic System of Notices and Permits for Commercial Establishments. They must also present the Notice or Operating Permit issued by said system, in accordance with the provisions of the Law of Commercial Establishments for Mexico City.

VI. Sanctions for Non-compliance: Infringements committed by tourism service providers, hosts, or technology platforms to the provisions of the Tourism Law and the provisions derived therefrom will be sanctioned through a procedure conducted by the Administrative Verification Institute of Mexico City with admonition, fine, or suspension.

Regarding technology platforms, a series of requirements are defined for their registration in a specific registry intended for these companies. Among the requirements are; (i) presentation of the public deed proving their constitution, (ii) presentation of the fiscal status certificate, and (iii) presentation of the cover of the civil liability insurance policy, which must be contracted with an insurer duly accredited by the National Insurance and Bonding Commission. Likewise, by virtue of the reforms to the Tourism Law, additional obligations are established for tourism service providers, including, among others, optimizing the use of water and energy in their facilities and reducing, as far as possible, the generation of solid waste. Furthermore, they are required to ensure compliance with safety requirements, in accordance with current regulations on comprehensive risk management and civil protection.

It is important to note that these reforms are not exclusive to Mexico City. Cities like Barcelona, Paris, Berlin, and New York have implemented similar regulatory frameworks to address issues related to short-term tourist rentals. In the United Kingdom, for example, registration and regulation systems have been introduced for hosting platforms to protect residents' interests and ensure the sustainability of the tourism sector.

In other states of Mexico, such as Quintana Roo, the implementation of new regulations has had an immediate negative impact on the vacation rental market. According to reports from the State Tourism Secretariat of Quintana Roo, the number of units dedicated to vacation rentals in said state decreased by 25% during March 2024.

Despite the recent entry into force of the new regulations under the Tourism Law in Mexico City, it is important to note that, so far, the relevant registries for hosts and vacation rental technology platforms have not been established. We will closely monitor any further developments in this regard and keep our clients informed of any relevant updates.

In case of doubts or comments, or to obtain more details on how these reforms may affect your operations or for additional advice, do not hesitate to contact us. We are here to help you adapt to regulatory changes and maximize opportunities in this new environment.