OSUNA GONZALEZ Y ASOCIADOS, S.C.
ABOGADOS - ATTORNEYS AT LAW
A Mexican Law Firm Specializing in Cross-border Dispute Resolution and Arbitration
After the Baja Bust, there is still Relief for Distraught Buyers
By Alejandro Osuna, LLM,
If you bought a piece of real estate in Mexico from a developer or broker, it is likely that the contract you entered into is invalid.
According to the Federal Consumer Protection Law, contracts of adhesion for real property, acquired for residential purposes must be registered with Mexico´s Federal Consumer Protection Agency. The contracts that require registration include contracts for the sale of time shares.
The registration isn’t automatic. The Federal Agency must first review the contract to verify that it satisfies the requirements provided for under the Law, such as inclusion of information describing the project, if available, language regarding the existence of a model unit. Other requirements include the description of documents that prove that the developer owns the property, the existence of any liens, and/or authorization to sell the property. It must also include information regarding the payment of assessments or fees for public services.
With regard to new projects, the contracts must describe the licenses and/or construction permits, technical specifications, the type of materials to be utilized the potential buyer. If the property to be sold does not have such documentation, the contract must expressly advise. Other information that is required includes a description of the property, size of the lot, size of the construction, type of structure, finishes, accessories, parking space(s), areas of common use, a percentage of the area assigned, services, and a general description of the property.
Minimum Information Required in Real Estate Contracts
Per article 73 TER of the Federal Consumer Law, for a contract to be recorded it must include the following information:
I. Place and date in which the contract is to be made;
II. It must be written in the Spanish language, without prejudice to it being prepared in another language. In the event of a dispute, the Spanish version will control;
III. Must include name, address and tax payer number of the developer;
IV. A space to include name, address, and if applicable, tax payer number of the buyer.
V. Specify the amounts that are to be paid in Mexican Pesos, though the contract may also include the price in a foreign currency;
VI. A Description of the object of the contract;
VII. Total value of the transaction, form of payment, as well as any other additional expenses that the parties are to incurr;
VIII. A list of the rights and obligations of seller and consumer;
IX. Contractual penalties that apply to seller as welll as to the consumer in the vent of breach, which must be mutual and equivalent, without prejudice with what is provided for under other statutes;
X. The guaranty that is granted to secure performance of the contract, such as a performance bond;
XI. The process to cancel the contract of adhesion and the implications for developer and consumer;
XII. The date on which the service or property will be delievered;
XIII. Contracts that involve the sale of real property, the seller must include a description of the property, and the characteristics of the building and structures, of the furhinishings and finishes;
XIV. In realty contracts, these must include the conditions under which the final deed is to be signed, including a mention of whether the property shall be free from liens at the time the deed is issued.
What happens if the Contract isn´t Registered?
Per article 87, second paragraph, of the Federal Consumer Protection Act, contracts whose registration is required under the Law, or under an Official Government Standerd, or whose registry has been denied, shall be ineffective as agains the Consumer. This effect was confirmed in 2005 by Mexico´s Supreme Court of Justice, the Highest Court in the Country.
So, if you have bought into a timeshare, a condo or a house from a Developer anywhere in Mexico, and that contract that has not been registered with Mexico's Federal Consumer Protection Agency, it is likely that the contract is unenforceable against you. In my experience, I have yet to see a single real estate contract that has been properly registered with the Federal Consumer Protection Agency.
So, what´s the effect?
In a nuthsell, the contract is not enforceable as against the buyer. In addition, the consumer may pursue an action against the developer, including, performance, or a declaratory judgment that the contract is void, which would have the consequence of ordering the Developer to return your down payment money plus interests and legal fees.
Copyright, 2015, Osuna González y Asociados, S.C. All rights reserved.