Playa La Madera

Playa La Madera. Photo by Paul Curry.

This article covers condominium law in Mexico, how a condominium legally works and what are the rights and obligations of owners.

Governing rules

The governing rules for condominiums are the Condominium Ownership Law No. 557 of the State of Guerrero (referred to here as the Law), and the Condominium Regime, which contains the individual condominium development’s owners’ rules and regulations.

The Condominium Ownership Law No. 557, is a law of social interest and a public law; therefore, the provisions cannot be superseded by the condo regime. The condominium regime is a document granted before a notary public in Mexico and recorded with the Public Registry of Property. This regime shall contain the corresponding licenses, location, surfaces, metes and boundaries, description of the property, its private units and common areas or strata, value of each property and common shares, use and description of the property, cases when the condo regime may be amended, payment of maintenance fees, construction permits, plans, blueprints, common shares table, utilities plans, appraisal, and rules and regulations.

In short, the condominium regime is the manual of your condominium showing all the information regarding engineering, architectural, managing and legal procedures that you need to know. This is public information and you can obtain a copy from the Public Registry of Property.

The rules and regulations, I am going to refer to for practical reasons as “the by-laws.” These are part of the condominium regime and shall contain the rights and obligations of the owners, the procedure to collect maintenance and reserve fees, the amount and periodicity of these fees, the type of management the condominium has, as well as the procedures to establish a surveillance committee, to hold the owners’ meetings, to change the by-laws, the use of common areas, and the issues foreseen by the law and the condominium regime among other matters.

It is worth mentioning that there are other applicable laws, but this is the main legal frame governing a condominium in Guerrero, Mexico.

Type of properties

A condominium is composed of private units and common areas or strata, with the understanding that a private unit is the property that its owner can dispose of, while common areas or strata are owned by all the owners in common shares, and are regulated by condominium regime and by-laws.

It is very important to mention that in your capacity as owner of private property, nobody can rule on the manner in which you handle your property (e.i. limitations as to rentals or denying access to your property). These types of actions constitute a crime of dispossession.

Who is an owner (condómino)?

By law, an owner is the person (individual or corporation) that has ownership rights in respect to a property.  It is the owner (or the beneficiary in first place of a trust) of a private unit of a condominium. In English, this means that the individual, corporation or foreigner who is the first place beneficiary of a trust of the property shall be considered the owner (condómino).  In the case of a foreigner being the beneficiary on first place of his/her trust, he/she may attend and vote during a meeting of owners, with no need of a proxy from the bank (trustee).

What are the governing bodies in a condominium?

The governing bodies in a condominium are the Owners Meeting, the Surveillance Committee and the Manager of the condominium.

The Owners Meeting (or Home Owners Association – HOA) is the supreme body and the only one allowed to amend the condo regime, to appoint the Manager and the Surveillance Committee.  Also, to establish maintenance and reserve fees, and approve budgets and reports. The Owners Meeting is the supreme body in a condominium and it does not need to be incorporated as an entity to meet and approve resolutions related to the condo, with the understanding that these meetings need to be carried out in accordance to the law and the by-laws.

In Mexico, it is recommended to create a Civil Association (Asociacion Civil, A.C. for its abbreviation in Spanish), so that this entity becomes allowed to open bank accounts, hire employees and pay the expenses of the condominium.  With an A.C. you may reduce tax and labor contingencies for individuals, with the understanding that owners meetings may be held without having an A.C. I can say that an A.C. is most similar concept to what Americans and Canadians call a Home Owners Association (HOA).

The Surveillance Committee is comprised of two to five owners and its main functions are to supervise the performance of the Manager, to verify the reports provided by the Manager, to control the use of funds, to inform the Owners Meeting about any concern related to the management, to call meetings and to request the presence of a notary public.  Please be aware that 50% of the committee may be reelected for a subsequent period, but under no circumstances is the President entitled to reelection.

You could say that the Surveillance Committee is the “eyes” for the rest of the condominium owners in order to check that everything is running smoothly.

The Manager is the person in charge of keeping the minutes book, taking care of the goods of the condominium, carrying out the resolutions approved by the Owners Meeting, keeping records of all documents and information, managing the condominium, collecting fees from the owners, paying expenses, issuing receipts, delivering reports, calling meetings, verifying the fulfillment of applicable regulations, and additionally, the Manger has a power of attorney for litigation and collection and to initiate  administrative or judicial procedures against owners who do not fulfill their corresponding obligations.

How to hold an owners meeting?

As mentioned above, the Owners Meeting is the supreme body of the condominium, and in order to meet and approve legal and binding resolutions, certain aspects must be considered, such as how to properly call a meeting, how to hold the meeting in the condominium, how to verify that the owners are attending the meeting (personally or by proxy ), to have the required assistance and voting quorums, and to validate the minute, etc… These guidelines shall be provided in the by-laws and the law.

The call to a meeting has to be drawn in Spanish and within a certain period of time.  The call may be made by the manager, the Surveillance Committee or 25% of the owners. These same persons may request the attendance of a notary public in order to validate that the meeting has been legally called, installed and performed.  This makes it possible to have a legal record of the meeting and eventually constitute better grounds in case that the meeting or its decisions are challenged.

Owners may attend meetings personally or through a proxy, this rule being applicable for foreigners who in their capacity as owners are allowed to vote with no need to request a power of attorney from the bank holding their trust, as mentioned before. It is very important to mention that any owner who fails to pay two or more maintenance or reserve fund fees, shall be allowed to speak but not to vote at the meeting.

In order to consider a meeting legally installed in a first call, 75% of the owners shall be required to attend.  51% in a second call, and in a third call, whichever owners are present.  In all cases, any resolution may be approved by the majority of attendants to the meeting.

It is very important to mention that when one of the owners has more than 50% of the votes, the general rule is that a 75% of the total votes is required to reach a resolution, with the understanding that if this is not possible, the relevant matter will have to be solved by the competent court.

Once the meeting is legally installed only the matters of the agenda (included in the notice) may be discussed.  For every proposal a resolution must result.  It is recommended that the minutes be notarized in case it becomes necessary to present it before court.

Fees

The fees in a condo are divided into a) Maintenance fees, which are the payment for the day to day expenses that shall be allocated among the units that form part of the condominium in the form that it is approved by the owners meeting, and b) Reserve funds which are allocated among the units considering its value. Generally, the common share that the unit represents is the value used to divide this expense. In addition to these fees, the law considers an extraordinary fee in case that maintenance and reserve fund fees are not enough.

For the payment of these fees no offset, exception, or any other reason may be used to excuse non-payment.

As to delinquent owners, the Manager may prepare a statement of debt including the amount owed, accrued interest and penalties applicable, enclosing a copy of the minute book of the meeting and the by-laws duly signed by the President of the Surveillance Committee and the Manager. This statement is legally considered as a credit note; therefore, the property of the delinquent owner may be seized through an executive civil lawsuit so that he/she either pays the amount owed, or his/her property may be auctioned.

From my experience, I can tell you that buying property in Mexico sometimes goes beyond than just checking terms of payment. In the case of acquiring property in Condominium, it is worth taking a look at the condominium regime and the by-laws, and obtaining a proof that all maintenance fees have been paid by the previous owner in order to make a safe acquisition, consequently avoiding headaches and further expenses.