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Friday, March 2, 2012

Investing in Mexican Real Estate: Outlook, Framework and Special Considerations (Part 4)


This part explains the general pre-offer considerations and the process through which foreign nationals generally acquire ownership to real property located within the Restricted Zone. Unless otherwise specified, the contents of this section are based on the laws for the State of Baja California due to its proximity to California and the large number of resorts, condominiums and private residence clubs that are being developed in such State.

A. Pre-Offer

Certain threshold issues must be addressed before offering real estate products located in the Restricted Zone. Such key issues include the need for a condominium regime and the creation of a homeowners association.

1. Condominium Regime

The condominium is the optimal method of structuring real estate projects in Mexico. In particular, a condominium structure (a) allows each unit to be individualized and capable of being individually sold, (b) establishes each unit’s co-ownership share in the common elements and amenities of the condominium, and (c) provides the framework for the establishment and enforcement of condominium rules and regulations and for the creation of a condominium homeowners association, which are critical elements for the adequate operation, use and enjoyment of a real estate project.

2. Homeowners Association

Under Mexican condominium laws, the general assembly or Asamblea de Condóminos formed by all owners of the condominium is the governing body of a condominium. However, the condominium and the general assembly are not legal entities. Thus, it is common practice for condominium general assemblies to irrevocably assign their powers and authority to, and exercise such powers and authority through, a non-profit civil association formed for such particular purpose by the condominium owners. This provides a structure similar to a U.S. homeowners association and under which the general assembly may exercise its powers and authority and enter into contracts for goods and services as required by the condominium and its owners while protecting such owners from being personally liable for any obligation derived therefrom.

3. Trusts

As previously discussed, non-Mexicans can only acquire ownership to coastal property through a beneficiary interest in a trust. (To be continued)