Real Estate Articles

August 1, 2012

Donation of Property to Local Governments in Mexican Real Estate Development and Construction Projects

By Jorge Ojeda

Depending on the law of each state, there is an obligation to donate or make payment through a donation property to the municipality and/or state government where the real property is located, whenever a subdivision, urban development, condominium development and/or construction project is carried out. In some cases, this requirement may be burdensome for the developer, since the percentage of land to be donated may be significant. For example, this requirement can be anywhere from 7% to 17% in the state of Nuevo Leon, depending on the purpose of the real estate development. While it is common for the law to establish that donated areas must be used for green spaces or recreational areas, there are also occasions when a … read more

June 1, 2012

Do Mechanic’s Liens Exist in Mexico?

By Jorge Ojeda

In the U.S., a mechanic’s lien is a lien on land, buildings and other improvements that generally arises by state statute and assists to secure payment to those who supply labor and/or materials for construction projects. Mechanic’s liens basically help guarantee payment to contractors and/or subcontractors for labor and/or materials provided for land or a building. The concept of a mechanic’s lien, as understood in the U.S., does not exist in Mexican law, where the performance of certain formalities and proceedings is always required in order to obtain a security interest in real property and its improvements. To begin with, in Mexico, all improvements constructed on a tract of land form a part thereof, and the legal presumption is that … read more

April 30, 2012

Real Property Owner Required to Comply with Social Security Contributions for Employees of their Construction Contractor

By Jorge Ojeda

Real property owners must constantly enter into agreements for the construction of improvements, including buildings, warehouses, offices, etc., in which case the work is carried out by contractors, through their employees or sub-contractors. By law, such contractors are responsible for compliance with the employee-employer obligations related to their contracted personnel and employees arising from the corresponding project. In addition to the real property owner’s risk of being considered a substitute employer of the employees of its contractor, given that the source of employment and beneficiary of the services is precisely the real property of the owner, there is also a risk related to non-compliance with the employee-employer fees that must be paid to the Mexican Social Security Institute (IMSS, for … read more

February 27, 2012

Additional Obligations for Housing Developers

By Jorge Ojeda

Hidden defects are those which affect the use and enjoyment of an item sold and if known to the buyer would have caused him or her to pay a lower price for such item or not to purchase it at all. This concept is recognized by the Federal Civil Code and by the other civil codes of the Mexican Republic, which generally give the buyer the right to demand indemnity against hidden defects for a period six months as of the date of delivery of the goods that are the subject matter of the agreement. This time period tends to be shorter in commercial purchase or sale agreements in which the buyer, unless otherwise agreed, has only 30 days to … read more

December 16, 2011

The Regulation of Forest Lands in Mexico

In Mexico, it is important to verify whether real property used for construction and development is considered to be “Forest Land” and, if so, developers must to change the zoning of such forest land before the Mexican Department of the Environment and Natural Resources.   The General Sustainable Forest Development Law (Ley General de Desarrollo Forestal Sustentable) defines forest land broadly as that which is covered by “forest vegetation,” which means, “The combination of plants and fungi that grow and develop in their natural state forming forests, jungles, arid and semi-arid zones and other ecosystems giving rise to the development and balanced cohabitation of other natural resources and processes.”  Given the lack of a national forest inventory, Mexican federal environmental authorities … read more

November 8, 2011

Forms of Construction Agreements

By Jorge Ojeda

There are various forms of executing construction agreements, with the most common being: (i) the construction agreement for management of work, in which the owner of the work entrusts the management of the construction to a contractor who provides services in exchange for a fixed payment. However, at all times, the individual who contracts with suppliers is the owner of the work, with the support and management of the managing contractor; (ii) the fixed price construction agreement, in which the contractor agrees to carry out the construction for a fixed price and is bound to comply with the specifications agreed to by the parties, with all the materials, labor and other direct and indirect costs included in the fixed price; and … read more

September 8, 2011

Things to Consider When the Lessor Is Not the Owner of Leased Real Property

By Jorge Ojeda

In general, lessors own the real property they lease to their lessees. However, several exceptions provided by the local civil codes allow a person other than the owner to lease real property in Mexico based on: (i) instructions received from the owner, in which case the agreement will be considered as if executed by the owner; (ii) the owner’s authorization of a certain person for such purposes, in cases in which the authorized individual will grant the lease directly without intervention by the owner; (iii) authorization to the lessee to sub-lease, either generally or by means of specific authorization from the owner; and (iv) the express authorization by law conferred upon individuals such as guardians, executors and those who have … read more

August 8, 2011

Changing the Authorized Land Use Is a Crime in the Federal District

On June 27, 2011, an amendment to the Penal Code for the Federal District (Código Penal para el Distrito Federal or CPDF) was published in the Official Gazette of the Federal District (Gaceta Oficial del Distrito Federal), which included, among others, the modification to article 343 bis with respect to using real property in a manner that is different from the authorized land use. Previously the law sanctioned the unlawful use of real property contrary to the authorized land use, while the new amendment imposes sanctions of three to nine years of imprisonment and a fine on the persons who intentionally use land in a manner other than that which is authorized, making this a serious crime under which one … read more

July 8, 2011

The Difference between Subdivision and Urban Development

Although “subdivision” (subdivisión) and “urban development” (fraccionamiento) appear to be similar terms, from a Mexican legal standpoint, they are different. According to the General Law of Human Settlements (Ley General de Asentamientos Humanos), Mexican states have the authority to legislate in the area of human settlements and urban developments. Consequently, differences between both concepts should be reviewed according to the local laws on urban development. Nevertheless, the following provides some of the principal differences generally accepted in local laws. Subdivision implies the partition of property into two or more sections, with each of the sections having access to public roads. Each of the subdivided lots must comply with the minimum surface area established by the urban development plans applicable to … read more

June 5, 2011

The role of a Mexican notary public in the acquisition of Mexican Real Estate

In many cases, it is easy to question the role of the notary public in formalizing the sale of real estate in Mexico, which leads us to analyze the scope of the notary’s services and the legal certainty provided by notaries public in transactions of this nature. The notary public in Mexico is a lawyer who receives an additional license as a notary public, which allows him/her to be a notary in different types of transactions and legal acts, including those relating to real estate sales transactions. The notary participates in the legal transaction, that is, he/she renders his/her signature to formalize a contract, drafts the contract or revises the legality of the contract provided by the parties. The notary’s … read more