Mexican Developers Rules

Planning to Buy a Condo?

If you plan to buy a condominium unit in a new or recently completed complex, read this:

Negotiating a fair price, entering a fair contract, choosing the right location, the options and amenities, etc., is not nearly enough, you must have a copy of the CCR’s that will govern the complex and how the HOA will be integrated and how will it be run is also very important, so don’t neglect asking for a copy of the CCR’s and find out if the developer will be controlling the HOA and for how long, also if the developer is to have 2 or more votes per every unit compared to the 1 vote for every resident.

I often hear this from my readers:

“Our community is in the early stages of development; there are 3 dozen lived-in homes. The community is about 2 years old… I have lived here for less than two years. Our developer has appointed a board of directors consisting of three of his employees and not surprisingly maintains solid control of the community.

“HOA meetings haven’t been (are never) held, and the homeowners are given no voice. If any board meetings are held, they’re never announced and minutes, if any, aren’t made available to homeowners. By letter, I suggested to our developer that he form an advisory committee populated by homeowners… and my suggestion was rejected. It would appear that our board has no positive feelings towards the residents, and he has stated to me that that is the way he runs things.”

It All Depends On Your Developer

Too often developers ignore homeowners before the turnover of the HOA to the residents. I have seen varying degrees of involvement from developers and most rule with deaf ears to the homeowner’s demands to hold HOA meetings, to provide financial reports, to provide timely maintenance to common areas and amenities, etc.

Many developers don’t listen to homeowners, developers hold control of the HOA for too long, and for me, too long means holding on to it when more than 50 or 60% of the units or home shave been sold and are not favoring a transition. Homeowners must be put on the board as soon as it makes sense.

When it comes to the transition to homeowner control and the subsequent years, things go much more smoothly when developers have involved owners, the only problem that I have seen s when homeowners do not reside in the community and become part of the HOA. Then when other owners have complained about decisions that were made, those owners that are not steady residents lose a feel for true community issues.

Make sure that your expectations as a homeowner, concerning the HOA, are not out of line with reality. Because pre-transition, developers don’t give a lot of information to homeowners, and there’s not a lot of involvement for them, either.

Developers Rule—and That’s Not a Joke

How much control do developers have pre-transition? Developers usually have the upper hand. In Mexico, developers have almost no accountability to owners’ pre-transition. Also, developer runs HOA’s commonly hit homeowners with assessment increases or special assessments, or they’re materially amending the governing documents without the homeowner’s consent.

It’s quite common and customary for developers’ in Mexico to have employees serve on the pre-transition board, and I will say that this is legal but it leads to too much control by the developer on the community.

Developers also don’t meetings as frequently as needed—the minimum is one annual meeting of the board and one of the members. But they still have to provide notice in accordance with the statutes and bylaws, and owners can attend those meetings unless the topics discussed are privileged. Absolutely minutes should be kept. But like in any association, oftentimes they’re not.

Things Owners Can Do

Pre-transition owners usually don’t have much power, but they do have some. Here are some things that may make developers shape up or begin listening, even when they’re not required to:

1. Find out the process to request documents, and follow it.
2. Work through the management company. A good management company will try to walk that middle line. They don’t want to ruin their relationship with the developer, and when the developer turns over, they don’t want the homeowners’ board to throw them out, either. It’s important for managers to educate homeowners. 
3. Form your own advisory committee. If the HOA bylaws don’t include the possibility to create an advisory committee, which is sometimes called an ad hoc committee, propose it in the next HOA meeting.
4. Spend the money needed to file suit. Often owners are left having to bring an injunction or some sort of declaratory judgment action at their own expense, s that there is relief through courts, but it’s expensive, time-consuming, and not very certain.
5. If it’s time, force turnover. Depending on the way the bylaws and CCR’s where drafted, the developer is usually required to turn over the association to the owners when either 60 to 75 percent of the units have been conveyed or sold or it’s been three years since the declaration was recorded, whichever comes earlier.

So I would suggest considering these comments and suggestions before deciding on buying that condominium, once you have signed that purchase agreement your enjoyment may be limited to the whims of the developer.

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Rafael Solorzano
Attorney at Law / Licensed Exclusively in Mexico
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