Puerto Vallarta Real Estate Magazine The Sales Contract. Lady Justice is an international symbol of law and justice. She is always portrayed holding a balance which represents equity for all the parties of a transaction or dispute. Equity for all parties is precept that applies not only in the legal field, but also in the business field with the famous “win-win situation”. All contracts should also be fair and balanced. However, there are some contracts that can be one-sided and this may represent a risk to one of the parties. Developers in Mexico are prone to have one-sided contracts in their favor, even though by law there are required to include certain clauses in those contracts for the protection of the buyer.
Under Mexican law a contract is defined as “an agreement between two or more parties to create, transfer, modify, or extinguish obligations.” Contracts are an essential element of any undertaking since they provide clarity and accuracy to the terms, conditions and obligations agreed between the parties involved in a transaction. In real estate matters, contracts are of paramount importance, especially in countries like Mexico where anything that is written in a contract has significantly more value than any verbal agreement reached by the parties.
So what clauses is the developer required to include in the sales contract in Mexico?
The Mexican Consumer Protection Law states in article 73 and 73 Ter, that the developer must register the template of the sales contract before the Consumer Protection Agency, and in order to be registered the contract must include the detailed rights and obligations of both parties, equal penalties for both parties in case of default, a specific date when the construction will be finished, a specific date for delivery of the unit, a specific date for the transfer of the title, and the technical characteristics of the construction and the finishings.
And can there be an extension in case the construction is delayed?
According to the Federal Consumer Protection law, the developer can only unliterally extend the delivery date if he provides proof to the Consumer Agency that this delay was caused by Acts of God (such as a hurricane or earthquake) or Force Majeure (such as a strike or a riot). Other than that, the developer will be in default and in order to have an extension you will need to sign an amendment to the sales contract.
Having a balanced contract requires both negotiation and knowledge of the law. It is usually when one of the parties is kept in the dark that a contract is one-sided towards the other party. If you are buying property in a foreign country you should know your rights, foresee any risks and have proper legal representation, this way you will have a fair contract and you will protect your investment.
So if I have a verbal agreement with my realtor, is that considered a valid contract in Mexico?
Mexican law does not specify that a contract for the provision of services (in this case real estate agency services) requires to be in writing to be valid. However, the ideal scenario would be for you to have a written contract with your realtor since in case of a dispute, the written contract would have more probatory value of the relationship between you and your realtor. A written contract will also be very helpful in determining the specific obligations of your realtor and the specific cases in which he or she would be in breach of contract.
What about indemnity in case my realtor was negligent or acted in bad faith?
Article 2261 of the Civil Code for the State of Jalisco establishes that the provider of a service will be responsible towards the client for any negligence, lack of expertise or fraud incurred in the provision of the services. In this case, a written contract can also be very helpful in a Mexican court since it will provide a judge the documented evidence of a contractual relation and this will facilitate a ruling condemning your realtor to indemnify you by paying damages and lost profits. Furthermore, in case of criminal activity by your realtor, the written contract can be used as a piece of evidence in a Mexican criminal court.
There is a famous saying that goes: “Words are gone with the wind”. Nowhere has this saying more significance than in a legal dispute, especially here in Mexico. This is why a written contract with your realtor will not only be of use in court, but it will also be a preventive tool since your realtor will know that not honoring the contract can bring serious legal consequences.
This article written by Mexican real estate attorney Roberto Ortiz De Montellano. View his website here.