JaliscoCondosOrg Blog

Category: Delinquencies

  • Unconstitutionality of Article 1032

    The issue…

    In my last post about the delay in publishing the “Jalisco Condo Manual – Second Edition,” I mentioned that a higher court in Jalisco had found that Article 1032 of the Jalisco Civil Code was unconstitutional. I’ve received a surprising number of enquiries for details about this, and thought it easiest to deal with it in another blog post.

    Article 1032 is the civil code article that allows a condo to petition a judge to sell a unit at public auction if the owner repeatedly fails to pay fees, or violates other obligations.

    How we found this out…

    A condo decided to sue a particularly intransigent delinquent owner, and to rely on Article 1032 to rid the condo of the problem owner. This type of lawsuit is usually faster than a typical suit for recovery of a debt. However, there were unusually lengthy delays in getting the documents reviewed and approved by the judge.

    Working through a Guadalajara lawyer, we discovered that the local court had never had a suit like this before. In the past, local area condos had always just sued for the money owed. The judge, being unfamiliar with this article and its procedures, wanted more information before proceeding with the suit and the auction.

    The lawyer did some searching in court records in Guadalajara to find an example case the judge could review.

    He uncovered a case where a condo had successfully sued under Article 1032. The owner of the unit (a lawyer) had launched two appeals, which were denied. The auction was ordered to proceed, and a buyer was found. The owner launched one more appeal, and was, unfortunately, successful!

    The argument he used in this final appeal was that, the way Article 1032 is written, it precludes the owner from presenting a defence.

    The constitutional problem…

    Article 1032 just requires the condo to petition a judge with sufficient documentation, and if it has proven that it is a properly constituted condo, the identity of the titleholder, and that a repeated violation has occurred, the judge will then order the property to be sold at public auction. There is no provision in this article for any submission from the owner.

    Article 14 of the Mexican Constitution establishes the key legal principle of Seguridad Juridica (Legal Certainty). When the state seeks to use privation against someone (the act of taking away property or rights), this can only be done by means of a trial held in front of the courts. There can only be a judgement imposed against the defendant if they are allowed to contradict that which they are accused of, or that which is demanded from them, and that they be allowed to defend their interests.

    All laws passed in México must comply with this basic principle, and because Article 1032 doesn’t allow for this (because it has a defect in its wording), the higher court deemed it unconstitutional.

    History of the case…

    The case in question occurred in the Ninth Civil Court in Guadalajara. The lawsuit was admitted, and, following Article 1032 of the Civil Code and the corresponding civil procedures, the Judge gave the defendant a 5-day term to name his property appraiser. The defendant did not accomplish this. The defendant challenged the decision of the court, and the judge denied it, based on the way Article 1032 was worded.

    The defendant then filed an amparo lawsuit (a type of injunction on constitutional grounds) saying that Article 1032 violates his human rights. The judge for the amparo suit did not grant a hearing because he felt that the procedural stage of the lawsuit did not permit such an appeal.

    The Judge, following the rules in Article 1032 and the associated civil procedures, received appraisals from the condo and from a court-appointed appraiser, and established the value of the property. The Judge then ordered that the property be put up for auction following the auction procedures set out in the Code of Civil Procedures.

    A person was interested in buying the property, and presented an offer of purchase to the Judge. After publishing the required proclamations, they won the auction sale, and the property was ordered to be transferred to them as the new owner.

    Later, the defendant filed another amparo to revise entirely Article 1032 to comply with the constitutional principle that obliges the laws of all States of the Republic to not violate the Constitution. The judgement of the Fifth District Court in Civil Matters found that this article does violate the principle of a hearing, since the article does not allow the defendant to be heard in a trial before receiving a judgement. This higher court ordered the judge in Guadalajara to abandon without effects all judicial acts in that judgement.

    You can find the details in “Juicio de amparo indirecto 213/2012-III” (Judgement of Indirect Amparo 213/2012-III) published by the Juzgado Quinto de Distrito en Materia Civil en el Estado de Jalisco (Fifth District Court in Civil Matters of the State of Jalisco) on March 8, 2012.

    The ramifications…

    It is important to understand that this ruling does not change the Civil Code, nor does it create new law. Article 1032 still exists as written.

    However, if you use the procedure outlined in this article to sue a delinquent owner, and that owner appeals using this constitutional argument, you will likely lose your suit, and will have to pay the delinquent owner their legal costs, as well as being out of pocket for your own costs. If, as was the case for the Guadalajara condo, the case had proceeded to the auction stage, these out of pocket legal costs combined with the paid-out costs for the defendant were substantial (I believe about $70K to $80K pesos).

    Until the state Congress rewrites this article, and modifies the Civil Code, a condo’s best approach may be just to sue the owner for the unpaid fees as a debt.

    The problem with this is that, depending on the back-log of cases in the local court, this could take 1-1/2 to 2 years. It’s unlikely such an owner would pay fees during the duration of the suit. Therefore, if you won, you’d likely then have to initiate a new suit to recover these new unpaid fees. And on and on…

    The ideal, in my opinion, is what was intended by Article 1032 – removing the problem once and for all.

    As I mentioned in my last post, we have a modified suit before the courts now that we hope will accomplish this goal, but which we hope cannot be overturned using this constitutional argument. Unfortunately, we don’t yet know if it will succeed. Once it has concluded, one way or another, I will include all the details of what we learned in the “Jalisco Condo Manual – Second Edition.”

    We also intend to work to lobby the state legislature to make the necessary changes to the wording of Article 1032 to make it comply with the Constitution. Although they are continually updating and changing the Civil Code, this issue is likely not high on their list of priorities. We hope to change this, and get it on their radar. However, this is a future project…

  • Status of the “Jalisco Condo Manual – Second Edition”

    The “Jalisco Condo Manual – Second Edition” was originally scheduled to be published in July, 2015. Unfortunately, there has been a significant delay in this new edition because we need to include details from two ongoing and important issues:

    1. We are currently walking a condo through the entire process of SAT registration, bank account set-up, contracting of an accountant, and regular financial reporting – to be sure they fully comply with the new tax laws. Once this is done, we’ll have a detailed real-world guide on how to do this for the new edition of the book. Not surprisingly, this is taking longer than expected.

    2. A high court in Jalisco has ruled that Article 1032 (that allows a condo to sell the property of a delinquent owner at public auction) is unconstitutional as written. Because this is such a key article, as well as a vital weapon in a condo’s arsenal against delinquencies, this has significant impact on how to sue a delinquent owner. We are walking a test case through the Jalisco courts with a modified method of suing that we believe circumvents the legal problem. Once we figure out how this can be done successfully, with the end result being the removal of the delinquent owner from the condo, we’ll include complete details and procedures in the new edition. The case is progressing well, but such things always take longer than you might expect.

    Since these are both vital issues affecting condos, we have decided to wait until we have all the information before completing the new edition. This will make the new book much better and more relevant! Unfortunately, at the time of writing this post, we are still a few months away. We believe that the finished product, however, will be worth the delay.

    We hope you understand, and thank you for your patience.

  • Cutting-Off Water to a Delinquent Owner

    Any condo that has delinquent owners is frustrated by this state of affairs, and is always looking for any pressure they can apply to get these people to pay.

    Rather than a municipal water supply, some condos have their own water supply (often in the form of a well).

    They don’t actually own this water supply (it isn’t common property), since water is a national resource that always belongs to the Republic. What they should have is a concession from the Comisión Nacional del Agua – CONAGUA (National Water Commission). This is a federal body, set up to administer the nation’s water, along with a decentralised management system for it. This concession gives them a temporary right to use and distribute this water to users in their condo.

    Other condos might have a common property aljibe (water tank) that’s filled by the municipal water utility, and then water is pumped from this aljibe through the condo by a common property water pumping and distribution system.

    In either case, it’s tempting to want to shut off water to a delinquent owner to give them an incentive to pay.

    Water is highly regulated in Mexico

    The laws governing water use in the state of Jalisco are as follows (from highest authority to lowest):

    1. the Mexican Constitution and International Treaties on Human Rights (NEW – more on this later)
    2. the Ley de Aguas Nacional (National Water Law)
    3. the State of Jalisco Constitution
    4. the Ley Del Agua Para el Estado de Jalisco y Sus Municipios (Water Law for the State of Jalisco and its Municipalities)
    5. the Reglamento (rules of procedure) for the above law
    6. the Reglas de Operación de la Comisión Estatal del Agua de Jalisco – CEA (Rules of Operation of the State Water Commission of Jalisco – CEA)

    There are also several Normas Oficiales (official standards) for such things as the quality of water delivered for human use and consumption.

    The CEA is an organization made up of the representatives of local water boards or local organizations of water users (such as fraccs and condos), CONAGUA, and other competent authorities, and acts as the coordinating body in the respective watersheds in terms of the law.

    You cannot cut-off water

    Deriving from the National Water Law, and being amplified in the lower laws, is the right to water for drinking and sanitation. This is considered a basic need for life, and cannot be cut off.

    That said, you do have the right to enforce sanctions if you have a contract for water delivery with your owners, and this contract spells out the violations and the corresponding penalties. This contract could include a clause to limit water use in the case of non-payment. NOTE: the terms of your contract with your users cannot violate or contradict the terms of your water concession.

    Turning it down to a trickle

    A common practice has been to decrease the water flow to the unit to a minimal amount. Then you could argue that you hadn’t cut-off the water, but the owner might be inconvenienced enough to pay up.

    If your condo has its own water supply, and you have a water concession from CONAGUA, you need to carefully read the Terms and Conditions of your concession. It might have limitations on what penalties you can impose on your water users, including reducing or limiting their water. If you decrease water flow to a user, and your concession doesn’t let you do this, you could lose your concession.

    If your condo collects and redistributes municipal water, you might be in a better position. The aljibe, the pumps, and the distribution piping are common property and are jointly owned by all owners (including the delinquent owner). As such, you can’t deny an owner access to property (in this case equipment) that they own (jointly or fully). However, you can argue that in this situation the water itself (not the distribution system) is a service for which the condo pays from revenue received in the form of fees. Non-payment of these fees might be cause to reduce the non-paying owner’s water supply.

    Two important and recent changes to the Constitution

    Two recent changes to the Mexican Constitution might make the practice of reducing water risky.

    1.  In June of 2011 Articles 1 and 103 of the Constitution were changed to give equal weight to human rights contained in international human rights treaties to which Mexico is a party, and to make these enforceable by the Federal courts.

    The General Assembly of the United Nations at its 108th plenary meeting on June 28, 2010, adopted resolution A/RES/64/292 which says, in part:

    “1. Recognizes the right to safe and clean drinking water and sanitation as a human right that is essential for the full enjoyment of life and all human rights;“

    As of June 2011, this is now part of the Mexican Constitution and Federal Law.

    2.  To further shore this up, in February 2012 a new paragraph was added to Article 4 of the Constitution, as follows:

    “Every person has the right to the access, distribution, and sanitation of water for personal and domestic consumption in a form that is sufficient, healthy, acceptable, and accessible. The State will guarantee this right and the law will define the basis, the assistance, and the means for access and fair and sustainable use of the water resources, establishing the participation of the Federation, federated entities, and municipalities, as well as the participation of the citizens for the attainment of these goals.“

    It’ll take a few more years before this filters down into procedures in the other Federal and State laws, but it signals a significant change. Mexico is clearly getting in sync with a global movement towards making access to water a basic and fundamental human right. And, even though there might not be systems in place for fully carrying this out, it’s now a Constitutional right in Mexico.

    One of the more important words in this new article (that may have been intended to plug the trickle loop-hole) is “sufficient.” What exactly does this mean? In the context of the right to water, the internationally accepted meaning is this:

    “The water supply for each person must be sufficient and continuous for personal and domestic uses. These uses ordinarily include drinking, personal sanitation, washing of clothes, food preparation, personal and household hygiene. According to the World Health Organization (WHO), between 50 and 100 litres of water per person per day are needed to ensure that most basic needs are met and few health concerns arise.“

    Not exactly a trickle!

    These new changes could make it easy for a delinquent owner to get an injunction against the condo for seriously reducing their water. The injunction process is different from a lawsuit, and is much faster.

    Anyway… something to think about.

  • Can Delinquent Owners Vote at an Assembly?

    The controversy

    I think I might have chosen a controversial topic for my first blog post, but I’ve received questions about this topic from multiple condos both on the coast and in the Lake Chapala area, and I think it’s an important one!

    On page 37 of the “Jalisco Condo Manual” I wrote, “It isn’t legal to prevent an owner from voting at an assembly for any reason, including if they’re late in paying fees or assessments.”

    This post has been updated since it was first published with an opinion from a notario (see “A conclusion…” at the end).

    So, how did I come up with this?

    I based this partly on a legal opinion that our condo got when we were planning our first assembly to change the administration from the developer to the owners several years ago. The developer had forbidden delinquent owners from being at and voting at the assemblies, and the transition team wanted to know if this was legal. The legal opinion they got said that it was not. Unfortunately, this opinion wasn’t in writing.

    As well as this legal opinion, the opinion in my book was based on some reasoning:

    The condo law doesn’t set up categories of owners – it just defines owners (or, more correctly, condóminos or title holders). These owners are then given rights and obligations by the condo law.

    This can be interpreted as meaning that an owner is an owner, whether blue, four-feet tall, or delinquent.

    There’s nothing in the Code to suggest that a condo owner loses their inherent rights just because they’re behind on their fees. I believe that the right to be at a condo assembly, and to vote is a real right that’s attached to the title of each condo unit.

    • The section of the Code on owners’ rights and responsibilities does not qualify that these rights only apply when an owner is current.
    • The section on assemblies simply refers to owners attending and voting, and does not in any way qualify this.
    • The section that explicitly deals with the remedy for non-payment of fees does not mention that delinquent owners can be stopped from voting at an assembly (if this were the intent of the legislation, I’d expect something to be found here).

    Summary: since the Code gives explicit rights to owners (and I believe that property owners also have more rights under other sections of the Code), and since it doesn’t appear to lessen or change these rights when the owner becomes delinquent in their fees, I don’t believe that a lesser authority (such as the by-laws or a Council/Board) can override these fundamental rights.

    Another compelling argument was brought up by a commenter below: if your delinquent owners together have 26% or more of the condo rights, and you bar them from voting at assemblies, then you can never hold an extraordinary assembly (because you can never get the minimum 75% of the total condo rights needed to pass a motion).

    Dueling lawyers

    I’ve been told by various condos that they have legal opinions from local abogados telling them that they can and that they cannot prevent delinquent owners from voting at an assembly. Yes, you read that correctly… there are conflicting, polar opposite opinions out there.

    The problem is that none of these opinions are in writing, nor are there any citations. By citations, I mean that the lawyer says you can do this because of Article xxx of the Code, or the Ley de Blahblahblah, Article yyy. Without this, it’s impossible to know if they’re just off-the-cuff opinions (that might not be correct), or a fact of law.

    If I were on a Council/Board of a condo that was planning to enact a policy to take away a fundamental right of an owner, I’d want to have a very clear legal position to back this action up.

    Without this legal backup, I’d strongly recommend erring on the side of caution. I wouldn’t try to stop an owner voting at an assembly because they’re delinquent in their fees, unless I had a detailed (includes citations) written legal opinion from a Mexican legal professional supporting this action.

    A challenge to the community

    This is a controversial and important topic. I, for one, would like a definitive answer. If I see something concrete, I’m more than ready to change my position on this.

    So… if any of you out there have a definitive legal opinion on this, please share it in the comment section below this post! If you’ve prevented morosos from voting, and have run afoul of a lawsuit or other legal problem, please also share your story! If you prefer your comments or stories to be anonymous and unattributed, please use the “Email Us” tab on the left of this page to send us a private email.

    With the breadth of experience in the condo community in Jalisco, maybe we can all get a conclusive answer on this. Community interaction is one of the reasons I started this blog…

    A conclusion… [Update]

    I have received an email from a Jalisco notario whom I respect very much. He says that a formal legal opinion on this issue should not be needed because voting at an assembly is a basic right of condo owners. He adds that if a condo has an issue with unpaid fees, it must be dealt with in a law suit, and can never be used as an excuse to deny voting rights.