Is a Condo Responsible For Property Tax Bills?

An issue has come up recently that’s produced a flurry of questions from my readers. This topic seems to have created more interest than any other. So… a blog post seems in order.

Disclaimer

I have no first-hand knowledge of this situation. Everything I know about what the municipalities are allegedly doing is second and third-hand.

As always, these are my personal opinions and not legal advice. If your condo is directly affected, you need to get a Mexican legal professional involved.

Municipal back taxes

It appears that some municipalities in Jalisco are trying to ferret out property owners who have not paid their property taxes. Presumably, this is to create more revenue for the city coffers.

Apparently, they’re trying to identify unregistered construction and lots. Unfortunately, it appears that condominium common property has also come under their radar.

They appear to have hired property assessors to take measurements and photos of property they suspect, and to arrive at a tax value. From this, they seem to be assessing back taxes and penalties. They might be going back as far as ten years.

At least one condominium that I have heard about has been presented with a large bill.

Issue #1: a condominium is not a property owner

In my opinion, the municipality should not invoice a condominium for property taxes – current taxes or back taxes. This is because a condo does not own any property, including the common property.

The common property is co-owned by all owners. Each owner’s title to their private unit also includes a percentage ownership of all common property. This is clearly set out in each owner’s title document. Article 1001 of the Jalisco Civil Code defines this proportional ownership of common areas and property, and says that such ownership cannot be separated from the individual property.

From this I believe that if any property taxes are owed, then they’re owed by the owners of the property, and not by the condo. It appears that they might be going after the wrong party to collect these. In my opinion, the tax department is taking this approach because it’s easier to try to collect from a single source than from multiple property owners.

Issue #2: are back taxes owed?

The municipal tax department must assess property taxes on any property that’s correctly registered with a public title. All private units in a condo presumably fit this bill. The registered titles for each condo unit specifically include a percentage ownership of the common property.

When a valuation is placed on a condo unit for tax purposes, one would expect that it would take into account the co-owned portion of the common property that’s clearly defined in the Civil Code and in the title document of the unit.

If a tax department is now claiming that they failed to do this, then I’d expect that they must prove that their valuation did not include the common property.

If they can prove that their tax valuations did not include the percentage ownership of the common property, then they can likely recover the lost taxes. However, I fail to see how they can attach penalties to an error that they made.

My condo has always paid the property tax

A few condos have an arrangement in their by-laws by which they pay property taxes.

This might or might not mean that the condo has a tax obligation to the municipality.

I think it would depend entirely on the wording of the by-laws. Remember not to get bogged down in the semantics of any English translation of your by-laws. This is easy to do. All that matters is what it says in the Spanish version that has been publicly registered.

Hopefully, such a by-law clause would only appoint the condo administration as an agent to pay owners’ property taxes from the budget and fees as a convenience to the owners. In my opinion, this is a dangerous thing for a condo to do. However, if that’s what your by-laws say, then you likely have this obligation.

If this applies to your condo, then you need to have a Mexican legal professional examine the wording of your by-laws to determine how liable your condo might be.

What should we do?

If your condo has not been presented with a bill for back taxes, then I don’t believe there’s anything for the administration to do other than take part in public discussions, and keep informed on the issue.

If your condo has been presented with a tax bill, then I think your administration first needs to talk to a Mexican legal professional. I believe that ultimately the goal of the condo should be to shift this tax burden to the individual property owners where it belongs.

I wouldn’t suggest that the Administrator or the Board pay any such tax bill without the specific agreement of the owners meeting in an extraordinary assembly convened for that purpose.

If the individual owners receive tax bills, then they can try to dispute this on the basis that the taxes they have been paying included or should have included the common property. They should certainly dispute any penalties. Again, they should get legal help for their particular case.

If your condo has a by-law section that seems to make the condo responsible for paying property taxes, again I wouldn’t recommend that the administration pay this without legal advice and the specific agreement of the owners.

If it seems you must pay, hold an extraordinary assembly

The owners are the title holders of the property in question, and it’s their money the condo would use to pay any such tax bill.

If the legal professional you meet with believes that money is owed by the condo, then I strongly recommend that you call an extraordinary assembly to ask for the owners’ permission to pay (remember you need 20 days notice).

The wording of the resolution needs to be carefully considered. I can see two possible approaches:

The resolution might be to authorise the administration to pay this specific tax bill for the owners, and how it will be funded (such as by a special assessment). If this resolution passes, then the administration should be protected from owners who object to the condo paying this bill.

Or the resolution could do the opposite, and forbid the administration from paying this specific tax bill, making each owner directly responsible for paying their portion. In a condo with a by-law provision to pay property taxes on the owners’ behalf, this might modify the by-law section with a specific exception.

Both the choice of approach and the wording needs a legal opinion.

If the result of the assembly is that the administration should not pay, then I think the condo should have their legal representative present a copy of the registered minutes of the extraordinary assembly to the tax department. After this, they should hopefully turn their collection efforts to the individual owners.

Community Input

If you have direct experience with this issue that you feel would add to this post, or if you’ve been advised by a Mexican legal professional, please share your knowledge with the community by posting a comment.

Garry Musgrave
Writer of books about running a condo in the Mexican state of Jalisco, and following the state condo laws. Also the laws and processes involved in buying and owning real estate in Mexico. Author of the "Jalisco Condo Manual" and the "Jalisco Condo Law in English." His web site: JaliscoCondos

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