JaliscoCondosOrg Blog

Tag: Civil Code

  • 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…

  • How to Satisfy the Legal Requirement of a Minute Book for Board Minutes

    Why do you need to keep board minutes?

    Your condo is required by Article 1012 of the Civil Code to keep minutes of every council (board) meeting, along with their attachments. These minutes are an important part of your condo’s records that:

    • are a permanent and legal record of the proceedings of each board meeting;
    • record the decisions made by the Board, how they were made, and any resulting actions taken by them;
    • clarify what happened at a meeting for those who weren’t there;
    • document actions that are required to fulfil the board’s legal duties;
    • help orient new board members and owners to past issues facing the condo; and
    • are a useful management tool for evaluating the work of the Board.

    Legally, minutes can be inspected by owners, and used in court as evidence. As legally required official records, courts can consider the contents of board minutes when deciding a lawsuit.

    Minutes can be used to prove that board members fulfilled their legal obligations (such as meeting once a month), and have carried out their duty of care to the condo. A condo Board’s duty of care to the owners has at its core: active, informed, conscientious, inquiring, and impartial service. Therefore, board minutes can show that a board or committee took reasonable steps to be informed, and to carefully consider relevant issues before making a decision.

    What form must your board minutes be in?

    This article of the condo law also says that board minutes must be kept in a bound minute book signed on its first page by the municipal government. Such books are readily available at papelerías (stationery stores), and are designed to have hand-written entries (although this isn’t a requirement of the law).

    While this might seem odd, it’s not at all unusual. Some regional legislation north of the border calls for similar practices in association and corporate statutes.

    The intent of this requirement is simple: minute books have bound pages as a reliable way to prevent tampering (such as changing the minutes after they’ve been approved).

    In the 21st century, there are disadvantages to this requirement:

    • most people today prefer to use a notebook or tablet, and not to hand write anything;
    • it’s impossible to circulate DRAFT minutes to the meeting participants for review and comment; and
    • hand-written minutes are often not legible, and can’t be reproduced easily or well.

    Electronic devices are excellent and efficient tools for minute taking because they make editing, copying, and sharing of the minutes easy. How, then, can we reconcile modern technology with the aims of the condo law?

    While minutes could be taken electronically, edited, circulated in DRAFT, and sent to owners (or posted on a web site), and then transcribed by hand into a bound book, this is rather tedious and prone to errors.

    Adopt a sequential numbering system

    One of the main goals of this legislation is to prevent tampering by removing or adding pages. Adopting a sequential numbering system for your board minutes goes a long way towards meeting this need.

    In this system:

    1. Each board meeting is given a number, and this is included in the title at the top of the first page of the minutes. For example, “Minutes of the 29th Board Meeting of Condominio Vista del Basurero.” By doing this, no meetings can be erased from history, and no extra meetings can be added.
    2. Each page of a set of minutes is numbered sequentially in the footer. Add the meeting number to this page number as a prefix. For example, the pages of the minutes in the point above would be in the form: “29-1, 29-2, 29-3, 29-4…” As further security against tampering, add the page count to each page, such as: “29-3 (of 6).”
    3. The heading for each item of business in the body of the minutes is also sequentially numbered. These item numbers also include the meeting number as a prefix. For example, “29.3 Adoption of the Agenda;  29.4 Approval of Minutes of the Last Meeting;  29.5 Administrator’s Report…”

    With this system, each set of minutes starts with the title (containing the meeting number) and ends at the signature block. Each page and each item of business is sequentially numbered in a way that uniquely ties it to this one set of minutes. This makes it difficult for someone to tamper with the minutes. Further a collection of these sets of minutes (such as, a given year) is also sequentially numbered and difficult to tamper with.

    Have the approved minutes double signed

    When an approved set of minutes is printed to be archived in the condo records, have it signed by both the Chair and the Secretary of the meeting in the signature block on the last page. This must include the date they signed the minutes. Further, they must both sign each of the other pages in the margin.

    This is standard practice in Mexico for legal documents, and makes it difficult for anyone to put in an altered page.

    How do you meet the minute book requirement with computer-generated board minutes?

    There are two possibilities:

    1. glue the printed minutes (and all pages of the attachments) into sequential pages of a bound minute book; or
    2. keep them in a loose-leaf binder during the year, and have them bound at the end of each year (or periodically during the year).

    Gluing the pages into a minute book most closely satisfies the spirit and intent of the law.

    Keeping them in a loose-leaf binder can be a dangerous choice, because anyone can just take out a page and put another in its place. For this reason, it’s vital that you adopt the numbering and signing systems I’ve mentioned above.

    If you choose this route, I also strongly recommend that the binder be a temporary repository only for the current year (or part of it). At the end of the fiscal year, have the year’s minutes bound into a single volume. During the year, the loose-leaf minute binder must be properly secured on the condo property, and not accessible to anyone but board members. The requirements of owner access can be satisfied by making electronic copies available by email or on the condo website.

    Book binding services are usually available in most cities from business printers. Look in the Sección Amarilla (Yellow Pages) under “Imprentas y Encuadernaciones” (Printers and Book Binders). Since notarios regularly have their protocol books bound, you could ask your notario to recommend a company.

    Make sure that the binding method you choose is permanent. Spiral or cirlock bindings (where pages can be removed) are not acceptable. If your minutes have a lot of attachments, and an entire year would be too thick, bind them into six-month, four-month, or three-month groups, as needed.

    Whether you glue them into a bound minute book, or have them bound on an annual basis, don’t forget to include the attachments (financial and other reports, quotes, emails). Have the book signed by the municipal government. These two things are required by law.

    Avoid the minute book requirement by having board minutes certified by a notario

    This article of the Civil Code also says that if you cannot enter the minutes into a bound minute book for any reason (being impractical is a reason), then, for these minutes to be valid, they must be protocolised by a notario having residence in your jurisdiction.

    This means that you can take the final printout of your minutes to a notario and have him protocolise them. You’ll then have a stamped and signed official copy, and the original will be bound into the notario’s protocol book.

    If you adopt this route, then you need to budget several hundred pesos per month to protocolise your monthly board minutes.

    Also be aware that if your minutes are in English, the notario might insist on translating them before protocolising them. This should not be strictly necessary, because you won’t be publicly registering them.

    Alternatively, you could have the notario certify a printed and signed copy of the minutes. He’ll stamp and counter-sign each page, and attach a certificate. I don’t know if this satisfies the Civil Code requirement for “protocolisation.” Ask your notario.

    What happens if your condo doesn’t comply?

    Let’s say you don’t do any of these things. You just keep unbound printouts of your board meetings in your records. Are the Condo Police going to raid your office, and cart the Administrator off to jail?

    No. You can probably get away with this for years, with no apparent problems.

    However, if you get involved in a lawsuit where you need to rely on the board minutes to prove your side of the issue, you’ll find them inadmissible, and you won’t be able to use them to support your legal argument. Further, the fact that you’ve kept improper records might cause the court to find against you.

    Retention of board minutes

    These binders and minute books are part of the condo’s legally required records, along with the assembly minutes and the financial reports. They’re the historical record of the condo, and must be securely stored and not destroyed. They must also be accessible to any owner who wants to see them.

    In my opinion, minutes kept only in the form of electronic documents do not meet the requirements of the condo law. As well, electronic storage does not guarantee long-term preservation of your records because of changes in technology (a word processor ten years from now might not be able to read today’s files) and the degeneration of the computer media (hard drives fail, and CDs and DVDs can lose their data over time).

  • The Jalisco Condo Law Before 1995 – REVISED

    In the “Jalisco Condo Manual,” I say that that the book is based on the condo legislation passed in 1995, and that different rules applied before then.

    So what’s the situation for condos that were set up before 1995?

    This is a re-write of a recent article

    This is a re-write of the article I posted yesterday (June 3, 2013).

    I was misinformed about some facts, and the original  article contained errors. Thanks to Jim Rizzo for pointing me in the right direction to research the correct information.

    It’s important to me to always give you accurate information and advice, and I appreciate it when readers point out errors and give me the necessary legal citations to find the facts.

    I apologise for any inconvenience this might have caused my readers, and encourage you to re-read this article, since there are significant changes.

    A bit of history…

    So far, Jalisco has had three different condo laws:

    Before April 11, 1985: the first condo law was introduced on March 17, 1956, and was separate from the Civil Code. This law was referenced by the Civil Code in Article 986 (under Chapter VI – Co-Ownership). This separate law was called the “Ley del Régimen de Propiedad y Condominio” (Law of the Regime of Ownership and Condominium).

    From April 11, 1985 until March 6, 1995: the condo law was changed, and was still a separate law referenced by Article 986 of the code. This new law was called the “Ley Sobre el Régimen de Propiedad y Condominio de Inmuebles” (Law on the Regime of Ownership and Condominium Real Estate), and came into effect on April 11, 1985.

    From March 6, 1995: the separate condo law was replaced by a new section of the Civil Code. This new section of the code was created to deal specifically with condominiums. The code also added a condominium to its list of legal entities, eliminating the need for an association.

    In the earlier versions of the Civil Code (before March 6, 1995), a condominium was not a legal entity, and so a civil association was needed to legally represent the condo. The code section on associations was similar to today’s.

    The law in effect when your condo was set up is the one that applies

    The decree that changed the Civil Code to incorporate the condo law (among many other changes), says, “The rights and obligations resulting from actions and legal acts carried out under the authority of the previous code will be governed by the [previous code].”

    Since the public registration of a condo regime is just such a legal act, the laws that apply to a given condo will be those that were in effect when the condo was set up (when the escritura constitutiva was registered).

    The next two sections of this article outline the major similarities and differences between the old and new laws, but aren’t exhaustive.

    Similarities…

    Both the separate laws and the new code section bundle the entire condominium property under a Régimen de Condominio (condo regime). The second condo law introduced the types of condos: vertical, horizontal, and mixed, with similar definitions and characteristics. Both divide a condo into private units and common property.

    The rules for setting up the condo regime were similar, and had to be registered in a public document (the escritura constitutiva), that also contained the percentage rights of each unit.

    The second condo law introduced the concept of a condómino (registered titleholder).

    All three laws require owners to pay fees for administration, and repairs and maintenance. The second condo law introduced the requirement for a a reserve fund.

    All three laws have a provision to sell a delinquent owner’s condo rights at public auction.

    In all three laws, both condo fees and voting at assemblies are proportional to the percentage property rights.

    The administrative structure is similar: each version of the condo law has an Administrator. The second condo law introduced a comité de vigilancia (oversight committee). The main purpose of the oversight committee (like today’s consejo de administración) is to inspect the work of the Administrator, verify the financial accounts and the reserve funds, report to the owners about the work of the Administrator, and assist the Administrator with their work under observance by the owners.

    Differences…

    The first condo law doesn’t define types of condos, this was introduced in the second condo law.

    The concept of a condómino (registered titleholder) does not exist in the first condo law. This law referred to dueños (owners) and propietarios (property owners).

    The first condo law doesn’t require reserves, this was introduced in the second condo law.

    Both of the old laws differ from each other, and from today’s law when it comes to assemblies:

    • the first condo law was very basic, and had no requirement for regular assemblies;
    • the second condo law introduced a general assembly that had to be held at least once a year; and
    • the new condo law introduced the concept of ordinary and extraordinary assemblies, with an ordinary assembly being mandatory once a year in the first quarter of the year.

    There are also significant differences amongst these three laws about quorum for assemblies, and voting rules to pass resolutions at assemblies.

    The first and second condo laws had a rule that when one owner has more than 50% of the voting rights, a resolution also needs 50% of the remaining votes to pass. This was eliminated in the new condo law.

    The second condo law required the Administrator to give a detailed monthly accounting to each owner on the financial state of the condo. This requirement no longer exists in the new law ( although it’s good practice for transparency). Now the Administrator is required to produce a detailed quarterly report to any owner who asks (although, again in the interests of transparency, a good condo administration will automatically send this to all owners).

    The first condo law had no “Board.” The second condo law introduced the comité de vigilancia (oversight committee). The oversight committee had to have at least three members (there is no longer this requirement unless it’s in the condo’s by-laws). One of these would be the committee chair. Now there’s only a chair (presidente) by implication. The new law changed this to a consejo de administración (administrative council).

    The old condo laws are more basic than the new one, and are lacking several rules that have now become law.

    The bottom line…

    The particular condo law that applies to a given condo is the one that was in effect when the condo was set up. Some condos might have re-established their condo regime when the major change took place in 1995, many did not.

    To find out which of the three condo laws applies to your condo, you must check the date of your escritura constitutiva:

    If your condo was set up before April 11, 1985, then you’re governed by the first condo law (separate from the Civil Code), and you will have an association.

    If your condo was set up on or after April 11, 1985, but before March 6, 1995, then you’re governed by the second condo law (separate from the Civil Code), and you will have an association.

    If your condo was set up on or after March 6, 1995, then you’re governed by the new condo law (embedded in the Civil Code), and you should not have an association. This is the version of the condo law that is covered in my books, the “Jalisco Condo Manual” and the “Jalisco Condo Law in English.”