JaliscoCondosOrg Blog

Tag: legal opinion

  • 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…

  • 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.

  • What’s Legal and What’s Not?

    Most of the questions I get from book owners start out, “Is it legal to…?”. Sometimes there’s a clear answer, because the condo law covers the issue explicitly. However, sometimes this isn’t the case. What then?

    Basic legal principle

    There’s a basic concept in civil law (the type of legal system used in Mexico) that at first glance seems very simple. It says that anything that isn’t specifically forbidden is allowed.

    I said, “…at first glance.”

    To be accurate, when you think about this, mentally expand it to, “anything that isn’t specifically forbidden by any governing law in Mexico is allowed” Therefore, the problem for condos is that this principal doesn’t just apply to the condo law all by itself.

    The condo law in Jalisco is, in reality, a small section of the Jalisco Civil Code. When considering whether something is legal or not, you need to consider: municipal laws, the rest of the Civil Code, state laws, the Federal Civil Code, federal laws, and the Mexican Constitution.

    Be very sceptical…

    Be sceptical of people who say, “There’s nothing in the law that forbids this, so we can do it!” If they’re referring only to the condo law, they might not be correct.

    If an issue clearly applies only to a condominium, then you’re likely safe in relying on the condo law, and nothing else. Such things as:

    • the duties and responsibilities of the Administrator and Council/Board;
    • obligations of a condo owner;
    • the method of calling an assembly; or
    • the quorum and voting needed at an assembly.

    Other things are not so cut and dried.

    For example, issues affecting common property are regulated in two places in the Civil Code. As they relate specifically to the peculiarities of a condo regime, they’re in the condo law. However, the rules in the condo law are in addition to basic regulations about all common property (condo or otherwise) that are set out elsewhere in the Civil Code (this section is in the “Jalisco Condo Law in English”). If your particular issue with common property isn’t covered by the condo law, then you must also check the general common property regulations before deciding you can go ahead and do something.

    Some things might appear to apply only to a condo. When I looked at the issue of proxies at an assembly in an earlier post, this was an issue that the condo portion of the Civil Code was silent on. However, other parts of the Code were not.

    Beware of reducing rights

    Some actions you might be thinking about taking could impact a condo owner’s rights. Rights are taken seriously in Mexico. While there might be nothing in the condo law, these rights could be protected because they’re fundamental rights, real rights attached to the ownership of property, or rights given by another law.

    Before doing anything that lessens or removes something that looks like it might be a right, make sure you have the law on your side. I strongly recommend that you get a written and cited legal opinion. If you get only a verbal opinion, it might not be correct, and the condo, not the lawyer, could be liable.

    You also need legal citations that you can use in a court case if the person objects, and this becomes a legal issue. It’s also a good idea to quote these citations at the time you lessen or eliminate something that could appear to be an owners’ right (for example, in a by-law clause or in a letter to the owner). This gives you solid, defensible backup.

    Don’t forget to check your by-laws

    There could be an issue that isn’t covered by the condo law, or any other law, but might be regulated closer to home: in your by-laws!

    By the way, while we’re on this topic, if one of your by-law articles contradicts the condo law or some other law, then it has no validity. So what exactly does this mean? It means that it can’t be enforced.

    If you have an illegal by-law article, there’s nothing you can do to force any owner to follow it. Owners might not know it’s illegal, and could happily comply. Sometimes for years. But, if someone does not, you can’t impose fines, sanctions, or penalties (OK… you can try, but you can’t legally collect them if they don’t pay), you can’t successfully carry out a legal action, and you can’t force the sale of their house at public auction. You’re welcome to try any of these, but you won’t win in court.

    Never assume knowledge

    My final piece of advice is to not rely on your knowledge of condo laws and practices from other jurisdictions, or legal practices from the U.S. or Canada.

    Each state in Mexico has its own condo law. While there are fundamental concepts that are the same, there can be significant differences. The same is true in the U.S. and Canada. Each U.S. state, and each Canadian province, has its own condo legislation, and these do vary.

    It’s also important for foreigners to realise that Mexico, and the U.S. or Canada have significantly different legal systems. The U.S. and Canada use a common law system, while Mexico uses a civil law system. Many legal concepts and practices fundamental to the legal systems North-of-the-Border just don’t apply in Mexico.

    Common law legal systems rely on a history of earlier judicial decisions (jurisprudence) as the main source of law. Under common law, the judicial branch has great discretion to interpret and create law over time.

    In contrast, a civil law, or code-based legal system, relies mainly on the written law. Changes to the law come about through the actions of the legislative branch. Judges don’t usually have the discretion to interpret the law, or to take positions that differ from the law as it’s written.

  • 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.