Baja Mexico,  is an attractive country for foreign investment, among other things, because its low salaries, location close to the border with San Diego, tax benefits, government privileges,  etc. most of foreigners might ask, what are the areas or activities that they can invest in Mexico? The answer is in the foreign investment law.

Radio and television services, but not the cable television services, the distribution of gas, credit unions, terrestrial transport services of passengers, etc, are activities reserved for  Mexicans only; and finally, there are certain activities called, “activities with specific regulation, that welcomes foreigners to invest in, for instance: 25% in air lanes, specialized air transport; 49% in insurance institutions, bail institutions, money-exchange services, among others. In short, there are  around 45 activities mentioned in the foreign investment law that allows foreigners to invest in, but there are not all of the activities regulated in the mentioned law, which means that, according to the supreme court of justice of the nation, what is not forbidden it is allowed, meaning that, if the foreign investment law does not establishes all of the industrial, or commerce activities, for instance, hotel, constructions, vehicle dealerships, etc., in all activity that are not regulated in the foreign investment law, means that a foreigner can invest in, up to a 100%,  or through a Mexican company formed by two foreigners.

Foreigners can invest as individuals, as well as through a Mexican company formed by either two foreigners, with the restriction that the company won’t handle the activities reserved for Mexicans or Mexican government. There are certain procedures that need to be followed in order to invest, for instance: first, get your Mexican corporation formed; second, register the corporation in two government offices; after this, get the hacienda permit (register of the IRS or tax clue number to pay taxes); get your immigration visa to do business in Mexico; and finally, according to the activity in particular that the corporation is about,  ask for the corresponding permit to the municipal government, or either federal government; in addition to this, there will be some other legal aspects that has to be covered, like the necessary contracts,  for instance.  The fact is that all the above can change and simplify, according to the activity chosen by the foreigner that wants to handle or develop.

The foreign investment law, among others, consider as a foreign investment, the acquisition of land, which has its own chapter, as well as the bank trust, being this last topic one of the most  issues that concerns foreigners, which will be treated in a further article, however what is important to establish is that a bank trust is not the same as a purchase agreement or a family trust; Under the bank trust, the bank institution acts as trustee, holding the title and virtual domain of a property, although the material ownership, right to enjoy and use is the beneficiary’s right, in other words, the foreigner in Mexico purchasing property, named as beneficiary in such bank trust.

Under fee simple ownership, as opposed to a bank trust, there is no annual payments to the trustee, as commission for acting as such; Under a bank trust, a beneficiary can name beneficiaries in case of death, etc. Bank trusts initially were granted for 30 years, back in 1973; It was on 1993 when the law changed and since then bank trust are granted for a 50 year term, renewable.

In Mexico, as in the majority of countries, the political constitution is the maximum law, which establishes the fundamental citizens’ rights, as well as the form and structure of government. Mexico’s political constitution is a document written in 1917, which establishes within its first 29 articles the individual rights of the citizens that live in national territory.

Is important to mention that, in many of it’s parts, is very similar to the constitution of the united states of America, by virtue of their existing similarity of the individual’s fundamental rights (bill of rights), known in Mexico as garantias individuales (individual rights), there also exists similarity in the  power division (executive, legislative and judicial) and democratic way of government, the constitution of the united states, have 7 articles and 27 amendments with the bill of rights in its first 10 amendments, individual’s fundamental rights (bill of rights), the Mexican constitution, with 136 articles, that contains have the individual’s rights in the first 29 articles.

Let us emphasize on the fact that, foreigners as well as Mexicans, have the individual rights granted by the Mexican political constitution, without distinction. Such rights granted by this constitution, cannot be restricted or suspended, but in those cases and conditions that the constitution itself provides.

Every individual, for the only fact of being within national territory, enjoys of the individual rights granted by the constitution, and there shall not be any discrimination because of ethnical or national nature, making clear that by saying every individual, we refer to Mexicans and foreigners, and saying discrimination because of national nature.

Among others, some of the rights granted to Mexicans and foreigners by the Mexican constitution, are the following:

1. A) article 5: freedom of work
2. B) article 6: freedom of expression. (as long as there is no attack to morals and public peace nor interfering in political issues).
3. C) article 7: freedom of print.
4. D) article 11: freedom of transit. (to move freely in national territory)
5. E) article 14: hearing right or due process. (not being deprived of his rights without being heard and defeated at court of Law)
6. F) article 16: legal safety. (not being bothered in his person with out written warrant by the competent authority)
7. G) article 17: right to administration of justice. (in case of legal controversies, there are courts to provide justice)
8. H) article 27: right to own properties in Mexico. (real estate acquisition and trust contract)

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There is a full and complete legislation in the probate area in Baja Mexico. What could concern more the American and foreign community in Baja, is what to do with their real estate interests, therefore, this article is more focused on such community. The general rules in Mexico regarding successions, is that there are two types of successions. The intestate succession and the testate succession, just like in the U.S. legal system.

The second one means that there is a will and successors. The first one means that there are successors but there is no will, and this is the more complex case. Regarding the order of preference on how the successors will inherit, is as follows: The ones with better right to inherit are the closest to the decedent, and they exclude the rest of the relatives. In first place and in equal circumstances are:  the Wife and Children; then, the parents and grandchildren, grandparents and so on. Usually these rules apply when there is no will.

In case that a person wants to make a will, they can will their properties to whom ever they want, even disregarding the aforesaid order. There is not much regulations that explain the rules of the foreigners successions, and there is where the Attorneys must combine different regulations and file the to the court, in order to give an accurate legal advise to foreigners, however, to avoid further complex legal problems, one of the things a foreigner in Mexico must do when purchasing land in Mexico, is do their estate planning: Will or trust. In personal property, there shouldn’t be a problem, but in real estate usually things get more complex. For instance, one of the biggest and most important advantages of the bank trust contracts is that people can bypass probate (meaning probate by the complex court process in order for the heirs to claim their decedent’s rights over real and personal property).

In trust contract, a beneficiary can designate a second beneficiary or beneficiary in case of death, and in doing such, the second place beneficiary, won’t have to go to the court and claim his rights. Therefore when purchasing land, a foreigner in Mexico, should also take in consideration how to do the estate planning the give their successors more safety to keep such assets. Obviously this probate and successions process is more complex than what this article shows.

Many things must be taken in consideration, such as Jurisdiction, last domicile of decedent, was the decedent marriage and under what legal form (community property or separate property), what kind of document does decedent had in regards of the real estate, among others, but most of all, how a person will acquire real estate and should that person make a will.

 

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Any development that adopted the condominium regime mode is subject to the Condominium Regime Baja California Law. Under condominium regime, each homeowner owns exclusively their private area and becomes a co-owner of the common areas with the other homeowners, in the percentages based on the chart of undivided areas. This publication is not addressed for subdivisions (fraccionamientos) that decided to create, adopt, and implement their own CC&Rs, being this their internal rules and regulations.

We are only addressing this article for condominium regime law, which by definition, Condominium is: Mode of real estate property that grants the title holder the exclusive right to access, use and enjoy a certain private unit and, at the same time a right to be unit owner of the property of common use, in accordance with this Law as well as with the condominium Articles of Incorporation and By-Laws. State Baja Condominium regime Law provides: “In the Condominium Regime, the titleholder of an exclusive property unit will have all rights granted by the civil legislation to the owners of the property”.

The unit owner shall have exclusive right over the unit of exclusive property and its accessories, as well as joint ownership of the common elements of the condominium property.” Having said this, we know that there is an official law that regulates condominium regimes, providing the rights and obligations of the homeowners, among other things. Now, some people believe that this is a homeowner option or right to be abiding by its provisions, internal rules and local regulations, which is incorrect, since the State Law is applicable to all developments that adopted this ownership mode. “This Law is of public order and social interest, general observance and applicable to the Free and Sovereign State of Baja California.

The purpose of this Law is to regulate the incorporation, modification, organization, operation, administration and termination of condominium regimes. This Law regulates the relationship between the unit owners and the relationship between the unit owners and the administration of the condominium regime establishing the criteria for the resolution of any controversy that may arise as a result of said relationships”.

Most of the problems arise from the management of common areas. Therefore, as co-owners for the common areas we need to procure the good relations and organization, in a legal and formal way. Common elements are the Areas and properties that belong undivided to all unit owners. The use of any common element shall be regulated by this Law, as well as by the condominium Articles of Incorporation and By-Laws. Among other reasons, because of some developments failures to promote the HOA culture and law enforcement, different problems have arouse:

1) Cultural differences (homeowners from outside Mexico that are used to foreign CC&R’s vs Mexican Nationals. In a way that Nationals are not familiar with development regulations, and believe that they are not obligated to comply with this rules and thus, think that non-Mexicans are trying to make them do the things in Mexico in their own way (“US way”);

2) Lack of information and formality respecting HOA matters, among the homeowners. In a community under condominium regime, there must be a defined process of formal communication and decisions taking. Meetings, notices, minutes, etc.

3) The law interpretation. This law is very vague and ambiguous, and it seems that many people interpret this law in particular, to their convenience. Also, the fact that there are internal and official regulations, it creates the confusion of law hierarchy.

4) Collection of HOA dues. This is not optional, this is a homeowners obligation, although when it comes to court collections, we need to make sure to have all of the necessary requirements. It seems that many homeowners does not want to pay their dues, but they should be aware of the legal consequences of not doing so; And finally, one of the most concurred issues,

5) The transition from the developer’s administration to the administration appointed by the homeowners. It turns in some cases, that after considerable time that all units under condominium regime were sold, homeowners are by their own and clueless of how to take and manage the administration. And the list can go on. The truth is that there are too many problems on HOA matters and meanwhile the congress do not amend the law for a better management and interpretation, adjusted to recent times, as well as a true governmental assistance and campaign to promote the condominium culture, we need to enforce this existing law, and promote the homeowners regime culture.

Given the different situations, we can take actions from two scenarios: New developments. Make sure that the transition from the developer’s administration to the homeowners administration, goes smoothly; Old developments, in which problems exists already. With the appropriate legal advice and accurate strategies, any situation can be arranged. Ultimately what should and will prevail, is the common good and the law enforcement, rather than individual interests and cultural issues. In all cases, the common denominators to face the existing HOA problems are: education, communication and procedural formality.

Finally, the state law promotes the Condominium Culture, being this: “Everything that may contribute to promote actions and attitudes to allow a healthy relationship between all unit owners, as well as to fulfill the condominium regime objectives. Some of these actions and attitudes are: respect and tolerance, responsibility and compliance, participation and joint responsibility, solidarity and mutual acceptance.

 

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