BY MARIANA LOPEZ-BUSTAMENTE
Baja California is certainly enjoying a major historical real estate boom. Nonetheless, the real estate industry has also been one of the sectors with the most complaints before the Federal Bureau of Consumer Protection (“PROFECO”).
For this reason, if you are considering buying a property for residential purposes, it is very important that you take into consideration several caveats before putting your signature on the final contract.
Generally, real estate developers have standardized purchase contracts, meaning that these contracts have been prepared by them and are normally not negotiable, except sometimes as to price and form of payment. These contracts are called Adhesion Contracts by the Federal Consumer Protection Law (the “Law”).
Protect your investments.
According to the Law, developers, brokers and any other person intervening in the marketing and sale of real estate is obligated to record their adhesion contracts before PROFECO, to prevent them from containing abusive or unfair clauses that put consumers in a disadvantageous situation.
To that end, it is important for you to know the following 10 points that you should take into consideration before signing a purchase contract.
Before signing the contract…
- Contract registration. Find out whether the contract model you are asked to sign has been previously authorized by PROFECO. If the contract has been authorized, it should have a registry number and authorization date. You can research Adhesion Contracts at the website: https://burocomercial.profeco.gob. mx/ by entering the contract’s registry number or the seller’s name.
- Seller Investigation. It is also highly recommended to investigate whether there are prior complaints lodged before PROFECO against your potential Seller.
- Liens. The Seller must provide all appropriate documentation showing clean title to the property, and disclose any liens affecting the same, as well as a full and precise description of the property’s characteristics, area, structure type, facilities, amenities, accessories, parking spots, additional services, among others.
- Delivery date. Make sure that the contract specifies the property’s delivery date.
- Conventional Penalties. Verify that any established penalties are fair and reciprocal for both parties. There are often cases where conventional penalties apply only to the buyer.
- Warranty period. According to the Law, the Seller must provide a warranty for a period of not less than 5 years regarding structural parts, 3 years for waterproofing and 1 year for all the other items of the property. All terms start running upon delivery of the property.
- Jurisdiction. The “jurisdiction” clause is the “forum and choice of law” stipulation. It is crucial because it indicates the place where any eventual complaints should be filed and the law that will apply to their resolution. Naturally, the forum and the applicable law should preferably be that of the place where the property is located and not of the place of the Seller’s location, because this would put you in a very disadvantageous position.
- Lopsided provisions. Given that these contracts are prepared by the sellers, it is strongly advised that you pay close attention to all clauses imposing obligations and duties to the buyer. We have seen contracts where the buyer is obligated to purchase blinds and other items such as finishing decorations unilaterally selected by the seller and from suppliers that are also unilaterally selected by the seller.
- Termination of the Contract. The contract must indicate the termination procedure and the corresponding implications to each party, and given the cause, you must review the terms and conditions regarding refunds.
- Down payment. The seller has no right to request any payment until the agreement has been formalized by a written contract, except for any investigation expenses. Taking the previous recommendations into consideration will diminish the risks of exposure in your real estate investment; however, we highly recommend that you always seek professional legal advice to review and determine the contract’s full terms and conditions and duties to the buyer. We have seen contracts where the buyer is obligated to purchase blinds and other items such as finishing decorations unilaterally selected by the seller and from suppliers that are also unilaterally selected by the seller.
Mariana Lopez-Bustamante is part of the legal team at SANCHEZ Y ASOCIADOS, a Tijuana based law firm that specializes in real estate transactions for foreigners. You can reach them at their office in Blvd. Agua Caliente 10611-507 in Tijuana, call them at +52 (646) 686-4137 or email at [email protected].