Am I in default for non payment on my Real Estate purchase contract?, Not necessarily…

Apr 23, 2012 by Miguel Tapia

One of the main differences between the US legal system and the Mexican Legal system regarding real estate contracts or transactions has to do with the fact that the Mexico Legal system is by far much more formalistic, meaning in essence that in many instances in order to determine what rights and obligations the contracting parties have, certain formalities need to be met, and such circumstance also applies to the payment obligations.

Over the years in providing legal advice to my foreign clients, as it is natural, I have seen that such clients regarding contracts that they have signed and executed in Mexico tend to interpret them under the laws that they are more familiar with, which are the laws of their own country (US or Canada), forgetting perhaps that the contracts that they have signed are ruled and should be interpreted based on the laws of Mexico, which in many instances have rules that greatly differ from that from their country of origin.

In the last three years that the recession and the global economic downfall has greatly affected the possibility of many buyers to fulfill their payment obligations on contracts/purchase contracts they have executed in Mexico, the proper interpretation of such contracts becomes crucial in order to determine whether or not such buyer is in default of its payment obligations.

I have seen in repeated occasions, buyers who have not been able to pay or fulfill their payment obligations as set forth in the contract, and as a consequence sellers enforcing (out of court and in a unilateral way) their right to rescind and repossess the real estate based on what both parties (in their minds) consider a contractual default.

I have also seen in repeated occasions the seller keeping the moneys that they have received from the purchase transaction, plus repossessing the real estate, which I personally consider an abuse.

However, after carefully analyzing many of the above referred transactions, I have found that in a great deal of them, if not in the majority of them, some of the formal requirements that the Mexican Law provides as mandatory in order to consider the buyer in default of its payment obligations have not been met, and thus, under Mexican Law such buyer could not have been considered in default of its payment obligations, which basically turned the rescission of the contract and repossession of the real estate illegal.

As it can be imagined, the consequences of not having proper legal advice when interpreting the contracts executed under Mexican law can be disastrous and can result in “rescissions” and “repossessions” made and executed by the seller when perhaps there was no default in the payment obligations to begin with.

Having established the above, it is very important to seek proper legal advice by a highly qualified Mexican attorney who can review your contract, analyze your specific situation and determine if you are in default of your obligations, because as you can see, even when buyers have missed scheduled payments under the contract, not necessarily are they in default with their payment obligations under Mexican Law, and perhaps they may have suffered an illegal rescission of their contract, or even worse, an illegal repossession.

If you are in the above mentioned position and feel exposed, or if you have been a victim of repossession of your real estate, or don’t know if under Mexican Law you are in default of your contractual obligations, we can help regain your peace of mind, please feel free to contact us for a free consultation and evaluation of your case at mtapia@internationaladvisors.com or by calling us at (602) 266-0225.

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