HOA Vs. Condominium Meetings – what are the differences?
Public Notary #26
We all know about the differences between the legal systems of common law and civil law, such as the ones that rule in the USA and Mexico, respectively. What we do not know, or sometimes seem to ignore, are the basic differences between condominium law in the state of Arizona and that of Sonora. And more importantly, who or whom governs over the condominium regime.
The main difference is the role the HOA plays in relation to the condominium regime. A condominium regime is a special form of ownership over a multiple unit property in which there are individual owners of the various units within the condominium development, as well as the common properties shared with the other owners. OK, so far, so good. In Sonora, as in the rest of the Mexican states including Mexico City, the deed that incorporates the condominium regime and its bylaws (reglamentos) before the approval of all permits required, has to be drafted by a Mexican notary public (notario público), and duly recorded at the office of the public registry of the property, in the city where the real estate is located.
As for the entity that will govern the life of the condominium project throughout, it is the assembly of the condominium owners. Under Sonoran law, the condominium owner’s meeting is the supreme body of the condominium development according to article 28 of the condominium law. The condominium owner’s meeting, among its other powers, has the right to freely appoint the administrator, to appoint the surveillance committee, to discuss and approve the expense budget for the year, to set the maintenance fees based upon the budget, and to empower the condominium administrator, etc.
However, in Puerto Peñasco, many condo owners perceive that HOA’s are the entities that have the above mentioned powers. This misconception has created a great deal of confusion in the market as well as creating significant problems for real estate developments. At the end of the day, this false perception endangers the legal security of the project itself.
In the state of Sonora, the condominium owner’s meeting is the supreme authority over the development. The administrator is the individual or legal entity that is charged with the responsibility to perform the agreements taken by the meeting. The surveillance committee supervises the performance of the administrator.
Do you need an HOA in a condominium regime incorporated on a property located in Sonora? The answer is no, however, each condominium regime has been incorporated differently and they have different bylaws. The caveat is to check if, in any given case, the HOA is duplicating the powers of the condo owners meeting. If that is the case, the HOA cannot appoint an administrator or propose a budget, much less approve it or appoint the surveillance committee. Sometimes it is beneficial to have the HOA. Each condominium project requires tailor made decisions.
There needs to be great caution in that if HOA meetings are making decisions that by law are only empowered to the condo owners meeting, then the HOA’s decisions are null and void.
Another matter of confusion is the committee issue. According to the Sonoran condominium law, there is only one committee in the structure of the condominium. That is the surveillance committee and its function, as above mentioned, is basically to supervise the activities of the administrator. However, there are committees created within most of the condominium projects that are not authorized by the meeting of the homeowners and are self regulated by the same surveillance committees. It is amazing how many investors tend to “adapt” the Arizona laws rather than the Sonoran condominium laws. As an example, we have participated in many seminars and meetings since 1975 and always we have said, with the law in our hand that in this case Mexican law will prevail. In the case of real estate, as is provided from the Mexican constitution to state laws and municipal regulations, any and all foreign purchasers of real estate in Mexico are subject to, and under the jurisdiction of the Mexican laws.
Financial committees in Arizona have many purposes, duties and responsibilities. They work closely with the property manager and their accounting personnel. They establish budgets, financial goals, and spending limits. They can also propose an increase in maintenance fees, collect delinquent assessments and keep member accounts accurate, among other duties. We have mentioned the role of the condominium administrator in the Sonoran law and their responsibilities. They include, among others, to draft the budget and present it to the meeting for its approval, collect all maintenance fees, including the ones delinquent, etc. In my opinion, it is a simple matter. Mexican nationals or foreign citizens are governed by the laws of Mexico. They have to respect them and they have to abide by them. If anyone in the country does not obey them, there will be consequences that can affect the development, and its continued viability.