Puerto Vallarta Real Estate Articles

The first quarter of 2004 is the time when owners meet for their annual condominium meetings. Among the items on the agenda to discuss are the operating budgets and priorities for the coming year. These meetings, both general and extraordinary, are very important to the successful operation of the building. The state of Jalisco, Mexico has a comprehensive, condominium law enacted in 1995, which addresses financial details and voting procedures to protect condominium owners and their property.

These are my observations and recommendations from attending a number of these meetings for owners.

The primary beneficiary(ies) named in the fidecomiso document are the persons recognized to represent the property in legal matters. If your condominium is in the name of one of your children or a parent, you must have a proper proxy from them to vote at these meetings.

If your fidecomiso (trustee) requires that you receive permission in advance to vote at the meetings, make sure this done. The administrator of the building many times is in charge of this important detail. Some fidecomisos are written that give permission in advance and do not require special letters for each meeting. If the person named in the fidecomiso is not attending the meeting and sending their representative, a proper proxy form is still required.

If you are going to give someone your proxy, decide whether you will give to them a general one to vote as they see fit or if you want them to vote as you direct on certain issues.

Your administrator should give you ample notice of the meeting date and time, as well as the agenda for both the general and the extra ordinary meetings. Take the time to review this information and plan your responses or position on these various points. You should already be familiar with the operating costs of your building by receiving at least quarterly financial reports.

In the general meeting, with a proper quorum, owners carry a motion by a simple majority or 51%. An extra ordinary meeting requires a 75% vote. Owners vote according to the percentage of common elements they own, which is described in their fidecomiso document.

If an item is brought up and discussed that is not on the agenda you received in advance, a vote requires everyone to decide on this off-agenda topic.

The Jalisco Condominium Law of 1995 also addresses a format to follow for the meetings. The first order of business in the general and extraordinary assemblies is to give recognition to whoever is representing the ownership rights of each condominium.

A President, secretary and vote counters are named to conduct the assemblies. The president and secretary who are chosen to conduct this meeting do not have to be members of the board, but can be members at large.

If there is a legal quorum, the meeting continues. There is a system to adjourn and recall within certain days thereafter, which permits a legal condominium meeting to be held with a smaller quorum. This procedure is to allow time for more owners to have representation or give the owners present the opportunity to hold a legal meeting.

In the general meeting there are very important items to discuss and vote upon. The general condition and running of the building is a major subject of discussion. The record of income and expenses for the current year should be discussed and approved or not approved.

The budget for the coming year is to be voted on. This budget for the coming year should be tied very closely to the previous year's actual income and expenses. For this reason, a 12-month record should be discussed for both the ending year and the coming year. Income and expenses should be documented and presented by a very qualified professional. I recommend any condominium association use a professional, experienced accountant who is knowledgeable of condo law and accounting. The accountant should be accountable to the board and the entire ownership. The accountant and the board of directors should keep the owners informed and send them quarterly statements on the financial conditions of the building

Reserve funds are a very important part of the budget. Many buildings are now adding an insurance policy for the common area and basic structure in the event of hurricane damage or an earthquake.

An important standard item of business in the general meeting is the appointment of the administrator and his/her salary. An administrator in Jalisco has great responsibilities and authority. He/she should make decisions in the operation the building, which are representative of the philosophy of the board of directors. The board, in turn, should represent the majority of the opinion of the entire ownership.

The appointment of the coming year's board of directors is another very important item for the general meeting. During the year, the board should communicate closely with the administrator. The board should have a system of reporting to the general membership during the course of the year. The entire ownership should receive reports on the financial condition of their property.

The extraordinary meeting is held when there is need to discuss and vote on topics which requires a 75% vote to be approved. These subjects include any modification of the condominium bylaws, special assessments, or legal action against a non-paying owner. The extraordinary meeting covers an agenda also, and this agenda should be followed.

When there are important changes approved in an extraordinary meeting, these decisions need to be formally notarized and registered in the public registry so as to become binding to the ownership. If the condominium assemblies do not correctly give notice of coming meetings or conduct them properly, any decisions made at these meetings can be unenforceable.

The Jalisco condominium law is to protect owners from decisions being made improperly and causing harm to them, either financially or restricting use or enjoyment of the property. Even though many owners are absent part of the year, decisions on the budget and other topics cannot be properly made without their representation.

You as an owner don't want a large financial assessment being approved which binds you without first receiving proper notice and having the opportunity to vote. In the past, there have been general assemblies held in other cities than where the property was located. When a general and extraordinary assembly was held in Guadalajara regarding a property in Puerto Vallarta, many owners could not attend and gave their proxy to a few people who made all the decisions. Assemblies should be held in the city where the property is located.

Other topics that are important to owners who share a building are pet rules, vehicles and parking, common area maintenance, television satellite reception, the use of the swimming pool, guest rules and privileges.

Condominiums can operate as a condominium regime or an Association Civil. The decision needs to be well researched and carefully thought through as to the legal entity by which the condominium will operate.

A well run, fiscally responsible condominium building not only makes owners happier but also enhances the real estate value.

This article is based upon legal opinions, current practices and my personal experiences in the Puerto Vallarta-Bahia de Banderas areas. I recommend that each potential buyer or seller conduct his own due diligence and review.