Additional Obligations for Housing Developers

February 27, 2012
Additional Obligations for Housing Developers

Hidden defects are those which affect the use and enjoyment of an item sold and if known to the buyer wouldhave caused him or her to pay a lower price for such item or not to purchase it at all. This concept is recognizedby the Federal Civil Code and by the other civil codes of the Mexican Republic, which generally give the buyerthe right to demand indemnity against hidden defects for a period six months as of the date of delivery of thegoods that are the subject matter of the agreement. This time period tends to be shorter in commercial purchase orsale agreements in which the buyer, unless otherwise agreed, has only 30 days to make a demand based on thisreason. On January 18, 2012, the Official Journal of the Federation published an amendment to article 73 Quarter(sic) of the Federal Consumer Protection Law (LGPC, for its acronym in Spanish) imposing upon developers ofhousing and time shares the obligation to provide an indemnity against hidden defects of real property as of thedate of delivery for a period of (i) five years with respect to structural issues; (ii) three years for waterproofing;and (iii) one year for all other elements. While the one year rule established in the LGPC in the 2009 amendmentlengthened the term of the obligation in comparison to the general law, this obligation is now extended withrespect to structural matters and waterproofing (to five and three years respectively). It is clear that this obligationwill apply only to developers of housing and time shares, pursuant to which those purchases of real propertydestined for other uses, such as for commercial or industrial use, shall continue to be governed by the general lawand, specifically, by any agreements between the parties.

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