Issue #
May 2014

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Investing in Real Property with a History of Having Been Communal Property (“Ejido”)

May 10, 2014

Multiple hotel developments, golf clubs, industrial plants and a whole range of investments in Mexico have been and continue to be developed on tracts of real property which, at one time or another, were communal properties (“ejidos”). One often hears stories of investors who were fooled into believing that they were purchasing private property, when in fact they were being offered to purchase ejido land, which caused many “headaches” for such investors.The regime of land of communal origin presents various peculiar features, which must be understood. The Agrarian Law (Law) classifies communal properties as real property for communal use, real property for human settlements and real property that is divided into parcels. In principal, only parceled real property can be subject to being sold to third parties not belonging to the ejido, as the group meeting of the members of the ejido have the power to change the intended use of communal property and to assign such property as long as they comply with certain formalities provided for in the Law. Likewise, the meeting of the communal property members is that which can determine to authorize the communal property holders so that they may opt to obtain the total ownership of their parcels and, as a consequence, that such will be governed by Civil Law, therefore making it possible for an individual to purchase it and become its owner. For such purpose, once the meeting of communal property members has issued its approval, such interested communal property holders must go directly to the National Agrarian Registry to request the cancellation of their parcel certificates and to have a deeds of property issued, which must be recorded in the corresponding Public Registry of Property where the real property is located.Although the Law indicates that a communal property holder obtains “complete ownership” of his parcel with his deed of title, the first transfer to other parties not part of the ejido involves specific mandatory requirements and formalities, as follows: (i) formal notification of the right of first refusal corresponding to the family members of the seller, those that have worked the parcel, the communal land holders, the neighbors and the nucleus of the communal population. In order to comply with this requirement, the Law establishes the possibility of giving notice of the terms of the offer to the Communal Property Commission, which must be published in the most visible location of the communal property, so that interested parties can exercise the right within 30 calendar days following the notification; (ii) notification of the right of first refusal of the state or municipality where the real property is located, in such cases in which such is a part of the territorial reserves in the plans for development; and (iii) the sale price at all times must be equal to or above the commercial value of the real property, which is determined by means of an appraisal prepared by the Appraisals Commission of National Assets or any authorized banking institution.After the previously described first sale, subsequent sales of the real property originating from communal property are no longer subject to compliance with special requirements.It is important to note that timely compliance with the aforementioned aspects has been the subject of different opinions by the Judicial authorities, which must be taken into account in order to ensure the legal validity of the purchase and sale; otherwise, a risk exists that legal authorities may invalidate the purchase and sale as legally null and void, which can also affect the chain of title for any future sales of the former ejido property.

Real Estate

Labor Law, Work Shift and Overtime

May 10, 2014

The Federal Labor Law (“FLL”) establishes that the work shift may be freely agreed upon by and between the employer and its employees, so long as the employer does not exceed the maximum work shifts established by the FLL. The FLL provides that employers may utilize the following types of work schedules with its personnel, in order not to violate the FLL: a).- The day shift, which begins at 06:00 hours and ends at 20:00 hours, with a maximum duration of 8 hours per day or 48 hours per week; b).- The night shift, which begins at 20:00 hours on one day and ends at 06:00 hours on the following day, with a maximum duration of 7 hours per day or 42 hours per week; and c).- The mixed shift, which consists of periods of time of the day work shift and of the night work shift, so long as the night period is less than 3 ½ hours, and if such time is exceeded, the shift shall be considered a night shift, and its duration shall be 7 ½ hours per day or 45 hours per week. The FLL establishes that during a continual work shift, the employee shall be given at least half an hour of rest and that for every six days of work, the employees shall be given at least one day of rest with pay of full salary. The FLL also establishes that attempts should be made so that the weekly day of rest for employees falls on Sunday. However, if the employees work on such day, they shall have the right to be paid for that day, plus an additional bonus called “Sunday bonus,” consisting of the payment of 25% of the salary paid for regular work days.On the other hand, the FLL establishes that work shifts may be extended due to extraordinary circumstances, but may not exceed 3 hours per day, nor 3 times a week, for a maximum of 9 hours per week. The mentioned overtime of 9 extra hours of work per week that are legally permitted by the FLL, shall be paid an additional 100% of regular salary corresponding to the hours of the work shift. Therefore, such overtime should be paid at double salary, and in the event that the overtime exceeds such hours, the workers shall not be obligated to work such hours. In the event that overtime exceeds 9 hours per week, the employer shall be obligated to pay all of such overtime, with an additional 200% of regular salary, which, therefore, converts such time worked into a triple salary, without subjecting itself to the sanctions set forth in the FLL. Pursuant to the foregoing, if the employer requires the employee to work more than 9 hours of overtime per week, independent of the corresponding payment that it may have to make to such employee or worker, it shall be subject to a sanction imposed by the Department of Labor and Social Welfare of between 50 and 250 times the general minimum salaries in effect in the Federal District, for each of the affected workers (as of the current date, the minimum daily salary is $67.29 pesos – approximately $5.17 US dollars). It is convenient to note that if the employees (regardless of whether their positions are operational, managerial or as directors, with the exception of the general director) work overtime for the company, such time shall be compensated pursuant to the terms of the FLL as mentioned hereinabove, and in the event that the employer does not pay the corresponding compensation, it shall be subject to the following: (i) that the labor authorities require it to pay the overtime that is claimed; and (ii) that the Department of Labor will impose on it the previously mentioned sanctions. The payment of overtime shall at no time be compensated or paid to the workers in another manner other than by means of the payment of salary, as set forth in Article 33 of the FLL, upon establishing that the rights of the workers may not be waived.Lastly, it should be noted that although the FLL does not expressly state such, legal authority exists from the Mexico’s Supreme Court of Justice and from the Federal Collegiate Circuit Courts, which give employers the opportunity to work out alternative work shifts, which topic will be addressed in a future article in the CCN Mexico Report™.