Building in Mexico – A Guide to Protecting Yourself
Let`s face it, no matter in what country you live, building a house or a part of it, presents a set of challenges. Some of these challenges are similar all over the world, but some are very specific to the country and particularly the city where you choose to build. When building in Mexico, you need to follow certain precautions and this article should help you. We’re experts in Mexican real estate law and are here to help you avoid some of the pitfalls that are common.
In Yucatán, each area presents its own sets of challenges. In the coast and protected areas, you need permission from the environmental authority as well as a building permit from the city; in historic centers, you also will need a permit from INAH (The Archeology and History institute); etc.
Now it is the builder’s job to know and obtain this permit, but it is important that, as owner of the property, you know what is necessary to stay in compliance with the law when building in Mexico. If the permit is not obtained, the fines and penalties will be on you and not on the builder. These fines can be up to $20,000 USD and can include the definitive cancelation of the construction and even jail time.
This adds importance to the already difficult decision to choose the right builder. But then again, as clients, how can we make sure we are fully protected, legally and economically? Especially in the construction industry in Mexico, which is mostly informal. In this country, building and construction, and the related industries which comprise them (e.g. plumbing, electrical, masonry and more) are still considered to be crafts that are passed from generation to generation. The problem with this is that not everybody takes the time to make it a proper business, mainly because of the cost that this represents.
In Easy Legal Mexico, we receive a significant number of clients who contact us with problems with the builders, for many different reasons, but generally seeking to obtain the same result: I WANT MY MONEY BACK.
Unfortunately most of the time, this is not possible and we find ourselves in the difficult position to tell these clients that they don´t have the tools to have a solid case build around their claim. So it’s important to consider how to protect yourself and your investment when building in Mexico.
This is the main reason we decided to write this and make a list of the most important things you as client have to check at the time you choose a builder.
1- USE LEGAL AND ESTABLISHED BUILDING COMPANIES and the rest of the points of the list are based on you hiring this kind of building business. Understand that this is a lot more expensive than just hiring the construction worker that lives in the area and can do the work cheaply, but the fact of the matter is that you don´t have any way to protect yourself in the event of shoddy work from those kind of builders.
An established company will:
- Have references that you can check and review online,
- Be able to issue facturas,
- Have the legal ability to enter a binding contract and, most importantly,
- Place importance on their reputation.
You have a very important weapon, if you need it, against established building companies that you don´t have against the informal worker. This is THE PUBLIC OPINION, because they care about their name and reputation. This is especially true if they work with the expat community, who are often more accustomed to reading and posting reviews. If you ever find yourself in a position where you have a problem with them, 80% of the time they will offer a solution to avoid a bad review or damage to their reputation.
2- GET A LEGAL CONTRACT AND RENDERS THAT SHOW YOU WHAT THE FINAL WORK WILL LOOK LIKE. Verbal contracts are not valid in this country. Even written ones need to be written properly from a legal standpoint, as you have to make sure it protects you completely. This is particularly important when building in Mexico, as this is typically a higher expense than most of your other expenses.
Among other things you have to make sure that are detailed in the contract are:
- Establish the cost
- The exact work to be done
- In what time frame it is to be completed
- Any penalties for problems
- That it is the builder’s responsibility to obtain ALL the necessary permits to build as well as make sure their workers are paying in to social security,
- That the builder is responsible for any consequence that could a rise of the lack of any of these requirements.
Our best recommendation here is to seek legal advice to review the contract and make sure you are protected. The contract should have all the requirements to be legally binding and will hold up in a court of law.
3- GET A FACTURA (legal receipt). I know things are different in other countries, but here in Mexico facturas are the only legal proof of payment. Simple receipts, made by hand or printed, do not meet all the fiscal requirements to be legal or accepted in a court of law.
You can sugar coat it any way you want but at the end of the day, a builder or any other service provider that doesn’t issue a factura is doing one thing: TAX EVASION.
You also need the factura to show that you actually made the payment for the work described in it. Informal workers are informal precisely for that reason, not to pay taxes, so they will not be able to give you a factura.
Yes, it will cost you at least 16 % less without the factura, but the consequences of that savings could end up being much more expensive. So think twice before you get in to a big problem just to save a few bucks.
4- REVIEW ALL THE REFERENCES. Informal workers can typically only provide verbal references from one or two people that you may know, which is just not enough people to truly indicate a certain quality. Also, because their livelihood is not as impacted by public opinion, they tend to do one poorly executed job once in a while, and that could very much be your project.
Established companies care about their reputation and collect tons of references that can endorse the quality of their job. I know it doesn´t give you a 100 % guarantee but the chances of getting it wrong are lower if you have a bigger sample to verify you are hiring the right builder.
5- GET A CALENDAR OF PAYMENTS. Do not pay in advance; pay according to a calendar that should be done based on accomplishing goals and a job well done. Once you approve the work that was done, you make the next payment, and so on. Make sure you leave the fee or a good percentage of the cost for the final payment, once you have approved the final product. At the end of the day that is your biggest weapon to obtain the proper service: The Money.
6- Finally, STAY ON TOP OF THINGS. Building, especially building in Mexico, is not a service you can just pay for and forget about it until is ready. You definitely have to check the work periodically to make sure it is exactly what you have in mind and what you are paying for. This will save you most of the hassle. If you are not happy with the work, you can stop it on time and either have the workers correct it or even make a change of builder without losing money or time.
If you just leave it be, it may be too late and by the time you realize that the work was not done correctly, too much will have been built already. What you put on paper (the contract) may or may not be what you have in mind, so be present and make sure that the reality meets the quality and standards that you had in mind.
At the end there is no guarantees and the fact of the matter is that, just like with everything, to obtain retribution you will have to go through the hassle of the legal system (a court of law), which is slow and complicated BUT that is your best protection and without a legal contract, you are simply unprotected and have no defense, which will be also reflected in the negotiation table.
Contact us for more information regarding this matter. Be smart, protect your money, your time and particularly your peace of mind.