MEXICO Law and Practice Contributed by: Roberto Cannizzo, Carlo Cannizzo, Stefano Amato and Mauricio Moreno-Rey, Cannizzo
subject to restrictions based on its location and use. 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security The granting of security over real estate does not trigger taxes. However, notary public fees and registration fees to the RPP should be paid, and in certain locations, such as Cancun, the pay - ment of a transfer tax (ISABI) is mandatory. Nota - ry public fees and registration fees usually vary from state to state, depending on the amount secured. Enforcing a real estate security results in the same taxes as acquiring the property (see 2.10 Taxes Applicable to a Transaction ). It is important to consider that in some cases, depending on the lender, where there is a fore - closure procedure, particularly when collateral is owned by a private individual, the lender may end up having to pay the borrower’s taxes (income tax and/or VAT on constructions) aris - ing from the transfer of the property as part of the foreclosure procedure. The notary public is responsible for withholding these taxes. 3.5 Legal Requirements Before an Entity Can Give Valid Security There are no special legal rules or requirements the entity must comply with to grant a valid security, other than complying with the regula - tions included in its by-laws, to avoid ultra vires acts. 3.6 Formalities When a Borrower Is in Default In typical real estate transactions, collateral is structured through mortgages or security trusts. If a borrower defaults, the lender must initiate a foreclosure legal procedure in the case of a mortgage. For securities granted through trusts, the process follows the rules set forth in the rel -
evant trust agreement, with the trustee usually acting as the executor. When other creditors of the borrower have secu - rity interests in the same asset, priority is gener - ally established in the document through which the security was granted. In such cases, the judge will order the notification of other creditors about the existence of the lawsuit or procedure, allowing them to participate in the process. Under Mexican law, in situations where the bor - rower has other creditors, the mortgagee or trustee has priority over other creditors when it comes to collecting from the secured asset. 3.7 Subordinating Existing Debt to Newly Created Debt It is possible for existing secured debt to become subordinated to newly created debt by agree - ment of the parties involved. There are certain legal obligations which have preference in rela - tion to pending debt or securities, such as tax and labour credits, under certain circumstances and with limitations. 3.8 Lenders’ Liability Under Environmental Laws A lender holding or enforcing a real estate secu - rity is not liable under environmental laws for any pollution of the real estate if it did not cause it. In terms of the Federal Environmental Liability Law, the individual or legal entity which, through its action or omission, directly or indirectly dam - ages the environment, is liable and must repair the damage, or, where repair is not possible, shall be liable for environmental compensation. 3.9 Effects of a Borrower Becoming Insolvent Under Mexican law, a borrower’s security inter - ests in favour of a lender cannot be deemed
623 CHAMBERS.COM
Powered by FlippingBook