MEXICO Law and Practice Contributed by: Roberto Cannizzo, Carlo Cannizzo, Stefano Amato and Mauricio Moreno-Rey, Cannizzo
indemnification, risk of loss, waivers and limi - tations of liabilities are freely negotiated by the parties. 7.4 Management of Schedule-Related Risk Parties may agree that the owner is entitled to monetary compensation/liquidated damages if certain milestones or completion dates are not achieved. Unless there is a force majeure event or delays caused by the owner or third-party factors such as licences or permits, liquidated damages for any incomplete work are usually paid. The payments by contractor of penalties or other amounts (damages) are usually guaran - teed through the issuance, for the benefit of the owner and/or owner lenders, of: • performance and advance payment bonds; • letters of credit; and • parent or third-party guarantees, in addition to payment holdbacks as agreed by the par - ties. 7.5 Additional Forms of Security to Guarantee a Contractor’s Performance The most common way for owners to seek to guarantee a contractor’s performance of a pro - ject is to obtain performance bonds, including advance payment and performance bonds. However, letters of credit, parent guarantees, holdbacks and escrow accounts are also com - mon. 7.6 Liens or Encumbrances in the Event of Non-payment Contractors and/or designers cannot lien or otherwise encumber a property in the event of non-payment. In Mexico, there are no mechani - cal liens as in other jurisdictions.
However, it is important to note that in the case of certain equipment (ie, elevators and air con - ditioning equipment), the seller or manufacturer may include a domain reserve in their sales agreement, which allows them to retain owner - ship of the equipment until payment is made. This domain reserve must be registered in the Mexican Federal Register of Property and Com - merce (RUG). 7.7 Requirements Before Use or Inhabitation Local laws determine the requirements to be met before inhabiting a project after its construction. For example, in Mexico City, it is necessary to obtain authorisation for the use and occupation of the construction, and for this it is necessary to present the construction licence and the con - struction logbook in which the progress of the executed works is registered and endorsed by an expert, among other things. Furthermore, it should be noted that the properties must comply with safety regulations, evacuation routes and civil protection, etc. Lastly, there are operation licences that must be obtained for the property to be used for its intended use, which depend on the business (hospitality, restaurant, parking lot, etc).
8. Tax 8.1 VAT and Sales Tax
If real estate is acquired through the direct pur - chase of real estate, various taxes and rights must be paid, including VAT on the value of the construction (unless it is a residence), paid by the purchaser at a rate of 16%. As previously mentioned, certain locations, such as Cancun, mandate for the payment of a transfer tax (ISA - BI), and such tax shall be calculated by applying a rate of 2% to the value of the property.
636 CHAMBERS.COM
Powered by FlippingBook