MEXICO Law and Practice Contributed by: Roberto Cannizzo, Carlo Cannizzo, Stefano Amato and Mauricio Moreno-Rey, Cannizzo
2.5 Typical Representations and Warranties
request of a commercial folio from the Public Registry of Commerce of the area where the company is located. • Agreements – to be performed by the attor - neys. The scope of the review of agreements in the context of a real estate business combination (ie, merger, purchase of shares) varies depending on the structure of the transaction. • Assuming the transaction is the direct pur - chase of real estate, the review should cover at least: (a) the last sale-purchase agreement that transferred the property of the real estate and the chain of title; (b) any agreement that may affect the property, such as leases, commodatum, usufruct and easements; (c) federal zone concessions; credit agree - ments, if the real estate is subject to a mortgage, trust or any encumbrance on the property; (d) agreements regarding services, main - tenance, repair or supply of assets or utilities; (e) hotel management agreements and fran - chise agreements; (f) insurance policies; and (g) management, licensing and operation agreements. • Environmental – to be performed by the attor - neys and environmental specialists for phases I and II, and authorisations reviews. • Tax matters – to be performed by the tax advisers. • Disputes – to be performed by the attorneys. • Surveys, usually under American Land Title Association standards – to be performed by professional surveyors, ALTA surveys, zoning confirmations, analysis to determine if the real estate is in an archaeological zone or histori - cal monument, etc.
Sale and purchase agreements commonly include representations and warranties covering:
• the seller’s authority; • legitimate ownership; • absence of liens; • unpaid taxes; • land use compliance; • required permits; and • environmental matters.
Environmental warranties often involve permit existence and contamination absence, typically based on the seller’s knowledge. Due diligence, including Phase I (and sometimes Phase II) stud - ies, is crucial. In M&A transactions, standard representations and warranties apply. However, in asset acqui - sitions, authorities may treat the deal as a busi- ness acquisition, potentially transferring tax or labour liabilities if the seller has outstanding obligations. Mexican law includes statutory indemnification, where sellers must guarantee the property’s con - dition and compensate buyers if eviction occurs due to a third-party ownership claim. To mitigate misrepresentation risks, agreements include indemnities, damage payments, and remedies like caps, survival periods, baskets, and anti-sandbagging clauses. Indemnities are often backed by escrows, holdbacks or joint liability of parent companies. While representa - tion and warranty insurance exists, it is rarely used in Mexico.
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