Mexico Condo Insurance – What You Don’t Know About Your Mexico Home Owners Association in Mexico
Mexico condo insurance is something you should definitely consider investing in for your unit in Mexico. Owning a condominium in Mexico makes you subject to the laws governing condominium management. This may include a home owners association (HOA), but not necessarily. What is more important is that even when you have a condominium, you may still have to get your own Mexico condo insurance to supplement the blanket insurance that an HOA may have for the building.
Home Owners Association (HOA)
A home owners association, or HOA, can result from the regimen de condominio, a legal document which details the existence of the building and legally describing the exclusive ownership into individual units. The document delineates the co-ownership of the common areas, thus forming a sort of non-profit partnership between the unit owners. Depending on the size of the unit, the owners are assigned a portion of building ownership, as well as the common areas. Each owner is then assessed association dues based on the percentage of ownership.
The regimen de condominio also includes specific duties and responsibilities, such as meetings, election of an administration, arranging for Mexico condo insurance and paying the necessary taxes. As it stands, however, this partnership cannot function as an entity representing the condominium owners in lawsuits to enforce the regulations in the condominium by-laws, unless it is formally organized as an HOA. It can sue a unit owner who is not paying for association dues. All unit owners have to comply with the rules and regulations established during the annual meetings and administered by the HOA. The HOA can be administered by selected unit owners or by a property management company.
7 reasons condo HOA don’t insure for full value
Condo HOAs in Mexico are expected to maintain a commercial insurance property for the entire building, including common areas like parking levels, outbuildings, pools, gymnasium, fixtures, fittings, elevators, and so on. Most insurance policies, however, are extremely limited. They normally exclude third-party liability, except for injuries that occur in common areas, renter’s liability and hurricane, water and wind damage.
The HOA doesn’t insure for full value:
- To keep premiums low – Optional add-ons like third-party liability will increase the cost of a Mexico condo insurance policy.
- To keep association deductibles low.
- To encourage unit owners to use common areas circumspectly and avoid unreasonable claims for personal injury in common areas.
- To compel unit owners to have their own Mexico condo insurance to cover their personal property.
- To discourage unit owners from renting out their units.
- To discourage malicious acts covered by insurance to benefit the HOA.
- To keep the insurer from being involved in HOA business concerning renovations or changes implemented to common areas in the building.
No HOA Setup
An HOA setup is not required by law in Mexico. However, unit owners will find that an HOA makes the building administration more efficient, as well as transparent. Most HOAs have an oversight feature that ensures that the rules and regulations are being followed and the funds available are being disbursed judiciously.
No Cat Coverage to Keep Cost Down
Most Mexico condo insurance policies will provide catastrophic coverage, but as an option. This will significantly increase the insurance premiums, thus increasing the association dues that must be collected from unit owners. Most HOAs will avoid doing this as much as possible to avoid problems with collections. This is short-sighted, however, especially in Mexico, which is often visited by hurricanes and other natural disasters that can damage a condo building extensively. Condo unit owners can find themselves shelling out more money than they should to repair the damage that would have been covered.
Betterments & Fixtures Policy
There are two types of Mexico condo insurance coverage: named-fixtures and all fixtures. An all fixture policy or betterments & fixtures policy is the broadest possible coverage for Mexico condo insurance when it comes to existing structures. It covers fixtures and betterments in your unit.
Mexico condo insurance can be customized to mimic similar policies in the US. Individual unit owners should not rely on their HOA to provide the only coverage, as it excludes the interior of each unit, providing no unit coverage for fire, theft or flood. It makes sense for condo unit owners to have their own personal Mexico condo insurance tailored for their specific needs.
Administrative Organization of Condominiums
Administratively, condominium ownership is organized much like a Mexican corporation. There is a condominium owners’ meeting, a surveillance committee, and an administrator. The administration of the condominium is carried out in many different ways and by one or more people. Some condominiums like to hire a management company, or create a condominium owners association, while others prefer to appoint a sole administrator or a managing board nominated from owners. This section examines administration without a condominium owner’s association, though the book goes on to discuss administration under Home Owners Associations later.
The formation of an association (asociación civil) is not necessary for all condominium properties. Associations have advantages, but they also require greater expenses: public notary fees for its creation, revision and extinction; notarial powers of attorney granted to the association’s legal representative when he is appointed, etc. They also require more formalities and tax obligations, which, if not attended to, cause more headaches than anything else does. It is possible to administrate a condominium project with an informal association without establishing a formal association. The size and type of condominium complex is often the determining factor when deciding if a formal association is necessary. Smaller condominium complexes with a minimal amount of facilities are less likely to require an association. Their legal relationship with third parties is less than large complexes with many employees.
In cases of informal associations, the only obligation the condominium owners have is to keep an authorized minutes book (libro de actas), and to pay any taxes or social security payments for employees which the condominium may hire. Other taxes likely to need paying are property taxes on common assets, and income tax on any income generated from the exploitation of the common assets.
Because of the nature of condominium ownership, the law provides for representation of the condominium and its owners through a common representative who is granted sufficient powers. A sole administrator and the surveillance committee, consisting of one or more condominium owners can carry out the administration.