The Importance of Renovation or Construction Contracts in Mexico

(PHOTO: Top Mexico Real Estate)

Building a new home or renovating an existing property? It is imperative you review a construction contract with a lawyer before you sign. These contracts are designed to establish the obligations between the contractor or builder and the property owner regarding the execution of work. Details of the agreement should include price, terms of payment, the manner, and deadline for the job to be carried out.

If you are living and dealing with day to day life in Mexico, you understand that prices and quotes change often and that mañana does not necessarily mean tomorrow.  Home construction or renovation is said to be one of the most stressful events in your life, make sure you can rely on the contractor to get the job done professionally and on time.

The construction contract between individuals is regulated by the Federal Civil Code and the commercial code.

 It is important to specify these aspects in the contract:

  • The construction project must be carried out under the contractor’s supervision and direction, and he is responsible for his own materials and equipment.
  • The contractor must be responsible for the actions of the employees including any subcontracted workers or hired companies.
  • The contractor will take responsibility for work carried out by third parties including any hidden defects.
  • The contractor will be responsible for all permits and obtaining construction licenses from the municipal or state government authorities. The contractor must provide all original documents to the homeowner once the construction is complete.
  • Establish payment terms for the construction, depending on the parties agreement. Either the full payment will be paid upon delivery of the project or installment payments made after each stage of the project is finished.
  • Once the price for the project is agreed on, the contractor can not request an increase unless the cost of materials or wages have increased by at least 25%.
  • Any increase in price or changes to the plan or design must be authorized in writing by the owner
  • For renovations in a condominium complex, it is the contractor’s responsibility to request authorization from the condo administrator. The construction plans must be in accordance with the condominium regime.
  • The homeowner must make it clear they are not the employer of the workers. The contractor is responsible for the workers and must provide proof of compliance with their obligations to various government agencies including Mexican Social Security Institute (IMSS) and INFONAVIT.
  • The contractor will register the start date, incidents, suspension or cancellation of work and also provide corresponding documents once the job is complete to the Mexican Social Security Institute (IMSS).

Additional considerations of a construction contract:

  • Specify the quality of materials the contractor is obliged to use in the contract.
  • Agree on any fines or penalties for a breach of the contract by either the owner or the contractor.
  • Document the start date and the delivery date and any compensation if the project does not complete on time.
  • Acts of God or force majeure, situations beyond either parties control which exempt the contracting parties from fulfilling their contractual obligations.

Things do not always go as planned, especially with renovations or construction. Consider the possibility that the project will not complete by the delivery date specified in the contract. In some cases, the owner has sold their previous home expecting to move into their new home, but due to construction delays they end up renting a place for months. Is there any compensation for the costs they will incur?
If your renovation project is a rental, will you lose guests and income from the delay?  If  the amenities are not finished, and your guests are not happy, is there any recourse?
If you have a valid reason and want to back out of the contract will your deposit be refunded?

Consult a lawyer to review any contract before you sign. For more information about contracts or any legal matter, contact@mexlaw.ca.

 

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