In San Miguel de Allende a horrible fraud scheme is happening and people are being left without money or a home. It’s happening in condo developments that use heavy promotion in billboards around the city, but that collect payments from buyers and don’t deliver.
Two types of real estate fraud
» Those who don’t finish construction.- In this category are those developments which for years have collected payments for the houses (almost always between 20 to 60 percent of the price), but that are either late on construction or haven’t started at all.
This developments use empty promises of finishing construction soon and false excuses —like blaming government or covid— for being late. The truth is that they won’t finish construction and government or covid have nothing to do with their breach of contract: it’s the partners of this construction companies embezzling money for their own personal purposes instead of using it on their development.
The worst part is that most of this developments used bank credits for construction (or to simulate construction), so defrauded buyers not only will have to deal with the construction company, but also with the mortgage from the bank over the assets of such company —including the construction and the land—.
» Those who don’t give deeds.- In a similar manner to the previous ones, this developments have finished construction and in some cases they have even delivered the homes to the buyers, but they still don’t deliver their respective deeds to said buyers.
This developments have mortgages on the properties they constructed, because they were built using bank credits. Buyers paid in full thinking they were buying a free of liens property, but the developers embezzled the payments and didn’t pay the respective mortgage of each house.
The great danger with this developments is that the mortgages are usually overdue, which means that any moment the bank can execute on the property and push buyers out of them, leaving them without any protection.
Some legal details on this type of fraud
One common characteristic of this type of fraud (which involves more than five companies in the city) is that they don’t use PROFECO registered contracts, which is ilegal. PROFECO is the Federal prosecutor for the Consumers and some of this developments have already been suspended for not using registered contracts.
Other common characteristic is that this fraudulent contracts are titled as Promise Contracts and not as BuySell agreements. This with the objective of generating uncertainty in the buyer and also in the courts when this cases are brought to justice.
One last detail is that in many cases the representative of the company who signs the private contracts doesn’t even has POA to sell, which is fraud by itself. This is one more strategy to put buyers in uncertainty about how to fight for their rights.
What can you do?
The strategies change depending on the development and the fraud scheme used. But almost in all cases, the proper thing to do is:
- Put a complaint in PROFECO
- File a Criminal Complaint.
- File a Commercial Lawsuit for breach of contract and damages.
The process takes long and lawyers that don’t do this type of cases on a usual basis can lose because of lack of knowledge of the procedures against developments.
The best strategy is to hire lawyers who have had cases against construction companies in the past and that understand very well the applicable norms for the protection of consumers.
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