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Maria O’Connor – Part II Single • Chicago, Illinois • Attorney, Tropicasa Real Estate
Maria soon discovered that everything she did in PV opened a door for her. Teaching English at the hotels opened the door to her job with Los Tules. Then, through a contact at the hotel, she got a job as an assistant to Brock Squires, the owner and operator of the La Costa Coldwell Banker real estate agency. Working as his personal assistant, she soon made a contact that helped her get work at the construction company, Grupo Playa del Sol, where she worked from 1998 to 2003. She did a lot of legal advising for the company because of its financial relationships with U.S. clients and U.S.-style loan agreements. Maria had experience with both financial relationships and loan agreements from her work at the Chicago law firm, so she was able to help the company understand how those agreements would fit with Mexican law.
Work was going great at that time, but in 1999 Maria felt a strong urge to return to the classroom to enhance her skills. She paid a visit to the Centro Estudios Universatarios Arcos, the first accredited university in Puerto Vallarta and a private school affiliated with the Polytechnic University in Mexico City. She asked the director if she could audit a history class, but he told her that they didn’t really have any classes she could audit. In fact, most of the majors were specific to the needs of the local market, more bread and butter degrees like accounting, business administration, and law. He recommended that she work towards a law degree, which she did. Maria, in addition to her day job, spent five hours a day, five days a week, for three years in school and graduated in 2002 with her Mexican law degree. The cost was just six hundred pesos per month. “It was a challenge since I had to do everything in Spanish,” Maria laughs. “Luckily, I have always loved school and done well. I graduated second in my class.”
By 2003 Grupo Playa del Sol’s outside legal firm decided to open an office in Puerto Vallarta, and Maria was hired to work in that office. It opened in the fall of 2003 and was an immediate success. She mainly did corporate work and real estate, but because she was an American and understood Mexican law well, she had many clients who were interested in investing in Puerto Vallarta as well as other locations within Mexico. She concentrated on working with condo associations, house purchases, investments, structuring of corporations for tax purposes, and business planning. Of the clients she acquired for the firm, about 90 percent were foreigners, mainly Americans. But after four years in the law office, Maria could no longer resist and took the full-time plunge into a very hot real estate market by becoming Tropicasa Real Estate’s in-house attorney in the fall of 2007. Joining the firm was an easy decision since the owner of the firm had been her good friend for many years, and Maria was ready for a new challenge. Now, helping primarily Americans and Canadians become homeowners in Mexico became Maria’s full-time job. “I think it is important for those who want to purchase down here, as well as those who already live here, to know something about the Mexican legal system for their own protection. Mexico’s legal system is based on Napoleonic law, which in turn is based on Roman law. It’s codified law, which means that whatever is not in the law is not allowed, and whatever is prohibited in the law is prohibited. There should be no gray areas, but that is not always the case. The litigation system, for example: a lawsuit or criminal proceeding has no jury. You probably won’t even see the judge. It’s all written, and there is no oral argument. It can be complicated, and there is a lot of corruption to deal with within the system. Corruption, of course, is not specific only to Mexico, but it is very real here.”
That may change eventually. Mexico’s President Calderón signed legislation in June of 2008 designed to fundamentally change Mexico’s system of justice, allowing for U.S.-style oral trials and establishing a presumption of innocence for all criminal defendants. Under the new law, however, the changes need not be fully implemented until 2016. Maria strongly believes that understanding local law is essential to making the best of living here. “There is a saying here: ‘Better to have a bad agreement than a good fight,” she says. “For every lawyer that tells you that it’s going to cost you more to prove your point than it’s worth, you’ve got nine lawyers who will take your money and set you down a path where you may eventually win after years of litigation and expense. I think if people know some of this information in advance, especially labor laws, they will be better prepared to deal with the system.”
“For example,” Maria cautions, “Americans, Canadians, and other foreigners who buy real estate in Mexico often run into labor problems. Labor law is the number one area where they can get in trouble. In Mexico, labor laws favor the employee. If it is one person’s word against another’s, they are going to believe the employee. Knowing what you are getting into when you hire a maid, a gardener, or other service workers helps provide you with a worst-case scenario so you won’t be surprised.”
Maria adds that if you ask someone verbally to come to work for you and to work only for you, once he or she starts work, that is as good as a written contract in Mexico. “Make sure you have their duties and all the work details in writing. Once hired, people have all the rights and privileges, like severance, proportionate vacation time, and Christmas bonus. If you don’t pay, they can sue you and you must continue to pay their salary until a decision is made through a court of law. Always pay severance. It is pay for ninety days of work, any vacation time they have coming, and their Christmas bonus. If you don’t pay severance, you will probably be sued. It’s as simple as that.”
Maria feels strongly about providing both newcomers and expats currently living in Vallarta information about the legal system and their rights. “I’ve seen too many situations that could have been avoided if people had a better understanding of Mexican law. A prime example of things people don’t understand is how cultural perception enters into the equation. If someone steals from you in the states, it’s pretty clear-cut what to do. Not so here. Say, for example, your maid steals from you. To justify terminating the maid, you must first prove before the court of law that she stole from you and then use that legal decision to justify termination and exonerate you from paying severance. During the time you are trying to prove that the maid stole from you, the maid’s daily wages accrue under the law. If you cannot conclusively prove that the maid stole from you, or if the final labor hearing is scheduled before the criminal case is resolved, you will be on the hook for the full amount of accrued severance. The lesson here is to consider not prosecuting and pay severance. I think you will find it cheaper in the long run to forget it. Always count on paying severance, and focus more on establishing a better security system within your house.”
Another area of litigation Maria sees a lot when dealing with Americans and Canadians is “stop constructions,” meaning suing people who build construction that is in front of your house, taller than the law allows, or that blocks views. “When clients ask me what the city regulations are regarding what can be built, I tell them, ‘You know what, depending upon how much money they have, they can build whatever they want.’ I can tell you what the zoning laws are, but in reality, if people want to build something, they will. The only way you can guarantee your view is by buying that piece of land yourself.” Maria’s final piece of advice to someone who lives in Puerto Vallarta or is thinking about buying down here is to pay your taxes. “It’s primarily the people who have investment property here who rent it out and don’t register with Hacienda, which is the Mexican IRS,” she says. “If you generate income in Mexico, you must pay taxes on that income. The government is really cracking down on this. If the real property is located in Mexico, it generates tax here. In January of 2008, the new flat tax went into effect with the rate in 2008 set at 16.5 percent and increasing to 17 percent in 2009 and 17.5 percent in 2010. Everyone who rents out property will be subject to the flat tax as well as the traditional income tax and will pay the higher of the two. Hacienda is actively looking for and contacting all owners who rent their properties to be sure they register. However, whatever is paid in Mexico can be credited on tax owed in the U.S. or Canada, as authorized by the tax treaties between the countries. They have your name and address, so be warned.”
“Don’t leave your brain at the border and come down here and think things are done that differently. They’re not, especially when you’re buying property,” Maria exclaims. “Do everything you would do back home. Do your due diligence, use escrow, hire a lawyer if you don’t feel you’re being well represented by your real estate agent, and don’t be afraid to ask questions.” Email to a friend.
Will continue next month…
• Please click here to read Chapter 2 – Part I
• Please click here to read Chapter 2 – Part III
• Please click here to read Chapter 4 – Part I
• Please click here to read Chapter 4 – Part II
• Please click here to read Chapter 4 – Part III
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Maria soon discovered that everything she did in PV opened a door for her. Teaching English at the hotels opened the door to her job with Los Tules. Then, through a contact at the hotel, she got a job as an assistant to Brock Squires, the owner and operator of the La Costa Coldwell Banker real estate agency. Working as his personal assistant, she soon made a contact that helped her get work at the construction company, Grupo Playa del Sol, where she worked from 1998 to 2003. She did a lot of legal advising for the company because of its financial relationships with U.S. clients and U.S.-style loan agreements. Maria had experience with both financial relationships and loan agreements from her work at the Chicago law firm, so she was able to help the company understand how those agreements would fit with Mexican law.
By 2003 Grupo Playa del Sol’s outside legal firm decided to open an office in Puerto Vallarta, and Maria was hired to work in that office. It opened in the fall of 2003 and was an immediate success. She mainly did corporate work and real estate, but because she was an American and understood Mexican law well, she had many clients who were interested in investing in 
That may change eventually. Mexico’s President Calderón signed legislation in June of 2008 designed to fundamentally change Mexico’s system of justice, allowing for U.S.-style oral trials and establishing a presumption of innocence for all criminal defendants. Under the new law, however, the changes need not be fully implemented until 2016. Maria strongly believes that understanding local law is essential to making the best of living here. “There is a saying here: ‘Better to have a bad agreement than a good fight,” she says. “For every lawyer that tells you that it’s going to cost you more to prove your point than it’s worth, you’ve got nine lawyers who will take your money and set you down a path where you may eventually win after years of litigation and expense. I think if people know some of this information in advance, especially labor laws, they will be better prepared to deal with the system.”
Maria adds that if you ask someone verbally to come to work for you and to work only for you, once he or she starts work, that is as good as a written contract in Mexico. “Make sure you have their duties and all the work details in writing. Once hired, people have all the rights and privileges, like severance, proportionate vacation time, and Christmas bonus. If you don’t pay, they can sue you and you must continue to pay their salary until a decision is made through a court of law. Always pay severance. It is pay for ninety days of work, any vacation time they have coming, and their Christmas bonus. If you don’t pay severance, you will probably be sued. It’s as simple as that.”
Another area of litigation Maria sees a lot when dealing with Americans and Canadians is “stop constructions,” meaning suing people who build construction that is in front of your house, taller than the law allows, or that blocks views. “When clients ask me what the city regulations are regarding what can be built, I tell them, ‘You know what, depending upon how much money they have, they can build whatever they want.’ I can tell you what the zoning laws are, but in reality, if people want to build something, they will. The only way you can guarantee your view is by buying that piece of land yourself.” Maria’s final piece of advice to someone who lives in 