Donation of Property to Local Governments in Mexican Real Estate Development and Construction Projects

Depending on the law of each state, there is an obligation to donate or make payment through a donation propertyto the municipality and/or state government where the real property is located, whenever a subdivision, urbandevelopment, condominium development and/or construction project is carried out. In some cases, thisrequirement may be burdensome for the developer, since the percentage of land to be donated may be significant.For example, this requirement can be anywhere from 7% to 17% in the state of Nuevo Leon, depending on thepurpose of the real estate development. While it is common for the law to establish that donated areas must beused for green spaces or recreational areas, there are also occasions when a prohibition exists against donatingareas that are subject to encumbrances, such as an electricity right of way easements granted to the FederalElectricity Commission. While some laws require that donation of land have been declared unconstitutional, theprocess to obtain an amparo injunction and enforcement of the judgment may affect the timing of a project andthe willingness of the authorities to grant authorizations required for a project. In these cases, it is common fordevelopers to prefer to make payment through a donation of land or, when permissible by law, comply with thisrequirement by acquiring and donating real property in another location, the same which requires reaching anagreement with the respective authorities. Consequently, it is important to review the applicable laws withrespect to land donations and evaluate the impact that such may have on a given real estate development project,and, if applicable, the possibility of asserting available legal defenses.