Mexico Releases New Mandatory Standard (NOM 029) for Timeshare Services | Newsletters | Legal News: International
The Federal Official Journal of March 28, 2022 published a mandatory standard NOM-029-SE-2021, Business Practices – Informational Requirements for the Provision of Timeshare Services (NAME 029), which replaces the 2010 version. The new NOM 029 will come into effect on September 24, 2022.
Scope of the new NOM 029
NOM 029 governs the standards required for the sale and pre-sale of timeshare services, mandatory content and registration of timeshare agreements, requirements to be included in timeshare regulations, certification procedures and supervision of suppliers of timeshare services, among other processes. Based on the new NOM 029, buyers can sell, transfer or assign their rights under a timeshare services contract. The promotion and marketing of international timeshare services is also permitted.
Requirements and registration of timeshare membership agreements
Suppliers are still required to register their membership master agreements for the sale or pre-sale of timeshare with the Federal Consumer Protection Agency (“PROFECO”). Prior registration with PROFECO of these agreements is required to sell or pre-sell timeshares. To obtain this registration correctly, the text of the purchase contracts must comply with a large number of requirements described in NOM 029 and the Mexican Federal Law on Consumer Protection. These include:
- Obtain and file damage and loss insurance policies covering real estate and personal property;
- Obtaining government licenses for construction and development;
- Obtain notarized trust agreements or deeds registered with the Public Property Registry (required under Mexican law to create the timeshare regime on the property);
- Drafting of agreements in Spanish and court-certified translation from another language in a side-by-side column format where the Spanish text will prevail in case of discrepancies; and
- Deposit of guarantees by service providers to guarantee compliance with their obligations.
Purchase contracts must contain, among other requirements: (i) the station’s internal regulations, which must comply with a number of provisions in favor of the customer; (ii) a clear description of the charges to be applied to the customer; and (iii) the procedure to be followed by clients to sell, transfer or assign their rights and the calculation of the resulting costs. The procedures for registering the agreement in order to comply with NOM 029 are listed in the publication in the Official Gazette of the Federation. Developers can begin the registration process after the publication date of NOM 029 and before it comes into effect.
Main changes introduced in NOM 029
Some of the main new provisions of NOM 029 different from the 2010 version are:
- In the event that the fees stated in the purchase contract are insufficient for the maintenance of the station, the promoter is responsible for covering any difference.
- In the event that the buyer is prevented from using the services agreed in the purchase contract and for any reason whatsoever if the promoter is unable to accommodate the client in another place of equal category, the promoter is responsible for all disbursements incurred by the buyer, such as accommodation and food and, where applicable, a premium of at least 20% of the agreed price.
- In the event that the buyer is entitled to a refund due to the cancellation of the purchase contract and there is a default in payment, the promoter must pay, in addition to a refund, default interest nine percent (9%) per annum on amounts not returned.
- Developers can apply for a NOM 029 conformity assessment certificate from independently approved inspection units, through which a five-year conformity report can be issued following a special procedure in under NOM 029. Developers may begin this process after the publication date of NOM 029 and before it leaves. in force. Nevertheless, Mexican regulators can still conduct inspection visits and apply their supervisory authority to verify the compliance of timeshare service providers under NOM 029.
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Foley has a strong interdisciplinary team of hospitality and leisure, real estate and regulatory in the United States and Mexico with a deep understanding of the condominium market, able to help clients understand and implement implement the steps necessary to comply with the new NOM 029, including in creating timeshare regimes in Mexico, drafting and reviewing Mexican timeshare agreements and regulations, registering with PROFECO, and obtaining new conformity certification procedures for service providers available under NOM 029.