Mexico Issues New Mandatory Standard (NOM 029) Related to Timeshare Services
The March 28, 2022 Federal Official Gazette published mandatory standard NOM-029-SE-2021, Business practices-Informational requirements for the provision of timeshare services (NOM 029), which supersedes the 2010 version. The new NOM 029 will go into effect on September 24, 2022.
Scope of New NOM 029
NOM 029 governs the required standards for the sale and pre-sale of timeshare services, mandatory content and registration of timeshare agreements, requirements to be contained in timeshare regulations, certification procedures, and supervision for timeshare service providers, among other processes. Based on the new NOM 029, purchasers may sell, transfer, or assign their rights arising from a timeshare services agreement. Promotion and commercialization of international timeshare services is also permitted.
Requirements and Registration of Timeshare Adherence Agreements
Providers are still required to register their adhering boilerplate agreements for sale or pre-sale of timeshares before the Federal Consumer Protection Agency (“PROFECO”). Prior registration with PROFECO of these agreements is required to sell or pre-sell timeshares. To properly obtain this registration, the text of the purchase agreements must comply with a large number of requirements outlined in NOM 029 and the Mexican Federal Consumer Protection Law. These include:
- Securing and filing damage and loss insurance policies that cover real estate and personal property;
- Obtaining government licenses for construction and development;
- Obtaining notarized trust agreements or deeds registered with the Public Registry of Property (necessary under Mexican law to create the timeshare scheme on the property);
- Drafting of agreements in Spanish and court certified translation of another language in a side-by-side column format whereby the Spanish language text will prevail in the event of discrepancies; and
- Posting of bonds by providers to guarantee compliance with their obligations.
Purchase agreements must contain, among various other requirements: (i) the resort´s internal regulations, which shall 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 for clients to sell, transfer, or assign their rights and the calculation of the charges arising thereof. Agreement registration procedures 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 following the publication date of NOM 029 and before it goes into effect.
Primary Changes Introduced in NOM 029
Some of the main new provisions of NOM 029 different from the 2010 version include the following:
- In the event that the charges set forth in the purchase agreement are insufficient for the maintenance of the resort, the Developer is responsible for covering any difference.
- In the event that the purchaser is prevented from using the services agreed upon in the purchase agreement and for any reason if the developer is unable to accommodate the client in another location of equal category, the developer is responsible for any out-of-pocket expenses incurred by the purchaser, such as for lodging and food and, if applicable, a bonus of no less than 20% of the agreed upon price.
- In the event that the purchaser is entitled to a refund due to cancellation of the purchase agreement and there is a default in such payment, the developer must pay, in addition to a refund, a default interest of nine percent (9%) per year on the unreturned amounts.
- Developers may request a NOM 029 conformity assessment certificate from independently approved Inspection Units, through which a five-year compliance report may be issued following a special procedure under NOM 029. Developers can begin this process following the publication date of NOM 029 and before it goes into effect. Nevertheless, Mexican regulators may still conduct inspection visits and enforce their supervision authority to verify the compliance of timeshare service providers under NOM 029.
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Foley has a robust hospitality and leisure, real estate, and regulatory interdisciplinary team in the U.S. and Mexico with deep understanding of the fractional ownership market, able to assist clients in the understanding and implementation of the needed steps to comply with the new NOM 029, including in the creation of timeshare regimes in Mexico, the drafting and review of Mexican timeshare agreements and regulations, registrations with PROFECO, and in obtaining new compliance certification procedures for service providers available under NOM 029.
