1. Presented by: Scott A.Preston & Letvia M. Arza-Goderich
Sales and Marketing of Mexican Real Estate Products in the United States Challenges and Regulatory Impact
Presented by: Scott A.Preston & Letvia M. Arza-Goderich

2. Federal Law – ILSA (“Interstate Land Sales Full Disclosure Act”)
Requires registration with the Department of Housing and Urban Development (“Housing and Urban Development” or “HUD”)
Applies to all sales to U.S. residents of land parcels located outside of their home state, including land parcels located in other countries
Applies to the sale of units in condominium developments or mixed-use properties
Requires registration of the project with HUD
Must deliver a detailed report on the property (“Property Report”) to the buyers
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EXEMPTIONS TO HUD REGISTRATION REQUIREMENT IN ORDER TO COMPLY WITH ILSA
The “improved parcel” or “two year” exemption
It is not necessary to register the project with HUD (the property report does not even need to be prepared / delivered) if the contract of sale provides that the construction or improvements will be completed in the parcel (or the condominium project) within the period of two years from the signing of the contract
The exemption is null and void if the seller tries to limit the remedies of the buyer in the event that the seller does not fulfill the obligation to complete the work in two years
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EXEMPTIONS TO HUD REGISTRATION REQUIREMENT IN ORDER TO COMPLY WITH ILSA
The “100 lot exemption”
Applies to the sale of properties in projects of less than 100 lots
Units from different properties can be included if they are part of a “common promotional plan”
To calculate the 100 lots, parking units and storage must be included
The contract of sale must include representations that the infrastructure, plumbing and electricity and other amenities have been validated
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5. Consequences of not complying with ILSA
REMEDY ALLOWS "RESCISSION" OR "REPEAL" OF THE DEAL FOR THE BUYER
ILSA provides that, if the project is not registered and the property report is not delivered to the buyer prior to the signing of the sales contract, the buyer has the right to cancel or revoke the contract (15 U.S.C. Sec (c)).
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6. LAWS AT THE STATE JURISDICTION LEVEL
The majority of States have created their own “ILSA”
Some States recognize the federal registration under ILSA in addition to the requirements under State law
The sale and/or promotion of real estate products to persons who are residents of, or entities domiciled in, a State usually is regulated under the laws of said State, even though the project is out of the territory of the State
In general, States require that the project be registered with the authorities of the State where the (current or potential) buyers reside
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7. State Registration Requirements
States which require real estate products located in Mexico to register with their regulatory or administrative agencies if prospective buyers are located within such States:
New York
Arizona
Colorado
Texas
California, a natural market for Mexican projects, does not require the registration of projects that are not located within the territory of the state of California.
It is necessary to include in the sales contract certain "sacramental language" (i.e., language required by State statute).
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8. “Reaching into the State”
In general, the mere publication of an advertisement or other form of promotion that could be considered as directed at residents of a State in order to induce the sale of real-estate product submits the promoter/developer/seller to the jurisdiction of that State.
Websites can be considered to be "announcements or promotional activity" that may constitute an offer or solicitation of offer of sale directed at the residents of a State.
Though notices or "disclaimers" are advisable, they do not guarantee protection from action by State authorities against the seller or promoter.
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Recommendations
Consult with professionals specializing in the federal and state schemes that regulate the sale and promotion of the real-estate product to residents of the USA.
Conduct your due diligence to identify the ideal markets for your real estate product.
Make sure you are well informed when making a decision with respect to the sales and marketing of your real estate product in the United States.
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