The facts disclose a structure that is, on its face, unremarkable in Mexican condominium practice: a developer-administrator outsources operational services to a service company. What makes the Zanzibar arrangement legally significant is not the outsourcing itself, but its three combined features: (i) the administrator (ZEEHM) is an asset-less shell whose sole function is to receive and transmit fees; (ii) the service provider (Zoransa) is owned by the same natural person who controls ZEEHM and developed the condominium; and (iii) the administrator refuses to produce evidence of the underlying costs, relying on the “third-party contract” characterisation endorsed by the Vigilance Committee (Comité de Vigilancia). This response argues that, under the Ley sobre el Régimen de Propiedad en Condominio para el Estado de Baja California Sur (2016) (“the 2016 Law”), read with the supplementary provisions of the Civil Code for Baja California Sur and general Mexican mandate and corporate law, neither the contract’s existence nor its nominal “third-party” form removes the administrator’s fiduciary, accounting and disclosure duties to the assembly of co-owners. The Vigilance Committee’s stated position is legally incorrect, and the refusal to evidence costs is, on the better view, indicative of self-dealing rather than of any legitimate commercial rationale.
The controlling legal characterisation: the administrator is a mandatary, not an arm’s-length contractor
Under Mexican condominium law generally, and the 2016 Law in particular, the administrator of a condominium does not hold the HOA fees (cuotas de mantenimiento) as its own property. The fees are collected on behalf of, and remain the patrimonial property of, the community of co-owners. The administrator’s legal position is that of a mandatario (mandatary/agent) acting for the assembly, with attendant duties of loyalty, diligence and rendering of accounts under Articles 2546 and following of the Civil Code for Baja California Sur (which substantially mirrors the Federal Civil Code on mandate). Article 2569 of the Federal Civil Code, replicated in the state code, expressly obliges the mandatary to render account of its management whenever required by the principal.
This characterisation is decisive. ZEEHM does not “own” the fees it receives; it administers them. Anything ZEEHM does with those funds, including paying them to Zoransa under a service contract, is an act of administration performed for the account of the co-owners, not a disposition of ZEEHM’s own assets. The supposed privacy of Zoransa’s internal accounts, as a separate legal entity, cannot defeat that. What must be evidenced is not Zoransa’s profit margin as such, but the administrator’s faithful application of community funds, of which the payments to Zoransa form part.
Statutory transparency duties under the 2016 Law
The 2016 Law imposes specific, non-waivable transparency obligations on the administrator. While the precise article numbering should be confirmed against the current consolidated text published in the Boletín Oficial del Gobierno del Estado de Baja California Sur, the Law consistently provides that the administrator must: (i) keep the accounting records of the condominium and the supporting documentation (invoices, contracts, bank statements); (ii) present periodic financial reports to the assembly, ordinarily monthly or at intervals fixed by the assembly, accompanied by supporting vouchers; (iii) make those records available for inspection by any co-owner at reasonable times; and (iv) submit to the oversight of the Vigilance Committee, whose function is precisely to verify the administrator’s accounts.
Two consequences follow. First, the obligation to evidence expenditure is a statutory duty owed to the co-owners; it is not a matter of contractual discretion that the administrator can contract out of by inserting a “no audit” clause in a sub-contract with a related entity. Second, the right of inspection belongs to each co-owner individually and to the Vigilance Committee collectively. The Committee’s view that “they have no right to inspect fees under the contract” inverts the statutory hierarchy: a private contract between ZEEHM and Zoransa cannot extinguish a public-order right conferred by the 2016 Law.
The “third-party company” argument: why it fails
Zoran’s central submission appears to be that, because Zoransa is a distinct legal entity, its costs and internal pricing are confidential and beyond the reach of the co-owners. This argument misstates Mexican law in three respects.
First, it conflates two distinct questions. The question is not whether Zoransa, considered as an independent enterprise, must open its books to strangers. It is whether ZEEHM, as administrator of the Zanzibar condominium, must evidence the expenditure of community funds it has authorised. The answer to the second question is yes, regardless of who the payee is. The administrator must be able to demonstrate that each peso of community money was applied to services genuinely rendered to the community at a price that is, in the language of the mandate provisions, consistent with the duty of loyalty.
Second, the related-party character of the transaction triggers heightened, not reduced, scrutiny. Mexican law recognises the concept of operaciones con partes relacionadas (related-party transactions) and treats them as inherently susceptible to conflict of interest. Although the most developed statutory regime is found in the Ley del Mercado de Valores for listed issuers, the underlying principle, that a fiduciary who contracts with himself must demonstrate the fairness of the transaction, is general. Under Article 2563 of the Federal Civil Code (and its state equivalent), the mandatary may not contract on its own account, or on behalf of another in conflict with the principal, without express authorisation. Where Zoran controls both sides of the contract, the burden of proving that the price paid by the community is at arm’s length rests squarely on him. Refusal to produce the underlying cost data is, in evidentiary terms, fatal to that burden.
Third, the corporate personality of Zoransa offers no shield. Mexican courts and commentators have increasingly accepted the doctrine of desestimación de la personalidad jurídica (lifting the corporate veil) where corporate form is used to evade legal duties, particularly fiduciary duties. The Supreme Court of Justice of the Nation (SCJN) has acknowledged the doctrine in commercial contexts, treating it as an exceptional but available tool against the instrumental use of legal personality. A structure in which a developer interposes a staff-less shell to receive fees and a wholly-owned operating company to receive over half of those fees, while refusing accountability for either, is precisely the abuse the doctrine targets.
The “flat fee, no markup” clause: legally inert without evidence
The contract is said to be a “flat fee, no markup” arrangement. As a matter of contract interpretation, that clause is meaningful only if it can be verified. A “no markup” representation that the obligor refuses to substantiate is, in effect, no representation at all. Under Articles 1796 and 1797 of the Federal Civil Code, contracts are to be performed in good faith, and obligations of result are to be evidenced. Where the administrator represents to the assembly that more than USD 500,000 per year is being passed through at cost, the corollary obligation is to demonstrate the cost base. The contractual label cannot operate as a self-certifying instrument that defeats the very statutory and civil-law duties that frame the administrator’s role.
Indeed, an honest “no markup” structure would ordinarily produce, rather than resist, transparency. A bona fide pass-through service provider has no commercial reason to conceal payroll, supplier invoices and overheads, because disclosure confirms compliance with the contract. Refusal to disclose is therefore not merely a procedural breach; it is evidentially inconsistent with the contractual representation itself.
Possible legitimate reasons for the structure: a fair appraisal
A balanced analysis requires consideration of the lawful rationales that may explain such a configuration. Four are commonly advanced.
First, liability segregation: developers frequently interpose a single-purpose vehicle as administrator to ring-fence litigation risk arising from condominium management from the operating business. This is, in principle, a legitimate corporate-law objective.
Second, operational efficiency: consolidating staff and maintenance in a single operating company (Zoransa) that services multiple developments can yield genuine economies of scale, which a “no markup” pass-through can pass on to the community.
Third, tax and labour structuring: separating the administrator (a fee-collecting entity) from the employer of operational staff is common to manage IMSS, INFONAVIT and ISR obligations cleanly, and to avoid the community itself becoming a substitute employer under the labour-subcontracting reforms of 2021 to the Ley Federal del Trabajo.
Fourth, administrative simplicity: a flat-fee structure provides budgetary predictability for the community.
Each of these rationales is, however, fully compatible with disclosure. None requires opacity. A developer pursuing any of them in good faith would welcome the opportunity to demonstrate the cost build-up to the assembly, because doing so would vindicate the structure. The fact that disclosure is refused, despite repeated requests and despite the statutory right of inspection, removes those rationales from the realm of plausible explanation in this case. On the better view, the only explanation consistent with the refusal is that the “no markup” representation cannot withstand scrutiny, i.e. that Zoransa is in fact extracting a margin, or that the services billed exceed those rendered. That is the conventional architecture of disguised self-dealing.
The Vigilance Committee’s position is legally untenable
The Vigilance Committee exists, under the 2016 Law, to verify the administrator’s accounts on behalf of the assembly. Its competence is defined by statute, not by the administrator’s contracts. To assert that the Committee has “no right to inspect fees under the contract” is to mistake the Committee for a party to the ZEEHM–Zoransa contract; it is not. The Committee’s inspection right is a statutory right exercised against the administrator. It reaches every peso of community money the administrator has disbursed, including disbursements to Zoransa. Any contractual clause purporting to oust that right would be void as contrary to a norm of public order under Article 8 of the Federal Civil Code.
Two further points should be made. First, a Vigilance Committee that endorses the administrator’s refusal to disclose may itself incur liability to the co-owners for breach of its statutory oversight function. Second, where the Committee is captured, the 2016 Law and the Civil Code preserve the co-owners’ individual remedies: an extraordinary assembly may be convened to remove the administrator, judicial inspection may be sought, and an action for rendering of accounts (juicio de rendición de cuentas) lies under the mandate provisions of the Civil Code.
Remedies available to the homeowners
The legally correct position is therefore as follows. The co-owners are entitled, individually and through the Vigilance Committee, to inspect the supporting documentation of all expenditures made by ZEEHM, including the invoices, payroll records and supplier contracts underlying the Zoransa charges. If access continues to be denied, the available avenues include: (i) convening an extraordinary assembly to remove and replace the administrator under the quorum and majority rules of the 2016 Law and the condominium’s reglamento; (ii) bringing a civil action for rendering of accounts against ZEEHM, joining Zoran personally on a veil-piercing theory where appropriate; (iii) filing a complaint with the Procuraduría Estatal de Protección al Ambiente or the competent municipal authority in Los Cabos charged with condominium oversight under the 2016 Law; and (iv) where the facts disclose appropriation of community funds, considering criminal complaint for administración fraudulenta under Article 388 of the Federal Criminal Code or its state equivalent.
Conclusion
The Zanzibar structure is not unlawful because it uses two companies; it is unlawful because it uses two companies to defeat the administrator’s statutory duty of account. The 2016 Law, read with the Civil Code’s provisions on mandate and with the general principles of related-party contracting, requires the administrator to evidence every disbursement of community funds, particularly where the counterparty is controlled by the same person who controls the administrator. The “third-party contract” argument inverts the analysis: the relatedness of the parties tightens, rather than loosens, the disclosure obligation. The “no markup” representation is not self-proving; it requires substantiation precisely because the contracting parties share a controller. The Vigilance Committee’s endorsement of opacity has no statutory basis and may expose its members to liability. While legitimate reasons exist for two-tier developer structures, every such reason is compatible with disclosure, and none survives a sustained refusal to produce cost evidence. On the balance of the available indicators, the most plausible explanation for Zoran’s refusal is that disclosure would contradict the contractual representation on which the structure depends. The homeowners’ allegation of foul play is, on the legal materials as they stand, the explanation best supported by the absence of evidence the administrator is statutorily obliged to provide.
References
- Congreso del Estado de Baja California Sur (2016) Ley sobre el Régimen de Propiedad en Condominio para el Estado de Baja California Sur. Boletín Oficial del Gobierno del Estado de Baja California Sur.
- Congreso del Estado de Baja California Sur. Código Civil para el Estado de Baja California Sur, particularly the provisions on mandate (mirroring Articles 2546–2604 of the Federal Civil Code).
- Congreso de la Unión. Código Civil Federal, in particular Articles 8, 1796, 1797, 2546, 2563 and 2569.
- Congreso de la Unión. Código Penal Federal, Article 388 (administración fraudulenta).
- Congreso de la Unión. Ley Federal del Trabajo, as reformed by the Decreto of 23 April 2021 on subcontracting.
- Congreso de la Unión. Ley del Mercado de Valores, provisions on related-party transactions and duties of loyalty (as analogical reference for fiduciary standards).
- Domínguez Martínez, J.A. (2016) Derecho Civil: Parte General, Personas, Cosas, Negocio Jurídico e Invalidez. México: Porrúa.
- Rojina Villegas, R. Compendio de Derecho Civil IV: Contratos. México: Porrúa (multiple editions), chapters on mandate and rendering of accounts.
- Suprema Corte de Justicia de la Nación, jurisprudence and isolated theses on desestimación de la personalidad jurídica (corporate veil piercing) in commercial contexts.
Note on sources: the precise article numbering of the 2016 Baja California Sur condominium statute and of the state Civil Code should be verified against the current consolidated text published by the Congreso del Estado de Baja California Sur, as state legislation is periodically reformed. The doctrinal framework set out above (mandate, duty to account, related-party scrutiny, veil-piercing) is drawn from primary federal civil and criminal codes and from established Mexican civil-law doctrine, and applies regardless of minor textual variations between the state and federal codes.
