The factual matrix presented — a developer-controlled administrator company (ZEEHM) sub-contracting more than half of the condominium’s fee income to a second developer-controlled company (Zoransa), coupled with a refusal to disclose underlying costs and a Vigilance Committee that endorses opacity by labelling Zoransa a “third party” — raises a discrete and answerable legal question under the Ley sobre el Régimen de Propiedad en Condominio de Inmuebles para el Estado de Baja California Sur (hereafter “the BCS Condominium Law”), read together with the Federal Civil Code, the Federal Commercial Code, the General Law of Commercial Companies (Ley General de Sociedades Mercantiles, “LGSM”), and applicable consumer and tax provisions. The controlling thesis is straightforward: under Mexican condominium law, the administrator owes a fiduciary-type duty of accountability to the assembly of co-owners that cannot be contracted away by inserting a related-party service provider between the administrator and the homeowners. The “third-party contract” characterisation advanced by ZEEHM and the Vigilance Committee is, on the better view, legally untenable, because (i) Zoransa is not a true third party where common control exists, (ii) the duty of rendición de cuentas attaches to the fees themselves, not to the corporate vehicle holding them, and (iii) the homeowners’ inspection rights are statutory and assembly-derived, not contractual concessions. The only coherent rationale for the structure and the refusal to disclose is the avoidance of scrutiny over an undisclosed mark-up, related-party profit, or tax position — none of which constitutes a legitimate reason in law.
The administrator’s position is fiduciary in substance, not merely contractual
The BCS Condominium Law 2016 establishes the administrator as an organ of the condominium, appointed by and accountable to the assembly of co-owners. Articles governing the administrator’s duties require the administrator to manage the common areas, collect ordinary and extraordinary contributions, maintain accounting records, and render accounts to the assembly periodically (typically at least annually, and at any time upon assembly resolution). These provisions are not default rules that the parties may displace by clever contracting; they form part of the régimen imposed by state public order legislation, and any clause in an internal regulation (reglamento interno) or service contract that purports to defeat them is void under Article 8 of the Federal Civil Code, which renders ineffective acts contrary to laws of public order.
That doctrinal point matters here because ZEEHM’s position — that its accounting duty is discharged simply by showing that fees were paid out under a “flat fee, no mark-up” contract — confuses the corporate form with the underlying obligation. The administrator’s duty of accountability is owed in respect of the resources of the condominium, which retain their character as homeowners’ funds until lawfully applied to common expenses. Mexican civil law treats the administrator’s relationship with the co-owners as analogous to a mandato (Articles 2546 et seq. of the Federal Civil Code and the cognate provisions of the BCS Civil Code), under which the mandatario must render accounts of everything done in the exercise of the mandate (Article 2569 of the Federal Civil Code). The mandatary cannot escape the duty of accounting by sub-mandating the work to an affiliate; the trace continues with the money.
Why the “third-party” characterisation fails on the facts
The Vigilance Committee’s argument rests on a formal proposition — Zoransa is a separate legal person, therefore its books are private — that is incompatible with the relational reality. Three distinct strands of Mexican law converge to defeat it.
First, the LGSM and the general principles of simulación in the Federal Civil Code (Articles 2180–2184) permit Mexican courts to look behind the corporate veil where one company is used as an instrument of another, especially where common ownership and absence of independent substance are evident. Where ZEEHM has “no staff, no assets and only a bank account”, and Zoran is the sole owner of both ZEEHM and Zoransa, the two entities operate, in substance, as a single economic unit controlled by the same beneficial owner. The Mexican Supreme Court (SCJN) has accepted, in matters of group liability and abuse of corporate form, that formal legal personality cannot be used to defeat obligations owed to third parties or to disguise self-dealing; the jurisprudence on abuso del derecho and fraude a la ley supports the same conclusion at the level of principle.
Second, even taking the corporate separation at face value, the contract between ZEEHM and Zoransa is a related-party transaction entered into by the administrator on behalf of the condominium. Under the BCS Condominium Law, the administrator is bound to act in the interest of the co-owners and to avoid conflicts of interest; where a conflict is unavoidable, it must be disclosed to and approved by the assembly. The transfer of more than fifty per cent of HOA income (over USD 500,000 per annum) to an entity owned by the same individual who owns the administrator is the paradigm conflicted transaction. The duty of disclosure is heightened, not weakened, by the relationship.
Third, the characterisation of Zoransa as a “third party” is internally incoherent with the “no mark-up” representation. If the contract genuinely contains no mark-up, then the homeowners are, by definition, paying Zoransa’s actual costs plus zero — which means the underlying costs are the homeowners’ costs, and the homeowners have a direct legitimate interest in verifying them. A flat-fee structure that purports to extinguish the right to verify cost is a contradiction in terms: a flat fee is only “no mark-up” if the cost base is known. The refusal to disclose the cost base is therefore not a defence of the structure; it is evidence that the representation cannot be tested, which under ordinary evidentiary principles permits an adverse inference.
The statutory inspection right under the BCS Condominium Law
The BCS Condominium Law confers on every co-owner the right to be informed of the financial state of the condominium, to consult the accounting records, and to receive copies of supporting documentation in respect of common expenses. The Vigilance Committee (Comité de Vigilancia) is constituted precisely to supervise the administrator on behalf of the assembly; its function is investigative, not protective of the administrator. Where the Committee declines to exercise its supervisory power, two consequences follow.
First, the individual co-owners’ right is not extinguished by the Committee’s inertia. The statutory entitlement to information is held by each co-owner qua owner; the Committee is an additional mechanism, not a substitute. A co-owner may convene or requisition an extraordinary assembly (typically on the petition of a stipulated percentage of indivisos, commonly 25%, although the precise threshold should be confirmed against the current text of the BCS Condominium Law and the Zanzibar escritura constitutiva) to compel the administrator to produce accounts.
Second, where the Committee endorses the administrator’s refusal, the Committee members themselves may incur liability for breach of their supervisory duty. The position that a Vigilance Committee has “no right to inspect fees under the contract” inverts the statutory architecture: the Committee’s powers derive from the BCS Condominium Law, not from the ZEEHM–Zoransa contract, and no contract between the administrator and its affiliate can shrink the supervisory perimeter that the legislature has fixed. To accept the Committee’s view would mean that an administrator could always insulate spending from oversight by sub-contracting it; that interpretation defeats the object of the statute and is therefore inadmissible under the ordinary canon that statutory purpose constrains construction.
Possible legitimate explanations — and why they do not survive scrutiny
A balanced analysis requires asking whether any legitimate commercial rationale could justify both the structure and the refusal to disclose. Several candidates exist, but each fails when tested against the facts.
Operational separation between an administrative entity and a service-provision entity is a legitimate and common arrangement in Mexican real estate, particularly where the developer offers integrated property-management services. Such separation can reduce administrative complexity, ring-fence liabilities, and permit specialisation. However, separation of function does not entail opacity of cost. A bona fide service provider operating on a “no mark-up” basis can readily evidence that fact by producing payroll records, supplier invoices, social security filings (IMSS), and tax receipts (CFDIs). Indeed, since 2014, the issuance of CFDIs has been mandatory for all deductible expenses under the Federal Tax Code (Código Fiscal de la Federación, Article 29), and these electronic invoices are designed to be verifiable. A genuine no-mark-up provider has nothing to hide and every reason to prove it, because doing so reinforces the contractual representation it has made.
Confidentiality of staff salaries is sometimes invoked. That argument has limited weight in this context. Aggregate payroll cost, supplier-level cost and category-level cost can be disclosed without breaching individual privacy obligations under the Ley Federal de Protección de Datos Personales en Posesión de los Particulares. Mexican data protection law does not shield aggregated financial information of a service company from a counterparty entitled by law to verify the cost base of a contract it funds.
Commercial sensitivity vis-à-vis competitors is also sometimes raised. That argument is implausible where the contract is described as “no mark-up”: there is, on that representation, no profit margin to protect. The argument is, in effect, self-defeating.
The remaining explanations are not legitimate. They include: (i) the existence of an undisclosed mark-up, which would falsify the contractual representation and constitute misrepresentation under Articles 1812–1816 of the Federal Civil Code; (ii) the diversion of homeowner funds to expenses unrelated to Zanzibar (cross-subsidisation of other developments owned by Zoran); (iii) inflated related-party invoicing designed to extract surplus from the condominium without declaring it as administrator’s remuneration (which would require assembly approval); and (iv) tax-positioning, in which the structure is used to characterise homeowner funds in a manner favourable to the controller and to avoid VAT or income tax exposure that would arise from a direct service contract. Each of these explanations is consistent with the observed facts — common control, no independent substance in ZEEHM, refusal to evidence cost, Committee endorsement of opacity — and each is unlawful or, at the least, requires disclosure to and approval by the assembly that has manifestly not been given.
The legally correct position
The legally correct position, applying the BCS Condominium Law 2016 together with the Federal Civil Code, the LGSM and applicable tax and consumer rules, may be stated in five propositions.
First, ZEEHM, as administrator, owes a non-waivable duty of rendición de cuentas to the assembly of co-owners in respect of all condominium funds, including funds transferred to Zoransa. The duty follows the money.
Second, Zoransa is not a true third party for these purposes. Where the administrator and the service provider are commonly owned, the contract is a related-party transaction that must be disclosed, justified and capable of verification. The “no mark-up” representation is itself a representation about cost, which the homeowners are entitled to test.
Third, the homeowners’ inspection rights are statutory. They cannot be defeated by a contract to which they are not party, nor by a Vigilance Committee that misconceives its supervisory role. The Committee’s position that homeowners have “no right to inspect fees under the contract” misstates the law.
Fourth, the appropriate remedies available to the homeowners include: (i) convening an extraordinary assembly to demand full disclosure and, if necessary, to remove and replace the administrator under the procedures of the BCS Condominium Law and the Zanzibar reglamento; (ii) civil proceedings for accounting (juicio de rendición de cuentas) under Articles 2569–2570 of the Federal Civil Code and the corresponding procedural provisions; (iii) where misrepresentation or diversion is established, civil actions for damages and for nullity of the ZEEHM–Zoransa contract on grounds of conflict of interest and simulación; (iv) complaints to PROFECO where applicable to consumer service relationships; and (v) tax denunciations to the SAT where invoicing irregularities are identified.
Fifth, on the facts as presented, the only coherent explanation for the combination of common control, absence of substance in ZEEHM, and categorical refusal to evidence cost is that disclosure would reveal something the controller wishes not to disclose: most plausibly an undeclared margin, cross-subsidy, or unauthorised related-party profit. A bona fide flat-fee, no-mark-up arrangement would be vindicated, not concealed, by transparency. The refusal is therefore probative.
Conclusion
Mexican condominium law in Baja California Sur does not permit an administrator to launder accountability through a wholly-owned affiliate. The duty to render accounts attaches to the funds, not to the corporate vehicle; the inspection rights of co-owners are statutory and assembly-based, not contractual concessions; and a Vigilance Committee that treats a related-party service contract as a shield against scrutiny misunderstands its own function. While operational separation between administrator and service provider can in principle be legitimate, the legitimacy is conditional on transparency, and the categorical refusal to evidence a “no mark-up” cost base is incompatible with that condition. The likely explanation for the structure and the refusal is the avoidance of disclosure of an undeclared mark-up, related-party profit, cross-subsidy, or adverse tax position. The homeowners are, on the better view, legally entitled to compel disclosure, and the Committee’s contrary position is unsustainable.
A note on the limits of this analysis
This analysis applies the publicly known framework of the BCS Condominium Law 2016, the Federal Civil Code, the LGSM and the Federal Tax Code. Specific article numbers within the BCS Condominium Law (in particular the precise thresholds for convening extraordinary assemblies, the precise periodicity of accounting, and the precise composition and powers of the Vigilance Committee) should be confirmed against the current consolidated text of the statute as published in the Boletín Oficial del Gobierno del Estado de Baja California Sur, together with the escritura constitutiva and reglamento interno of the Zanzibar condominium, which may modify default rules within the limits permitted by the statute. I am unable to verify the precise current article numbering of the BCS Condominium Law from first principles, and any litigation strategy should be calibrated against the statute as currently in force and the specific constitutive documents of the condominium.
References
- Código Civil Federal (Mexico), Articles 8, 1812–1816, 2180–2184, 2546–2570.
- Código Fiscal de la Federación (Mexico), Article 29 (electronic invoicing — CFDI).
- Ley General de Sociedades Mercantiles (Mexico).
- Ley Federal de Protección de Datos Personales en Posesión de los Particulares (Mexico, 2010).
- Ley sobre el Régimen de Propiedad en Condominio de Inmuebles para el Estado de Baja California Sur (2016), published in the Boletín Oficial del Gobierno del Estado de Baja California Sur.
- Domínguez Martínez, J.A. (2018) Derecho Civil: Parte General, Personas, Cosas, Negocio Jurídico e Invalidez. Mexico City: Porrúa.
- Rojina Villegas, R. (2014) Compendio de Derecho Civil, Vol. IV: Contratos. Mexico City: Porrúa.
- Galindo Garfias, I. (2015) Derecho Civil: Primer Curso. Mexico City: Porrúa.
- Barrera Graf, J. (2014) Instituciones de Derecho Mercantil. Mexico City: Porrúa.
- Suprema Corte de Justicia de la Nación (SCJN), jurisprudence on abuso del derecho, simulación and abuse of corporate personality (general doctrine; specific tesis numbers should be verified through the SCJN’s Semanario Judicial de la Federación before citation in proceedings).
