Originally posted by Woooosh
http://www.signonsandiego.com/news/2011/sep/25/baja-land-dea...
U.S.-connected companies bring no special legal protections for Americans seeking dream properties.
Baja California coastal real estate was booming in late 2006 when Dawn Nicoli and her husband, Bruce Hoey, bought into the upscale La Esmeralda
development planned in southern Rosarito Beach.
The Escondido couple said they felt safe paying $375,000 for two parcels of prime oceanfront property. They trusted their American real estate agent
and the U.S. firm she represented, Realty Executives, and felt encouraged by their positive first experience buying property from her in Mexico.
But more than four years later, the land is nothing but a vacant lot. The couple has filed lawsuits on both sides of the border in their increasingly
frantic struggle to obtain a refund. The property has a $1.8 million lien, and the Mexican company that took their money, Empresa Constructora
Fortaleza, has long since closed shop.
The case is one of several involving Americans who said they mistakenly placed faith in U.S. real estate franchises or projects promoted by U.S.
companies in Baja California. While affiliation with well-known U.S. firms or names may be a powerful marketing tool, it confers no special protection
in Mexico.
Experts said buyers can safeguard themselves far more by asking lots of questions, seeking out qualified attorneys or other independent consultants,
and understanding what they are signing before they hand over large sums of money. Title insurance and escrow accounts — even though not mandatory in
Mexico — are now widely available and offer a measure of security.
“The vast majority of people buying in Mexico have done it safely,” said Christopher Hill, chief executive of Stewart Title of Latin America. But in a
different legal system and without some of the checks and balances that are standard in the United States, U.S. consumers are advised to exercise “an
additional level of self-protection and due diligence,” he said.
Rule No. 1: Don’t pay for a property until you have the title. “Until you get the piece of the paper with the title, the home is not yours,” Hill
said.
Seeking remedy after the fact can be a lengthy, confusing and costly process.
More than two years have passed since buyers of Trump Ocean Resort filed suit in Los Angeles Superior Court seeking the return of more than $20
million in deposits. The lawsuit now involves nearly 200 people, many of whom said they were drawn to the project because of its association with New
York real estate magnate Donald Trump.
When the project was unveiled in 2006, Trump told the Union-Tribune that he was “a significant equity investor” in the planned hotel-condo project in
Tijuana. It later turned out that he only allowed his name to be used for marketing purposes.
The developers — Los Angeles-based Irongate and its Mexican counterpart, PB Impulsores — lost their financing in 2008 when a construction loan fell
through, and the project was scrapped early in 2009. By then, $32 million in buyers’ deposits had been spent.
Trump has distanced himself from the project since terminating his license agreement in January 2009.
FRANCHISE CONNECTION
In a more recent case, Galo Tello, a 64-year-old resident of Hawthorne, dreamed of acquiring an oceanfront retirement home in Mexico. Tello said he
went online, found Century 21 Acacia in Tijuana last October and “looked no further.”
Tello, employed as a sales manager at an electronic components firm, said “Century 21 was the name that I trusted, and basically that’s it.” Deciding
on a house in Playas de Tijuana, he signed an offer to buy it for $300,000, but the seller turned it down. As negotiations continued, Tello said he
was instructed to put $80,000 toward the purchase price. He paid the real estate agent directly.
Tello said he wept with joy when the agent told him the seller would consider $375,000 for the house. But in the weeks that followed, Tello said he
didn’t hear back. On Dec. 10, he asked for a refund if the offer was rejected. Tello said he is still waiting.
After researching public records, Tello said, he learned the dwelling was not for sale — and did not belong to the presumed seller.
Century 21’s offices in Mexico City and its headquarters in New York City didn’t respond to his appeals for help, Tello said. In July, he filed a
civil lawsuit in Mexico. He also is considering legal action in the United States against Century 21.
“They are allowing their franchises to use their names to rip off people. It’s as simple as that,” Tello said.
Matt Gentile, a spokesman for Century 21 LLC in New York City, said the Tijuana office operates as a franchisee of Century 21 Affiliates de Mexico, an
independently owned and operated company.
Gentile said the New York central office has an agreement with Century 21 Affiliates that requires the Mexican company “to monitor the activities of
its franchisees … and report the findings of its investigations to Century 21 Real Estate LLC. We are confident that C21 Mexico will investigate the
matter and work with its franchisee to facilitate a fair resolution of the matter.”
Victor Loza, president of the Baja California Real Estate Council, said he knows of eight or nine complaints against Century 21 Acacia, including
Tello’s. “We have not seen the authorities acting” to investigate, Loza added.
BOOM, THEN BUST
The coastal corridor that spans Tijuana to Ensenada has long been a draw for Americans who want a seaside home but can’t afford the prices in coastal
Southern California.
La Esmeralda in Rosarito Beach was part of a wave of Baja California projects planned in 2006 and 2007 as a booming real estate market drew buyers
from north of the border. The Great Recession ended those dreams for many developers and buyers.
During the boom, Realty Executives affiliate Diane Gibbs was one of the most successful real estate agents selling in the area, building a strong
reputation with U.S. purchasers with her advice on how to invest safely. “She taught classes on what to do. She was the guru,” said Nicoli, 53, a
professional photographer.
Last year, the city of Rosarito Beach filed a criminal complaint against Gibbs and the development company for selling lots that lacked the required
municipal permits.
This year, Gibbs was suspended from the local chapter of the Mexican Association of Real Estate Professionals on allegations of violating the group’s
code of ethics in connection with La Esmeralda. She is appealing that decision to the national association.
The plan for La Esmeralda involved 20 lots and 120 condominiums, according to a purchase agreement signed in February 2006 by Robert Bombela Fuentes
of Sacramento. Listed on the document as the legal representative of the developer, Empresa Constructora Fortaleza, is dentist Alessandro Porcella.
Fuentes, a retired utility worker, said he borrowed $67,500 against his home and wired it to a U.S. bank account in San Ysidro to reserve a lot in the
development. He was told the project would be completed by Oct. 18, 2007. When nothing happened by March 2008, he began asking for his money back.
“It was always the same promise — you’ll have it next week — but next week never came,” said Fuentes, who has joined Nicoli and Hoey in a civil
lawsuit in Mexico.
Just how many Americans put money in the Esmeralda project, and how much they lost, remains unclear. Nicoli and Hoey, a 50-year-old landscape
contractor, are among two groups that have filed lawsuits in San Diego over the fallout. The cases involve a half-dozen clients with close to $2
million in losses.
“Association with well-known U.S. companies makes it that much easier for Americans to believe it’s a safe investment,” said Daniel Watkins, an
attorney whose firm represents one of the groups. “But when it turns out the investment wasn’t safe, we’re met with all kinds of excuses, and the
American company had nothing to do with it.”
Management and an attorney for Realty Executives International, based in Phoenix, did not respond to requests for comment.
Gibbs referred questions to her Mexican attorney, who did not respond to phone calls or an email message. Porcella also did not reply to interview
requests.
sandra.dibble@uniontrib.com * (619) 293-1716 * Twitter @sandradibble
[Edited on 9-25-2011 by Woooosh]
[Edited on 9-26-2011 by Woooosh] |
