NAME-LENDERS AND THE SUPPOSEDLY IRREVOCABLE POWER-OF-ATTORNEY
I’m frequently uncovering powers of attorney given by national citizens in favor of foreigners so the proxies can buy or sell real estate. Thankfully, however, this practice has decreased substantially. Today’s commentary will focus on foreign proxies, although this topic is also applicable to national ones as well.
In the case of foreign proxies, the power of attorney is granted through “name-lenders”, Mexican people who are trusted enough by the foreigner to put their name on their property. This supposedly allows the foreigners to feel certain that their interests are protected properly. However, there is nothing farther from the truth, even though they have probably been advised by my fellow notaries (at least by the one that formalized the action) or by a real estate agent anxious to close a deal and get the commission. Truthfully, these fraudulent activities are instruments used to hide acts or contracts that may or may not be valid, to carry out the purchase or sale of real estate in restricted areas or areas protected by community property laws (ejidos), or actions that seek to avoid the fulfillment of fiscal responsibilities or formalize the action by way of a trust. Let me underline this concept: these actions are illegal and there are diverse penalties that will come to bear as a consequence to such.
Such power-of-attorney documents contain an almost holy legend that loosely translates to: “are of irrevocable nature since they are granted for the fulfillment of bilateral obligations or contracts”. What they don’t specify however, is the obligation or contract to which they refer, since if they did, the illicit nature of the granting of such a power would be obvious. So, since they are subject to that condition without explaining its nature, the irrevocability as such becomes very doubtful.
In my personal opinion, these powers can be revoked by the grantor whenever and however he/she wants it done. Let me explain:
The power-of-attorney contract necessarily implies a degree of trust between the grantor and the attorney and according to our legal codes, these powers can be revoked whenever the grantor so decides. As an exception to the rule, the irrevocable nature of such is only maintained when they are carried out to fulfill an obligation as stated above.
Aside from the danger represented by the revocable nature of these powers, I’ll be talking later on about the consequences to the proxy/purchasers in the case the “name-lender” should pass away or be subject to any sort of seizure of property due to debts.
So my advice is to think twice before using this “name-lender” concept that has become such an institution on the Nayarit and Jalisco coast.
German Goldman S.
Principal Notary
NOTARIA DIEZ DEMARCACION UNO
Boulevard de Nayarit 70-Desps. 4 y 5. Villa 5
Nuevo Vallarta, B.B. Nay. MEXICO (63732)
Tels: 011 52 322 2970022
