I HAVE CANCER AND THEY OFFERED US A TYLENOL.
After waiting three long months, North Beach investors hoped Sonora officials would make good on their promises of March 5 to provide some viable solutions to the problems at North Beach. Instead, as one disappointed investor put it: "I have cancer and they offered us a Tylenol".
A meeting was held at the Arizona Department of Real Estate on June 19, 2008 for the purpose of the Sonora government addressing serious problems brought to their attention at a previous meeting held on March 5, 2008. At that March 5 meeting, Sonora government officials were made aware of problems relating to North Beach including land fraud, and an on-going law suit, tying up millions of investor and developer dollars. The officials promised that, within three months, they would investigate and provide solutions to the investors at the June 19, 2008 meeting concerning the following North Beach properties:
Las Gardenias, Kasitas, Sunset Beach (North Beach)
Playa Azul
Riviera Real
Playa Dorado
Four separate ½ hour meetings were arranged by the Arizona Department of Real Estate to be held with investors and Sonora officials, leading us to believe that individual properties and their problems would be addressed. Much to the disappointment of the approximately 75 investor attendees, the Sonora officials presented the same SONORA PROPOSAL shown below. No individual properties or problems were addressed! According to the Sonora officials, they allegedly conferred with their governor, developers, private business people, and Puerto Penasco officials to come up with this proposal designed to address all North Beach investors.
Below is the proposal submitted by the State of Sonora:
MEETING WITH NORTH BEACH INVESTORS
LOCATION: ARIZONA DEPARTMENT OF REAL ESTATE
June 19, 2008 PHOENIX, AZ
SONORA PROPOSAL:
OBJECTIVE: Offer North Beach property buyers an incentive program in which they could recover up to 100% of their down payment (made in North Beach), through credit incentives applied towards the acquisition on a new property in Puerto Penasco, without declining rights to the ongoing legal process.
INCENTIVE DESCRIPTION:
1) Agreement with Puerto Penasco Developers to offer the following incentives:
a. LAS PALOMAS: 50% credit of down payments made in North Beach properties (Las Palomas) applied towards the acquisition of a property of equal or greater value.
b. BELLA SIRENAS: 50% credit down payments made in North Beach Properties (Bella Sirenas) applied towards the acquisition of a property of equal or greater value, limited to $50,000.
NOTE: Both developments currently have an Arizona Subdivision Disclosure Report (public report).
2) 100% exemption of closing and transaction costs.
a. Registro Publico de la Propiedad (Property Tax)
b. Traslado de Dominio (Transfer tax)
c. Honorarios de Notarios Publicos (Public Notary fees)
d. Avaluos (Appraisals)
NOTE: There will be nominal fees that apply in some instances, in such case, Sonora will absorb all costs.
3) Possibility of a capital loss tax write off in the United States for the investment Made in North Beach (please consult your accountant and/or tax advisor).
All transactions under this Program must be closed before August 31, 2009.
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Not one attendee of this meeting found anything encouraging. We asked people from each of the 4 developments involved what they thought, and all felt it was a complete waste of time.
Because each meeting was only ½ hour, of which the Sonora officials took 15 minutes, and because we had questions regarding the litigation, there was little time to fully digest the offer, but upon closer examination, the following points emerged:
" Under the BEST of circumstances, the buyer loses ½ of his down payment and if he elects to purchase a property at Bella Sirena, the maximum he can be credited with $50,000. In most cases, the down payments at both Las Palomas and Bella Sirena were in excess of $100,000.00.
" Both of these developments are having such a difficult time selling their properties, that any "live" buyer could most likely get the same discount.
" Las Palomas has just raised its Homeowners Association fees to $850.00 per month. " As a result of this increase, it has been reported that claims have been filed for refunds in the amount of approximately $4 million by people who have met the refund criteria within their contracts with Las Palomas.
Part 2 of the proposal would be considered a step in the right direction if anyone chose to take advantage of Part 1.
Part 3 is not an offer at all from Sonora. Anyone can investigate the possibility of a tax write off and it has nothing to do with the Sonora government participation.
We also came up with the following questions, which we will forward to the Real Estate Department, as well as to the Director of Tourism of Sonora:
" Is there a limit of $50,000 credit on Las Palomas as there is on Bella Sirena?
" In the unlikely event there is any interest on any buyer's part, how is the contract between the buyer and the developer, e.g.. Playa Azul affected? As an example, if I purchased a unit at Playa Azul in the amount of $300,000 and gave a down payment of $150,000, I am credited with $75,000 towards purchase in Las Palomas. But what happens to the developer of Playa Azul? Is my contract with him still in effect? And what position does this put the developer in?
When confronted with the issue of fraud being perpetrated, their excuse was that they were part of the Executive branch and not the judicial branch and there was nothing they could do for those investors who lost $2.5 million dollars in the original North Beach development. They suggested that these investors file a criminal action against the perpetrators (Martin and Grijavla). It was pointed out that the criminal statute of limitations was long past and there was an on-going lawsuit (2.5 years). These very same perpetrators named in that lawsuit had not even been served summonses to appear in court, therefore how could defrauded investors serve summonses to these individuals responsible for the fraud. They basically shrugged. Time after time, these officials made it clear that they were the Executive branch and could do absolutely nothing about fraud. When questioned why someone from the judicial branch was not in attendance, they again shrugged. It was made clear to them that members of the judicial branch should be in attendance at any further meeting between investors and the government.
It became clear to the officials that the media was watching very closely as evidenced by ABC News15 interviewing investors at the conclusion of each meeting. We will continue to keep pressure on the Sonora government by actively seeking media involvement including national exposure to the problems associated with Mexican real estate investments.
The Sonora officials indicated that this proposal was a first step and several other measures were allegedly being addressed by the Sonora government that they could not disclose. They indicated that there would be other meetings with investors before years' end. They were reminded that the state of Sonora as well as Puerto Penasco will continue to lose many millions of dollars in tourism and real estate investment if these problems were not resolved quickly and fairly. Until then, we will continue to discourage any investment in Mexico.
