Rocky Point Condo Owner Didn't Follow Mexican Rules, Fellow Owner Says

A Rocky Point condo owner who may lose her investment didn't follow Mexican rules for American buyers, one of her fellow condo owner says.

Neal Harris, who tells us he's on the homeowner association board at Bella Sirena and owns "multiple properties" in the condo tower, contacted us this morning to criticize the decisions of fellow condo owner Donna Peckenpaugh.

It looks like he's right, to an extent: If Peckenpaugh had conducted her affairs better, her condo might not be in trouble.

But no matter what mistakes she made in handling the purchase, losing the investment would be a very steep price to pay. It's one of those "only-in-Mexico"-type of problems.

In our blog post on Monday, we told how Peckenpaugh's being evicted from her condo and stands to lose the $350,000 she paid for it. The impending ouster follows a lawsuit between the Sandy Beach tower's American development company, the now-defunct Pelican Partners of Seattle, and several Mexican construction workers who were employed by Beck Group, an American company, to build the tower the project.

When courts in Mexico and the United States agreed that Pelican Partners had short-changed the Mexican workers, a Mexican court ruled that four of the condos should be given to the seven workers. Peckenpaugh's condo was one of them.

In April, a Mexican appeals court ruled against the former Scottsdale interior designer, leading her to talk to the news media. Channel 5 News, (KPHO-TV), also covered her story on Monday.

She was told to abandon her condo by the end of April and that she might be forcibly removed from the property. As of today, she hasn't yet been thrown out of the home that has been her full-time residence since 2009. 

Under Mexican law, foreigners can't own property within 30-60 miles of Mexico's coastlines. Many Americans have purchased homes in Puerto Pensasco (Rocky Point's Spanish name), but they don't really own them. Instead, after paying the seller, foreign homeowners set up a trust that owns the property and is managed by a Mexican bank.

Generally speaking, a trust is defined as a financial arrangement in which assets are managed by a third party.

A Mexican real-estate trust for coastal properties typically can be renewed every 50 years. Clearly, such an arrangement has its risks for the home buyer.

As Peckenpaugh admits, she didn't have a trust for her property. Nor did she realize, she says, that the condo remained in the name of Pelican Partners since she paid the company for it in 2006.

Harris, though, says "the developer was very clear about how we were to close the transaction."

Certified letters in English were sent to every condo owner about the litigation between Beck Group and Pelican Partners, telling the owners, "you need to make sure you get your final trust done," he says.

Bella Sirena has 220 condo units. Of the total, 216 buyers — mostly Americans — followed the instructions given by the developer, Harris says.

He and the other buyers are "happy," he claims, adding that he "has $2.5 million in that resort, plus I've bought other properties in town."

Peckenpaugh acknowledges to us today that she made mistakes and should have put a trust together.

"Yes, we should have, but in Mexico everything gets so time-consuming and complicated that one gets lax," she says. "Never again."

According to Peckenpaugh, the three other condo owners stung by the developer-contractor squabble have different situations. One, like herself, didn't put together a trust. As far as the other two, one purchased a trust "only to find out that it was not a good trust," she says. The owner's money was taken, but the trust never set up. The fourth condo buyer, a businessman from California, had a trust but still received word he was being evicted, she claims. "Clearly, the trust did not protect him."

We were unable to verify her information about the other owners.

Harris trusts his trusts. He believes his investments are sound.

"I'm not worried about it in the least," he says.

He admits it's possible that one or more of the condo owners affected by the development litigation may have been "defrauded" by people who claimed to be helping them set up a trust. If so, their problems may be resolved by Mexican authorities in separate proceedings.

Harris says he's familiar with another court case mentioned by Peckenpaugh that involves 11 Bella Sirena condo owners. That case was resolved with no condo owners losing their investments, he says.

Harris is optimistic that in the end, Peckenpaugh will not lose her home.

"There were a lot of people trying to resolve this before she went public," he says.

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Ray Stern has worked as a newspaper reporter in Arizona for more than two decades. He's won numerous awards for his reporting, including the Arizona Press Club's Don Bolles Award for Investigative Journalism.