Purchasing Your Dream Home in Mexico Part 1 / Page 2

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CHECK THE TITLE:

Does your seller have a registered title to the property?  Many foreign buyers, in order to avoid the closing costs, or through ignorance, have paid for their property, taken possession of it, and have never obtained a registered title! Ask for a copy of your Seller's title documents and reserve the right to examine them prior to the release of any part of your payment.  If they are in Spanish have them translated and, if in doubt consult with a neutral third party about their probable validity.  It should be added that if the seller has never acquired title to the property he is selling, it can often be remedied.  The  buyer should be aware of this condition, however, and be certain that the person who accepts his offer is truly the holder of the title.  Additionally, he should make arrangements for the additional costs, if any, involved in this double transfer.

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The prudent buyer of real estate in the United States or Canada would not consider leaving his title "in limbo" in either of those two countries; one should not do so in Mexico either.

The foreigner purchasing real estate in Mexico is buying personal, not real property if the acquisition is on the Baja Peninsula, within thirty miles of any coastline on the mainland, or within sixty miles of any border.  The acquisition is personal property.

How does personal vs. real affect the foreigner who acquires property under a Mexican bank trust?  The effect is negligible.  Instead of using the words; "transfer of title" one should more properly say "transfer of trust rights", or, "assignment of trust rights".  In practical terms the beneficiary has full control of the property.  He may direct the trustee bank to 1.- lease the property, 2.- mortgage the property, or 3.- sell the property.  The foreign owner enjoys full rights of usage and may do anything to the property permitted under Mexican law.  He enjoys the same rights of dominion as any Mexican citizen who has direct title to the property. He may construct a building, tear it down or modify it in compliance only with the local zoning and planning ordinances or, if applicable, the homeowner's condominium regime.
 

UNDERSTAND THE MEXICAN TRUST - FIDEICOMISO

Payment of the purchase price is not enough.  In order to have a valid ownership interest in the property which you are buying it is necessary to have the title recorded.  This puts the rest of the world on notice that the property is yours.  If you are a foreign person purchasing property in many parts of Mexico, including the entire Baja peninsula, the property will transfer not to your name but to the name of a Mexican bank as trustee for your interests.  The Mexican constitution prohibits direct ownership of real property by foreigners in the "prohibited zone", a strip of land thirty miles wide along its seacoasts and sixty miles wide along its borders with the United States and Guatemala/Belize, as well as the entire Baja peninsula.  This is the reason for the bank trust, the "fideicomiso", which has been established under the guidelines of the Mexican government so that foreigners may be protected in their property acquisitions.

Whether you are purchasing in a zone requiring a bank trust or in an area where title can be taken directly into your name, it is necessary that this transfer take place and your interest registered as soon as possible after the successful  conclusion of the negotiations to purchase your dream property.  Until this transfer takes place you are vulnerable:  the seller may die, the heirs may be unwilling to recognize your rights in the property, you may become involved in a lengthy and expensive probate proceeding.  Meanwhile, your interest may not be recognized by the authorities should you wish to obtain a building permit, by the bank should you wish to borrow money and use the property as collateral or as part of your assets; by the courts should a third party also claim an interest in the land, or, very importantly, should you later decide to sell it.

A permit to acquire the rights in the property must be obtained from the Secretary of Foreign Relations and the terms of the permit form a part of the deed. Currently, the term for a trust is fifty years. Multiple renewals are permitted under the law.  By requesting extensions each fifty years a property may be controlled by a family or business entity for generations.

RULE NUMBER FOUR: INVESTIGATE THE STATUS OF THE CONDOMINIUM REGIME

A word of caution for those who are considering the purchase of a condominium or a lot in a subdivision.  Just as in other countries, the unit, or lot must be legally described and an individual property tax number issued.  This individual property must be registered in both the Property Tax Office and in the Public Registry of Property.  Often, a developer will spend time and energy on promoting the sale of the properties prior to completing the establishment of the Condominium Regime.  Until this is completed, legal title to an individual unit or lot cannot be granted since there is nothing to describe!  Be sure to investigate the status of the condominium regime prior to completing the offer to purchase!

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Linda Neil, Salvatierra 120 esq. con Madero,
La Paz, Baja California Sur, Mexico
Phone: 1-877-214-4950 Mexico: 01-800-627-5130 x102