Mexico Real Estate

A Mexico notary public is an attorney that specializes in real property law and is specifically licensed by the state to legally transfer Mexico real estate property from one party to another. In my previous post in our Mexico real estate blog, I talked about the how to buy real estate in Yucatan One of the most important roles during the transaction are that of the notaries The number of Mexico notary public licenses is limited by the state. An attorney who wishes to become a Mexico notary must first attend classes and then pass a board. It is a demanding process and many do not make the cut.

For those few attorneys that do pass the test and are eligible to become a practicing Mexico notary public, they enter a waiting list for the next available notary license from the state. The wait is usually many years. Frequently, a law firm will have one or two junior partners who have completed the notario board exam and can assume the position of notario for the firm. A Mexico notary public license is extremely valuable and dearly guarded by the firms that have them.

The notary public is ultimately responsible to ensure that a clean, merchantable title is passed from the Seller to the Buyer, that the property taxes, transfer fees/taxes and any Mexico capital gains taxes are paid at or prior to closing. They are also responsible to properly record the transaction in their personal books and with the office of the Catastro (Mexico Public Registry). Should a notary public fail to discharge their responsibilities in an honest, fair and transparent manner, they could lose their notary license.

Choosing a notary public is usually not difficult and your Mexico real estate agent will be able to suggest a good notary that is versed in transferring titles to foreign buyers. You may also choose to work with an attorney who is not actually a notary but is connected to a notary. Frequently, these attorneys have passed their board to become a notary and are waiting their turn. In the meantime, they are skilled at checking titles, ordering Fideicomisos and setting up corporations.

If you are setting up a corporation, it is a good idea to find an attorney/Mexico notary public that understands the mechanisms of the proper corporation to best execute your business plan and objectives. Having your corporation construed and worded properly the first time will save money, time and frustration.

Notary Public fees will vary from one firm to another. Many fees are based upon the amount of the operation (appraised value of the property). Taxes and transfer fees are based upon this appraised value.

Frequently, the appraised value of the property is much less than the actual purchase price. If you wish to record your deal at the actual purchase price, that is fine, but be prepared to pay higher closing costs and, perhaps, you will be expected to pay the additional capital gains tax that the Seller will incur due to the buyer's desire to close the deal at the actual purchase price instead of the appraised value.

TOP Mexico Real Estate NETWORK; "Mexico's Leading Network of Specialists for Finding and Purchasing Mexican Properties Safely!"

Region:  Playa del Carmen Real Estate  Thomas Lloyd Graduate from Purdue University Business School with a degree in Management/Financial Option Investment.  He has been living, investing, and working in Mexico for over 15 years.  A Mexican certified & licensed realtor, he is the current president of TOPMexicorealestate NETWORK     "Our experience at work protecting your interests"  (512) 879-6546.

Find out how to protect your good faith deposit and Mexico Earnest Money.

Your ready to buy your piece of paradise, but handing money over to someone you don t know in a foreign country is a scary proposition. So how do you protect yourself from a fraudulent situation

Purchasing property in the Cancun real estate market and even in all regions of the Mexico real estate market is a quite different process than in many other countries. And when it comes to handing over deposit money, many buyers make the mistake of leaving their good judgment at home; thinking this is Mexico and this is how business is done here.

Most of those trustworthy buyers have purchased without problem, but there is always a risk. It is not necessary to have a Mexico Real Estate license to sell propeties So it is important to know who you are dealing with and how to protect your interests.

Mexico Escrow Services

Although not widely used in Mexico, escrow services are available through well know US companies and should be your first choice. There is a fee, but the protection it offers is well worth the extra expense.

Escrow is mostly used for re-sales but the property owner must be in agreement This can sometimes be an obstacle as some Mexican owners do not understand the concept of escrow. In most cases the listing broker can convince the owner if it is properly presented.

Mexico Broker

This would be the next option only if the property owner will not accept escrow deposit. Either the listing broker or the buyer s broker holds the deposit. This is more of a risk, so ask for references and DO CHECK THEM.

Mexico Developer

Most developers will not accept escrow deposits as they use incoming funds for construction. Deposits may be refundable or non-refundable (before the contract is signed) so do ask. It is important to work with a broker that you trust to present you with projects by developers with a proven track record.

The Mexico Property owner

It is customary for the initial deposit to go directly to the owner in the case of a re-sale. This is very risky and I do not recommend this situation. If unavoidable, do so in conjunction with your OWN Mexico real estate lawyer, following his advice so he can make sure you are legally protected.

TOP Mexico Real Estate NETWORK; "Mexico's Leading Network of Specialists for Finding and Purchasing Mexican Properties Safely!"

Region:  Playa del Carmen Real Estate  Thomas Lloyd Graduate from Purdue University Business School with a degree in Management/Financial Option Investment.  He has been living, investing, and working in Mexico for over 15 years.  A Mexican certified & licensed realtor, he is the current president of TOPMexicorealestate NETWORK     "Our experience at work protecting your interests"  (512) 879-6546.

This summer I have been seeing news stories and large amount of articles of the dangers and risks of coming to Mexico to visit or to vacation The majority of the stories have spoken of the entire country of Mexico in general, and unfortunately did not speak of regions or neighborhoods where the incidences were occurring whether it was some neighborhood of Mexico City, or some region of the state of Baja California

I also noted the misfortuneate timing of these news events being in the summer time which is basicallyeffecting Mexico's tourist high season and which is also effecting my area of work, the Mexico real estate industryLately though, I have starting to notice some articles that are becoming aware of the spilling over effects and have started to correct or attempt to report the data with a little more investigation and detail My question, “Is this too little too late”

This morning as I read through various articles I came across one that caught my attention inside of the Wall Street JournalThis article reported that many of the Mexican resort cities that are more than 1,300 miles away from the violent clashes, are witnessing cancellations and having their businesses effectedThe article is more complete by reporting more details so travellers are not making travelling and cancellation decisions based on partial informationThe link to this article http://online.wsj.com/article/SB123931839488506787.html#articleTabs=article

One of the quotes which I found interesting,

” Despite the travel alert, “we are not advising people not to go to Mexico,” says Heide Bronke Fulton, a State Department spokeswoman. She adds that the main areas of concern are cities and towns near the U.S. border. Travel alerts, which can caution against everything from cyclone season to terrorism threats, are far less severe than the State Department's “warnings,” in place for countries like Iraq and Sudan, which essentially advise against traveling to a country altogether. ”

After speaking with several visitors down here in Mexico this past week I realized the importance of passing this information and these types of articles and updates through channels such as Mexico real estate blogs and other mediums on the Internet The visitors from up north advised that the news being heard on the television and many news sources is quite harsh “Very bad and negative People and my family have come to me and asked me to cancel my trips down to Mexico I had to pull out a map and show them where I was going and where the problem areas were occurring” Even the Mexico tourism department has become very alarmed at the generalization of the reports up north and their effect on their economy They have published a map on the internet to help visitors understand the locations http://mexico-update.com/index.jsp

Unfortunately, the messages of pinpointing locations and distances may have missed the high season period The Mexico tourist department is rushing trying to correct this mishap It is April, a good portion of the high season has already been incorrectly effectedThe year for tourism in Mexico was starting strong, but now several hotels and businesses are now concerned in the cancellations that have occurredLets hope that this other message continues to be transmitted effectively to help recover some of the drop in reservations and travel plans for the rest of the year.

TOP Mexico Real Estate NETWORK; "Mexico's Leading Network of Specialists for Finding and Purchasing Mexican Properties Safely!"

Region:  Playa del Carmen Real Estate  Thomas Lloyd Graduate from Purdue University Business School with a degree in Management/Financial Option Investment.  He has been living, investing, and working in Mexico for over 15 years.  A Mexican certified & licensed realtor, he is the current president of TOPMexicorealestate NETWORK     "Our experience at work protecting your interests"  (512) 879-6546.

Below is an interview by an international property magazine, VENTANA, talking with our newest TOP Mexico agents & Brokers member from the Ixtapa real estate market, Tim Sullivan Tim is the owner of TICAR Real Estate company in Ixtapa-Zihuatanejo Guerrero.This beautiful oceanfront city sits on the Pacific Ocean, north of Acapulco and south of Puerto Vallarta.Tim arrived to Mexico back in 1987 and has been here ever since.In 1994, after having worked various years with local brokers and developers, Tim along with his beautiful wife of 15 years, Carmen, started their brokerage company Ticar, S.A. Mr. Sullivan will be joining the panel at the Mexico Real Estate Blog, TOPmexicorealestate.com where he will be sharing his expertise and development updates in this regional market of Mexico

Why did you choose this market in Ixtapa Zihuatanejo as your destination in Mexico

In actuality, I do believe that Ixtapa-Zihuatanejo chose me. Back in the autumn of 1987 circumstances conspired to allow my then partner, Linda Fox, and I to take a six-month long sabbatical and travel to Zihuatanejo where Linda had lived sporadically since the early 1970 s I had never been to Mexico before and had only some erroneous preconceived notions of what Mexico was all about. My concept of Mexico I d harvested from westerns and Saturday morning serials As soon as the plane landed at the Zihuatanejo airport all of those old stereotypes went right into the waste can.

What sets Ixtapa Zihuatanejo apart from other real estate locations in Mexico such as Puerto Vallarta or Los Cabos

The Ixtapa-Zihuatanejo market has a unique flavor which distinguishes it from the other destinations in Mexico whether they be beach resorts or colonial towns. The distinction is analogous to one of this area s most famous dishes;tiritas , which is a recipe calling for strips of locally caught fish marinated in lime juice, onions and sliced Serrano chile. This simpleplatillo is exquisitely satisfying and uniquely particular to the Ixtapa-Zihuatanejo area.

How large is the expatriate community here How many Canadian and American expats are living here

The use of the termexpatriate is one which I tend not to promote given that some of its synonyms areexile andoutcast . Certainly there are some of those but the vast majority of the 3,000 or so yearround and seasonal inhabitants are average citizens of their respective home nations who have chosen Ixtapa-Zihuatanejo and the surrounding areas as their home or home away from home.

How do expats assimilate to Ixtapa-Zihuatanejo s Mexican society and culture

By and large the non-Mexican visitors and residents have immersed themselves in the culture and rhythms of the Ixtapa-Zihuatanejo experience. There is any number of charitable organizations such as Ni os Adelante and S.O.S Bahia, S.A. to name just two, which receive bountiful donations of both time and money from the foreign and local communities alike. Social events are equally polycultural as lassos between individuals create expanding webs of interdependency.

Has real estate grown here over the years If so, what has detoned it

In the twenty plus years that I have lived in this paradise, Ixtapa-Zihuatanejo has experienced a slow, steady growth both in the permanent population as well as in the number of short-and long-term vacationers. Over the course of this steady expansion there have been two very strong booms: 1991-1995; and, 2005-2008. In each of these boom periods the prime stimulus for the growth in the specific area of Ixtapa-Zihuatanejo was the real value investors found in the local real estate in comparison with other destinations in Mexico where rapidly rising prices had out paced the demand. In contrast, in Ixtapa Zihuatanejo supply had always lagged behind a increasing demand.

TOP Mexico Real Estate NETWORK; "Mexico's Leading Network of Specialists for Finding and Purchasing Mexican Properties Safely!"

Region:  Playa del Carmen Real Estate  Thomas Lloyd Graduate from Purdue University Business School with a degree in Management/Financial Option Investment.  He has been living, investing, and working in Mexico for over 15 years.  A Mexican certified & licensed realtor, he is the current president of TOPMexicorealestate NETWORK     "Our experience at work protecting your interests"  (512) 879-6546.

Last week, I began discussing the process of how to purchase your Mexico dream home

Please click here to see this first post Mexico Real Estate Purchasing Process

and go here Mexico Real Estate Agents to learn more on this subject.

Rule Number Three:Mexico Real Estate Closing Costs

(Fideicomiso) Closing Costs:

Closing costs will range from 4% to 30% (yes, 30%!) of the total cost of your Mexico property. The higher the price of the property, the lower the percentage of total costs for closing. This is because certain expenses for permits in Mexico,and certificates are fixed, regardless of the value of the property. Costs of transfer include title search, transfer taxes, bank fees, government permits and Mexico notary public fees. Your seller may assist in some of these; especially those related to title search and insurance. Be sure to get a written estimate so that you will not have unwelcome surprises at the date of transfer of title! While your real estate agent may know the procedure, his or her specialty is to identify the correct property for you and to negotiate advantageous terms for the purchase. The technicalities of the transfer; negotiations for permits, registrations and so forth are generally more objectively and thoroughly handled by a neutral third party who does not have a financial interest in the transaction.

TOP Mexico Real Estate NETWORK; "Mexico's Leading Network of Specialists for Finding and Purchasing Mexican Properties Safely!"

Region:  Playa del Carmen Real Estate  Thomas Lloyd Graduate from Purdue University Business School with a degree in Management/Financial Option Investment.  He has been living, investing, and working in Mexico for over 15 years.  A Mexican certified & licensed realtor, he is the current president of TOPMexicorealestate NETWORK     "Our experience at work protecting your interests"  (512) 879-6546.

Mexico Real Estate Investments have been extremely profitable in this country for the past number of years But the overall consensus with our panel has been “surround yourself with Mexico real estate experts” to avoid unsuspected pitfalls Stewart Title has a team of lawyers that assist non-Mexican buyers, investors, and developers who are coming down in record numbers to purchase properties and develop in this growing Real Estate market

A question was asked a few days ago regarding a property purchase.

Mexico Real Estate Investment QUESTION

“Can you give us an estimate on the amount that would be due on Mexico Acquisition Taxes for a pre construction condo purchase

I entered into a contract  for a unit at Mexico Pre construction Condo “X”. They required a 30% down payment with a final payment of 70% at close.

My contract is all in US dollars How do I calculate the amount that should be captured on the deed and how will this affect the amount payable for the Acquisition Taxes In 2007 the Mexico exchange rate was approximately 10 pesos per dollar and in 2009 we are approximately 15 pesos per dollar

Mexico Real Estate InvestmentANSWER

Even though the purchase price was set in US Dollars, the deed by which the property is transferred will mention Pesos. Since 30% of the purchase price was paid previously at an exchange rate of 10.00 Pesos p/dollar and 70% will be paid at 15.00 p/dollar, the most practical way is to determine the amount paid in Pesos at the time of each payment:

Example:

Purchase Price in Dollars in July 2007 = USD$ 10,000.00

30% Down payment at 10.00 Pesos per dollar paid on July 2007= $30,000.00 Pesos.

70% at closing at 15:00 Pesos per dollar paid on July 2009 = $105,000.00 Pesos

Purchase Price in Pesos to be declared in the deed: $135,000.00 Pesos

It s important that the purchase price calculated is well determined, since it could affect the parties when calculating closing costs. The seller could pay more Mexico Capital Gains Taxes or the purchaser can pay more transfer of property tax and deed registration at the Mexico Public Registry if the figures are not registered correctly.

TOP Mexico Real Estate NETWORK; "Mexico's Leading Network of Specialists for Finding and Purchasing Mexican Properties Safely!"

Region:  Playa del Carmen Real Estate  Thomas Lloyd Graduate from Purdue University Business School with a degree in Management/Financial Option Investment.  He has been living, investing, and working in Mexico for over 15 years.  A Mexican certified & licensed realtor, he is the current president of TOPMexicorealestate NETWORK     "Our experience at work protecting your interests"  (512) 879-6546.

Many new Landlords with Mexico Real Estate rentals are unsure what their lease agreement (Contrato de Arrendamiento) really says and if they are truly protected. As with any Mexico legal document, the lease agreement is binding and should be reviewed by all parties carefully.

You will see from my other posts written about rental properties, click here Mexico Real Estate blog, it is important to get correct Mexican legal counsel when working with agreements and contracts Executed leases should be in Spanish with a complimetary English version available.

Key Points on a Mexico Lease Agreement:

• Names of all parties to the lease
• Lease dates
• Rental amount
• Location in which rent is to be paid
• Rent due date
• Late charges
• Security deposit amount
• How maintenance and repairs are to be handled
• Move out notice requirements
• Details about Landlord access to the property
• Utilities and Services
• Condition of the property
• Rules and regulations
• Pets
• Landlord remedies

Although many Mexico Managment Companies use different leases, some are drafted by an Attorney or Notario. Whatever version you or your Property Manager uses, make sure that you have a complete understanding of the document and how it will legally affect you and your Tenant.

TOP Mexico Real Estate NETWORK; "Mexico's Leading Network of Specialists for Finding and Purchasing Mexican Properties Safely!"

Region:  Playa del Carmen Real Estate  Thomas Lloyd Graduate from Purdue University Business School with a degree in Management/Financial Option Investment.  He has been living, investing, and working in Mexico for over 15 years.  A Mexican certified & licensed realtor, he is the current president of TOPMexicorealestate NETWORK     "Our experience at work protecting your interests"  (512) 879-6546.

Yucat n has been the attention of many international real estate investor in recent years With the many Haciendas, the old colonial architecture, and the increasing amounts of non-Mexican buyers, where can people begin their process into buying property here in paradise We asked Mitch Keenan, a Yucatan Real Estate broker, very well known throughout the entire Yucatan Peninsula, and with many years of on hand experience in Mexico Real Estate to help us out with this post and blog.

This post is about real estate in the states of Yucat n and Quintana Roo The author, Mitchell Jay Keenan,CRS is the general director and the operating broker for Mexico International Real Estate.

Keenan has been living and selling real estate in Yucat n for over 10 years. He has been a licensed broker in the USA since the 1980's. He holds a GRI (Graduate Realtor Institute) and a CRS (Certified Residential Specialist) certifications from The National Association of Realtors (NAR). He currently lives on his Quinta between M rida and Progreso with his partner and their four companions; Wazer, Lover, Lucky and Miri.

Yucatan Real Estate Brief History

Understanding the dynamics of the real estate market in Mexico requires a reflection on the socio-economic conditions that have developed in Mexico over the last several decades. The large middle class that has emerged in the last 30 years has provided for a more robust market. Additionally, with the growing foreign interest in living and investing in Mexico, the market is becoming more dynamic and secure for investment and ownership.

Historically, Mexico was a country of basically two large economic groups; the rich and the poor. The poor rarely owned real estate and the rich tended to subdivide what real estate they had and pass it on to their heirs.

The current real estate market (where two previously unknown parties come together to buy/sell real estate) is still a relatively new business in many regions of Mexico. This is the reason why, in most of Mexico, there is no MLS, no real estate licensing requirements for agents, no governmental oversight, limited institutional financing, and few large, organized real estate companies or real estate professional organizations.

The exceptions to this current scenario are Mexico City, Monterrey, Guadalajara, and many of the coastal resort areas, where there are limited MLS's, large brokerage firms, and functional professional organizations like AMPI.

It is important to remember that Yucat n has been like an “anonymous region” separated from Mexico for decades. Yucatecos tend to think of themselves as Yucatecans first and Mexicans second. Rules, regulations and new businesses practices have tended to evolve here more slowly than in other regions of Mexico.

Mexico Real Estate Purchasing Process

Historically, in Yucat n, when two individuals come together in an agreement to buy/sell real estate, the parties have utilized a “promise to buy/sell” real estate agreement. The agreement is typically drawn up by the Buyer's notario.

Note: the buyer is responsible for paying the notario and closing costs. The seller is responsible for paying their capital gains taxes.

Upon signing, the buyer gives the seller a deposit to hold as earnest money to seal the deal. In return, the seller provides the notario with current and notarized escrituras (title documents), cedulas (tax statements), planos (lot plan), personal data, and corresponding information.

This “promesa de compra/venta” is a vehicle still popularly used in Yucat n, and it is not unusual for a seller that is not represented by a real estate agent to require this contract with the understanding that the seller will hold the earnest money deposit.

Should the buyer fail to buy, at no fault of the seller, the buyer will forfeit the deposit. Should the seller for no fault of the buyer, refuse to sell, there is a penalty clause in the contract penalizing the seller to return the amount of the original deposit and pay a penalty equal to the amount of the deposit. If the seller does not return the deposit and pay the penalty, the buyer will have a very strong case for filing a lien against the property and pursuing legal action against the seller.

TOP Mexico Real Estate NETWORK; "Mexico's Leading Network of Specialists for Finding and Purchasing Mexican Properties Safely!"

Region:  Playa del Carmen Real Estate  Thomas Lloyd Graduate from Purdue University Business School with a degree in Management/Financial Option Investment.  He has been living, investing, and working in Mexico for over 15 years.  A Mexican certified & licensed realtor, he is the current president of TOPMexicorealestate NETWORK     "Our experience at work protecting your interests"  (512) 879-6546.

By now you should have determined if you are hiring a Property Manager for your Mexico Real Estate rental. You've interviewed and have chosen a Property Manager that you are confident with. The Mexico Property Manager that you've chosen has sent you the Property Management Agreement (PMA) and you notice a clause that states that you must deposit funds into a Trust Account with the Property Manager and you wonder

what this sum of money is for…

Many Property Management Companies require a specific amount of money deposited into what's referred to as a Trust Account. This amount can be as little as $100 or $1000 and will vary by Management Companies. Most companies I've had experience with require $250-$500.

Mexico Property Management Trust Accounts

Trust accounts can be complicated but the primary details that you should know are:

• Funds are the property of someone other than the Property Manager
• Funds in a trust account cannot be comingled with personal funds of a Property Manager
• Funds in a trust account are used for property repairs, taxes, insurance, utilities, etc.
• Funds in a trust account can earn interest which can sometimes be kept by the Property Manager
• When a Property Manager pays expenses from an Owner's trust account, there must be enough funds in the account to cover the expenses.
• The Property Management Company will/should provide a detailed accounting report outlining how funds have been disbursed.

Trust accounting is not difficult and experienced Mexico Property Management Companies know how to handle other people's money with care and consideration. However, it is your responsibility to insure you check your statements carefully and ask questions if you notice anything that you are unsure about.

TOP Mexico Real Estate NETWORK; "Mexico's Leading Network of Specialists for Finding and Purchasing Mexican Properties Safely!"

Region:  Playa del Carmen Real Estate  Thomas Lloyd Graduate from Purdue University Business School with a degree in Management/Financial Option Investment.  He has been living, investing, and working in Mexico for over 15 years.  A Mexican certified & licensed realtor, he is the current president of TOPMexicorealestate NETWORK     "Our experience at work protecting your interests"  (512) 879-6546.

Article 27 of the Constitution of the Republic of Mexico prohibits foreign ownership of real property located within 30 miles of any coastline or 60 miles of either border This is referred to as the Mexico restricted zone

Owning within the Mexico Restricted Zone

In 1973, recognizing that many Americans would enjoy the rights of ownership, and bring needed dollars to the country, President Echeverria approved the bank trust, Mexico fideicomiso, form of ownership which is available to non-Mexicans This regulation was further expanded in the Foreign Investment Law of 1989.

Mexico Properties located within the restricted zone, which includes the entire Baja Peninsula, may be acquired by a foreigner through a Mexican bank trust naming the buyer of the property as the beneficiary of the trust Naked title is placed in the name of the bank selected by the buyer, as his trustee The bank administers the property according to the instructions of the buyer/beneficiary The buyer/beneficiary has full ownership rights: he may build on the property, tear down existing buildings, modify them, rent, lease or sell at anytime conforming only to the general laws of the country established for all persons

Term of a Mexico Bank Trust

The term of the trust is fifty years and can be renewed for additional fifty year periods, after which it must be transferred to “one entitled to hold property” in Mexico In other words, title to the property may rest in one beneficiary indefinitely, provided that it is renewed within the terms established by the law

Procedure and Costs

The procedure for establishing the fideicomiso, the bank trust, is as follows: a permit must be obtained from the Secretary of Foreign Relations which includes a description of the property to be placed in trust, the use for which it is intended, and personal data on each of the beneficiaries Once granted the bank draws up the trust document which is recorded in the municipality where the property is located.

The costs for the permit to establish and register the trust are currently about $1,700 US and Mexico bank trust annual fees are generally $400.00 to $700.00 per annum there are additional closing costs in Mexico Real Estate, however, an it is wise to request a written estimate prior to beginning the transfer process.

* The costs mentioned above may require updating given the date of writing of this article

TOP Mexico Real Estate NETWORK; "Mexico's Leading Network of Specialists for Finding and Purchasing Mexican Properties Safely!"

Region:  Playa del Carmen Real Estate  Thomas Lloyd Graduate from Purdue University Business School with a degree in Management/Financial Option Investment.  He has been living, investing, and working in Mexico for over 15 years.  A Mexican certified & licensed realtor, he is the current president of TOPMexicorealestate NETWORK     "Our experience at work protecting your interests"  (512) 879-6546.

All too often citizens of the United States, Canada and other countries ASSUME that property purchases are carried out automatically in Mexico in a manner similar to that of their native countries The first law of property purchase in Mexico is DON`T ASSUME anything! Purchasing property is NOT the same as in other parts of the world

Would You Purchase a Property in Your Hometown Which Is Not Registered in the Local Public Registry or Land Titles Office

Would you hand a complete stranger, without an office or an established business entity, a check for perhaps hundreds of thousands of dollars to pay for a property Why do so many foreigners do this when they purchase in Mexico Many do not realize that Mexico has a complex and complete legal system and a court system that is as well organized as any that exists in the United States, Canada or Europe It is essential that you have an idea of how the system works and what to expect when considering a purchase of property in Mexico

Don't Leave Your Brain at the Border!

Article 27 of the Mexican Constitution prohibits ownership by a foreign individual or business entity of real property (real estate) within the “restricted” zone which is an strip of approximately 30 miles from any coastline and 60 miles from any border Recognizing the demand by foreigners for ownership of property and recognizing the importance of making desirable properties available to foreigners for potential positive impact on the economy, the Mexican government implemented a series of Foreign Investment Laws beginning in 1973 The law was modified in 1989 and again in December 1993, to incorporate the provisions of the NAFTA treaty passed in late 1993

For those who are acquiring property for residential usage, the law requires that title to the property in the restricted zone be transferred to a Mexican bank, as trustee, in the establishment of a trust (fideicomiso) in which the foreigner is the beneficiary The bank is the titleholder of the real property and the foreigner is the owner of the rights of usage of the property The bank owns the real property rights and the beneficiary owns the personal rights of usage Ownership of these personal rights is evidenced through a deed prepared by a Mexican Notary Public and signed by a representative of the trustee bank

Currently the term for a trust is fifty years The Foreign Investment Law of 1989 provides for renewal by filing an application Multiple renewals are permitted under the law By requesting extensions every fifty years, a property may be controlled by a family or business entity for generations For those foreign individuals or companies buying property in the interior of the country, not in the restricted zone, no bank trust is required but authorization from the Secretary of Foreign Relations must be obtained and ownership must be registered in the National Foreign Investment Registry located in Mexico City, as well as in the municipality where the property is located

Avoid Mexico Taxes and Extra Costs. Leave the Mexico Deed in the Seller's Name: This is Wrong!

Until the buyer is formally named as the owner in fee simple or in the bank trust in a public document before a Mexican Notary Public, title to the rights in the property remain with the persons named in the previous property deed Their signatures are required to transfer title If the buyer fails to obtain his or her own deed he/she will be required to obtain the titleholder's signature before a sale and transfer to another buyer This can be costly, frustrating, dangerous and time consuming

The Importance of Mexico Registration of the Deed for Beneficial Rights.

The Mexico purchase/sale document signed by buyer and seller is generally legally valid between the parties to a transaction It most likely contains the description of the property, the price to be paid to the seller, and any other special terms and conditions It WILL NOT, however, provide valid notice to third parties unless it is recorded in the Public Registry Office of the municipality in which the property is located Mexico's land registry system functions in much the same manner as the Public Registry offices in Podunk, North Dakota, Los Angeles, California, Ottawa, Canada or places in between

many foreigners purchasing property in Mexico do not understand the importance of registration of their interest in property They believe that it should be left in the name of the property developer, in the Master Trust, or in the name of the previous holder of title What if the developer goes bankrupt What if the corporation and its principals, disappear Who can sign as the representative of the property Who then owns the property What happens if an unscrupulous seller sells the property to someone else While title is in the name of the seller, it is HIS/HER asset; she may mortgage it, he may sell it again, it may be attached in satisfaction of a judgment, she may die without a will

Unless the Deed for the rights of the Beneficiary has been Recorded, there may not be a remedy for the purchaser who neglected to obtain a registered deed…his or her interest and investment, may be lost

To obtain the deed an appraisal, a property tax certificate, and a no-liens certificate must be obtained Notarized bank instructions must also be obtained if property is in the “restricted” zone Seller's capital gains tax and Buyer's acquisition tax must be paid The deed transferring rights to the buyer must be registered and stamped by both the tax office and the public registry If this process is not complete, the buyer is not fully protected The buyer's ultimate protection is registration in the Public Registry office record, NOT the Notary Public or the trustee bank!

Financed Properties in Mexico

When property is sold with a down payment and the balance to be paid over a term of years, many sellers prefer to hold title to the rights in their name and transfer title to their rights only upon receipt of payment in full Meanwhile, however, the seller may die, may disappear, may bo bankrupt…again risky situations for the buyer the prudent buyer will insist upon a transfer of title and registration of a mortgage or pledge in which he gives his rights in the property as security for payment of the remaining purchase price

In the event of default by the buyer, the seller must conduct a proceeding similar to a judicial foreclosure in the United States and Canada It is as troublesome as a foreclosure in any country in the world but notably more problematical The registered title and recorded pledge or mortgage provides the buyer a greater comfort level in his investment The lender also enjoys protection in having his loan recorded and will have an established legal proceeding to follow in the event of default by the buyer.

TOP Mexico Real Estate NETWORK; "Mexico's Leading Network of Specialists for Finding and Purchasing Mexican Properties Safely!"

Region:  Playa del Carmen Real Estate  Thomas Lloyd Graduate from Purdue University Business School with a degree in Management/Financial Option Investment.  He has been living, investing, and working in Mexico for over 15 years.  A Mexican certified & licensed realtor, he is the current president of TOPMexicorealestate NETWORK     "Our experience at work protecting your interests"  (512) 879-6546.