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The
Purchase of Mexican Real Estate  Foreigners
(non-Mexican) are able to purchase real estate in Mexico. They may directly own
rural or urban land in the interior of Mexico with certain limitations on specific
agricultural tracts. In the restricted protected zone, a Trust Deed is used. These
protected areas include100 kilometers along all natural borders, 50 kilometers
along coastlines, and all of Baja California. Banderas Bay is primarily in the
restricted zone.
The Trust Deed is established
through a Mexican bank giving foreign buyers rights and privileges of ownership.
As of 1994, the Foreign Investment Law allows these deeds to be established for
a term of 50 years and renewable upon termination. This public deed is called
an escritura. In the restricted zone, title can be held in one of two ways: (1)
the Mexican bank trust is for residential property. (2) A Mexican corporation
can hold non-residential real estate. Foreign nationals can be the sole and exclusive
stockholders of the corporate stock that holds the title to this nonresidential
property within the restricted zone. If you hold property as residential and claim
is as a residence in Mexico, you can be eligible to waive capital gains tax. Certain
restrictions do apply. The public notary in Mexico is
responsible for the transfer of real estate. The notary's responsibilities are
much greater than what we are familiar with in the United States. The notary in
Mexico is appointed by the governor of the state and the executive branch of the
federal government of the particular state. A notary is an attorney who has additional
specialization and has passed an extensive exam. He/she is appointed for life.
The deed (escritura) is prepared from the purchase-sale
agreement. The escritura, as well as all closing documents, is in Spanish. English
translations are courtesy translations, only. Prior to
closing, the notary examines the documents of the seller to verify title. A search
of the public records is done to determine further status of the title and the
existence of liens against the property. The notary is responsible for the collection
and payment of property taxes and government transfer taxes. If a seller owes
capital gains, that is determined by the notary. This tax is collected and paid
by the notary, when due. The escritura, or public deed,
names the seller conveying and the buyer receiving the property, in addition to
the legal description. The terms of the bank trust (fideicomiso) agreement are
incorporated into the escritura. There should also be a description of the metes
and bounds of the land, and a plat. In the case of construction, there should
also be a floor plan or footprint of the building on the land. A buyer should
also receive a copy of the building permit and evidence that utility services
on the property have been paid to the date of closing. At closing, the notary
meets with the buyer and seller to formalize the transfer by requiring appropriate
signatures upon execution of the deed. The escritura is then recorded with the
public registry where the property is located. The buyer
pays closing costs, with the seller paying any capital gains taxes and real estate
fees. Closing costs are typically higher than costs for buyers in the United States
and Canada. A large part of the cost is the application, approval and formation
of the bank trust (50 year, renewable), in addition to the transfer tax, and notary
services. Point to remember: 1.
Buyer or Seller Beware. There is no compulsory licensing in Mexico of real estate
agents. AMPI, which is the Mexican association of real estate professionals, is
the closest organization to the National Association of Realtors and their Canadian
counterpart. The members of AMPI work to regulate and elevate their degree of
professionalism in the practice of real estate in Mexico. 2.
Title insurance is available, through US-based title companies. Currently, title
insurance issued by a Mexican company does not exist. 3.
Sales contracts, to be legally binding, must be recorded before a notary public.
To bind third parties to a contract, the contract must be filed with the public
registry. 4. Oceanfront or river front properties are
typically adjacent to the Federal Maritime Zone. If there is use of and/or construction
in this zone, there is need for a concession, authorizing the use of this federal
land. A formal agreement has to be in place and annual payments made during the
term of the concession agreement. 5. Market appraisals
are not common. Appraisals, charged by the notary as part of buyer closing costs,
are for tax evaluation purposes. 6. There are Mexican
and American companies offering real estate mortgages. Terms and conditions vary
by lender. 7. Be sure to get an accurate estimate of closing
costs before you decide what your overall expenses are going to be in purchasing
real estate. 8. Determining how and where to send money
into Mexico is not simple. In order to escrow or hold purchase funds, a company
or individual must be properly licensed and empowered by the law to hold and disburse
these funds. These types of companies or individuals are not the norm. 9.
Purchasing real estate within the coastal areas of Mexico is not simple. It is
not like buying in the United States or Canada. Do not assume anything. Ask questions,
and then more questions. Harriet
Murray, Broker For additional information
on properties for sale or lease within the bay, please call or e-mail me at: harriet@pvmirror.com
Thanks and until next week. Archives
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