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"Caveat
Emptor" - Let The Buyer Beware  Real
estate Tax Reforms in 2002 have made it clear that Mexican citizens claiming residency
of a real estate property do not have to pay capital gains. Foreigners, who own
through a fideicomiso, do not have this automatic benefit from the new law. Non-Mexicans
will have to abide by the notary's criteria for documentation of exemption from
capital gains tax. Land without a dwelling on it cannot be declared a residence.
Mexicans and foreigners alike can find that they have taxes due upon sale of land.
What
do you do if capital gains are due from the sale of real estate? The tax will
be 25% of the profit received, without any deductions. When the fiscal authorities
determine a value of the property, if their value exceeds the sales price by more
than 10%, the difference will be taxed at 25%. If real
estate is acquired at no cost to the acquirer, the tax will be 25% of the total
fiscal value determined. Title Insurance is purchased
in the United States as protection for the buyer against mistakes in the review
and transfer of title from one party to another. In Mexico,
the office of Public Registry of Property records the transfer of title, encumbrances,
and liens. etc. The notary has the obligation to obtain a certificate declaring
if there are liens (or no liens) of public record. To not obtain this certificate
subjects the notary to civil and criminal charges. There is also the obligation
by the notary to notify the recording office immediately of the transfer of ownership.
The Public Registry is the source of public information. Whoever is registered
at the Public Registry is the legitimate owner of the real estate. As in the United
States, documents are filed in the order in which they are received and this establishes
their priority. Should you require title insurance on
a property being purchased in Mexico? You can hire a professional to do an opinion
of title. They should conduct a complete title search at the Public Registry.
This process is closer to what we know in the United States as an attorney's opinion
of title, or title abstract. A title policy protects against recording errors,
liens, encumbrances, encroachments, taxes and boundary line disputes, fraud, misrepresentation,
impersonation, secret marriages, incapacity of parties and undisclosed heirs.
It is your choice as a buyer whether to obtain title insurance or not. Commonly,
it will be a cost to the buyer. There are no Mexican insurance companies issuing
this type of insurance. An American title insurance company who is authorized
to work in Mexico can issue it. Bank Trust Fees have
become a topic of conversation recently, as the charges for the annual maintenance
of the trust have continued to increase each year. The agreement that the bank
incorporates into the trust or escritura for the foreigner, is not something the
typical purchaser reads or understands as part of his purchase due diligence.
When the escritura is ready at closing, it can be too
late to negotiate or modify any of the terms. If you let the bank give you a boilerplate
agreement that gives them the right to increase their fees under terms that they
alone can interpret, you can be the unwitting victim of increased and unnecessary
costs. This is what we call a unilateral contract, with rights for only one party.
If the fees the bank charges are a percentage of the
value of the property, they can set the value, not you. If the annual fees are
based on inflation, it should be US inflation, as the banks most commonly charge
in US dollars. Late charges and interest can be charged, with no notification
required by the bank. Fees that the bank can charge for
signing a power of attorney to allow you to represent yourself in a legal matter,
should be spelled out in the agreement. There should also be a cap on the bank
charge for reviewing and singing other documents as requested by you. The
bank can refuse to sign documents if fees, fines or interest have not been paid
on the trust. This refusal should only apply in the case of the sale of the real
estate. Other than a sale, the bank should not be allowed to refuse to sign requested
documents. To refuse to do so, repudiates the role and responsibility the bank
has as your fiduciary or trustee of your property rights. 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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