The Secrets of Buying Mexican Real Estate

By the Editors of Mexico Real Estate & Travel Publishing, L.L.C.
There are so many unusual stories circulating about buying real estate in Mexico that we want to begin by setting the record straight. A Mexican by birth or naturalization can freely buy real estate anywhere in Mexico. Now, everyone else can also buy real estate if the liberalized laws of Mexico are followed.

Border and Coastal Zone

Foreigners can buy property directly in Mexico's interior. However, the Mexican Constitution of 1917 designated the area within 100 kilometers (62 miles) of Mexico's borders and within 50 kilometers (31 miles) of the coastline as off limits to direct real estate ownership by foreigners. For many years this area was known as the Prohibited Zone. Because of recent beneficial legislation the area is now referred to as the Restricted Zone. Although direct ownership of real estate by foreigners in the Restricted Zone is not permitted even now, a foreigner can purchase the right to hold, occupy, use, improve, develop, rent and sell real estate by purchasing a beneficial interest in a bank trust which holds the legal title to the property. Technically it may not be outright ownership of the dirt under their feet, but it sure feels like it to the thousands of Canadians and other North Americans living in their own homes along Mexico's pristine beaches.

Bank Trust Ownership

With bank trust ownership, the bank holds legal title to the real estate and acts as trustee while the beneficial interest in the trust is owned by the foreign individual. The trustee bank is obligated to deal with the property only for the benefit of the beneficiary. The bank takes its instructions from the beneficiary owner. The beneficiary may be a foreign individual or other foreign legal person such as a corporation. This bank trustee arrangement is very similar to the way a trust works in the U.S.A. and Canada. The trust exists strictly for the benefit of the beneficiary who is for all practical purposes the owner of the underlying property.
The owner' s beneficial interest in the property may be passed on by will or inheritance, it can be used as collateral for a loan and the property can be freely enjoyed, rented or sold all as determined by the owner beneficiary.

Direct Ownership

The Foreign Investment Law of 1993 went even further and authorized the out- right ownership of nonresidential real estate in the Restricted Zone by a Mexican corporation which can be 100% foreign owned. This includes real estate purchased for development which will be sold off to foreigners for residential use. The corporation is considered Mexican and therefore the foreign shareholders can own the land directly through this Mexican person.

Notary Public

A Notary is needed to close any sale. In Mexico, a Notary Public is a quasi-governmental official who reviews all documents of importance with respect to the sale of real estate. A Notary Public in the United States typically has minimal training and responsibility. In the U.S.A, a notary typically attests to the fact that a person has signed a document.
The training, function and responsibility of Notary Public in Mexico is completely different. In Mexico, a Notary Public is appointed by the governor of a Mexican state for life. In order to seek appointment, the person must be a Mexico licensed attorney. This involves attending law school in Mexico, obtaining a law degree, passing an exam and being admitted to the bar in Mexico. To hope for appointment, the prospective Notary Public must then work as an apprentice for several additional years with a Notary Public. A notary does not act as an escrow service. The Notary Public' s job is to see that certain formalities have taken place. Although a notary is always an attorney, it is not the notary's job to provide any party with legal advice. Any buyer or seller who wants legal advice should hire a separate lawyer licensed in Mexico.

Public Registry

In Mexico, deeds, usually known as public instruments, can be researched at the local Public Registry of Property which is open to the public. There is a Public Registry of Property in most cities and towns in Mexico of any significant size. The Public Registry of Property is a government office in which documents are taken for registration so that third parties may research the ownership of land titles and liens on such titles. A Public Instrument must be finalized and signed by a Notary Public. The Public Instrument will typically list the parties involved in the transaction including the notary, seller, buyer, and the trustee bank It will also identify the property. Once the Public Instrument is finalized and signed by the notary, by the seller, by the bank as trustee (if a bank trust is involved) and by the buyer (who will also be the trust beneficiary if a trust is used), the purchase price changes hands and the transaction is considered closed.

Title Insurance

Although title insurance has not been utilized in Mexico to a great extent, it is now available for purchase by foreigners through title insurance companies in the U.S.A. There are many U.S.A. companies that provide title insurance on real estate transfers which occur in the U.S.A. Now at least three U.S.A. title insurance companies are providing title insurance services for Mexican real estate transactions. In the U.S.A. virtually all real estate purchasers and lenders are protected by title insurance. As more foreign lenders begin funding loans on sales in Mexico, more title insurance policies will be issued on Mexican real estate transactions. Purchasing title insurance is a good investment when buying real estate anywhere. To the extent of the policy's terms, the buyer is protected from unforeseen problems with the title to the property.

Knowledgeable Advisors

The acquisition of real estate in Mexico can be straightforward and simple, but common sense and the laws of Mexico must be considered if a buyer wishes to obtain good title and avoid problems. Mexico has a well developed legal system and a buyer should approach it with care and respect. A good real estate agent with a lengthy track record of success in Mexico and an excellent reputation is your best friend in buying property. The safest approach is to also obtain the advice of a Mexico licensed attorney regarding legal and tax issues.

 

 

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   This material is based upon information which we consider reliable, but because it has been supplied by third parties ,we cannot represent that it is accurate or complete, and it should not be relied upon as such. This offering is subject to errors, omissions, change of price or sale withdrawal without notice.