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urchasing real estate in Mexico has changed dramatically over the past eight to ten years for foreign, non-Mexican nationals. |
 Beginning in 1994, the federal government of Mexico liberalized ownership provisions of all property within the constitutionally protected area known as the "Restricted Zone." The properties that are considered to be in this zone are any real estate properties that are located within 62 miles of an international border or within 31 miles of the Mexican Coast Line and all of Baja California Sur, Mexico.
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Questions and Answers about Purchasing and Owning Property in Mexico by Mitch Creekmore, Stewart Title Guaranty de Mexico |
rospective buyers outside of Mexico's borders seeking to buy property can now enjoy greater legal freedom and ownership rights as mandated and protected under Mexico's new foreign investment law. In Mexico, as in the U.S., federal, state, and local laws administer the transfer of real estate property rights. Foreign nationals wishing to acquire property are subject to permission and registration with Mexico's Department of Foreign Affairs. This federal level agency is responsible for awarding the lawfully required permits and authorizations to purchase land in the Mexican Republic, as well as to acquire real estate properties or rights thereto. |
How do I know that I have title to my Property? |
ne thing that a purchaser must consider is whether the seller of the property has legal title to the property, and if so, whether the property can be legally transferred. During the formation, the Developers used an experienced team of Mexican and U.S. attorneys to organize what has proven to be an optimal ownership structure. They made certain that they acquired and could transfer legal title to the property.
Plus, the title of all property is fully insured by Stewart Title Guaranty Company of Houston, Texas. A thorough title search of the property was performed prior to the Developers acquiring the land. As a result, at least 15 days prior to closing, all purchasers will receive a title insurance commitment issued by Stewart Title Guaranty Company, which insures the title in the name of the purchaser for the full amount of the purchase price.
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How can I be sure that my earnest money is safe and where do I send my final funds? |
here are many aspects of Mexican real estate transactions that are very similar to transactions closed in the United States. The basic terms and principals with which a purchaser is familiar in the U.S. also hold true in Mexico. However, a foreign buyer is much better off to assume nothing. Two such aspects are escrow and earnest money deposit. In the United States, an escrow agent, Title Company, or a person legally empowered to act as an escrow agent, will serve in the capacity of handling escrow functions and earnest monies. In either case, the company or individual whom carries out the escrow procedure is licensed or empowered by law to do so. They are legally responsible to see that the agreed upon conditions of an escrow agreement are met before any funds are released. This is not the norm in Mexico.
Historically, foreign purchasers have given earnest money as contractual consideration to the Seller. And in many cases the real estate agent or "broker" involved in the transaction has served as an escrow agent. To leave no room for assumptions, the developers use a U.S. title company to act as a third party escrow agent in all of their transactions. Stewart Title Guaranty Company is empowered to provide these services utilizing U.S. banks. And, Stewart Title Guaranty Company is legally responsible to see that the agreed upon conditions of the escrow agreement are met before any funds are released. With this effort, you have the safety and security of your funds through a full escrowed closing in the United States on a property in Mexico.
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Who is responsible for the transfer of Ownership in Mexico? |
ltimately, foreign purchasers get to the point where they are ready to have their transaction consummated and take title to the property. In Mexico, all real estate transactions and the legal conveyance of any type of property involve the participation of the Notario Publico. Although their title translates to "Public Notary", the Notario Publico's responsibilities greatly exceed the formalization of signatures. Appointed by the Governor of the State and the Executive Branch of the Federal Government for a particular state district, Notario Publicos are attorneys that must pass two extensive examinations in order to receive their lifetime appointments.
In a transaction, the Notario Publico prepares the deed of conveyance subject to the Promise of Trust agreement between developer and the purchaser. The Notario Publico brings the purchaser and the seller together for the formalization of the property transfer and then authorizes the appropriate signatures upon execution of the public deed. And lastly, after the property transfer has been formalized, the Notario Publico will record the deed with the Public Registry of Property office in San Jose del Cabo. Prior to closing, the Notario Publico's additional duties include: (i) examine the documents to ensure their accuracy and legitimacy; (ii) to verify title; and (iii) to search the public records to determine the status of title to the property and the existence of liens against the property. The Notario Publico is also responsible for the collection of all applicable property taxes and government transfer taxes.
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Is this a lease or how do I hold title to my home? |
he title to all properties can only be legally vested and recorded in a Mexican Bank Trust called a "Fideicomiso". The Department of Foreign Affairs in Mexico City issues a permit to a Mexican Bank allowing the bank to act as purchaser for the Property. The bank is the Trustee of the Trust and the purchaser is the exclusive Beneficiary of the Trust. The Trust is not an asset of the bank; they simply act as the Trustee to hold the Title.
This is very much like Living Wills and Estate Trusts in the United States. A bank in Mexico of our choosing will hold the trusts. The bank takes instructions only from the Beneficiaries of the Trusts, which are the purchasers. As Beneficiary, all purchasers have the right to use, occupy and possess the property. They can also transfer (sell) their rights to the property to another qualified purchaser or bequeath their rights to the property to an inheritor. The initial term of all Trusts for properties is 50 years, and can be renewed for additional 50-year periods indefinitely. (www.Stewart.com) |
What about Closing Costs? |
f course, like all transactions in the United States, there will be closing costs incurred in all transactions. Purchasers can expect to pay between 4 and 6% of the purchase price not including Annual Home Owners Assessments. These costs include Permit Fees, Notario Fees, Acquisition Tax, Certificates of No Liens, Tax Appraisals, etc. |
The largest of these costs is the Acquisition Tax. This is a 2% tax based on the total purchase price of the property and is paid by everyone purchasing or acquiring property in Mexico regardless of nationality.
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