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Purchasing
Foreigners Purchasing Real Estate in
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History of Property Ownership in Mexico
1917 The
Constitution of 1917 proclaimed that all land in Mexico would either be
ejido (communal) or owned by Mexican nationals only. Ejido land was given
to every village in Mexico and could not be sold.
1973 A constitutional amendment known as the Foreign
Investment Law allowed foreigners to purchase real estate anywhere in
Mexico, except the restricted zone. The restricted zone consists of areas
within 100 km (64 miles) of international borders or within 50 km (32 miles)
from the coastline (at high tide).
1993 Mexico amends the constitution to allow foreigners to
purchase real estate within the restricted zone by means of a fideicomiso
(bank trust).
1994 The NAFTA trade agreement between the United
States, Canada, and Mexico is passed. A constitutional amendment allows
corporations to be 100% foreign-owned. (A corporation may own property in a
restricted zone without a fideicomiso.)
The Fideicomiso
The fideicomiso is a bank trust wherein the bank
(trustee) holds the trust deed for the purchaser (beneficiary).
While the trustee is the legal owner of the real estate, the beneficiary retains
all ownership rights and responsibilities and may sell, lease, mortgage, and
pass the property on to heirs. The fideicomiso is authorized by the Mexican
Government under the Ministry of Foreign Affairs
The bank is required to check ownership and insurance, and to verify that the
property is free of liens. A trust is granted for a 50-year period. The trust is
renewable at any time (for another 50-year period) by submitting an application
to the bank. If the 50-year period expires without renewal, the owner has
another 10 years in which he may submit an application to renew the trust. If
property is purchased that already has a fideicomiso, the existing trust may be
transferred to the new owner and will be good for the remainder of its 50-year
period, or the trust may be renewed. If property is already in a fideicomiso,
probate and transfer tax are avoided when the property is transferred.
There is a fee of about US$350 (varies from bank to bank) to obtain the
fideicomiso and an annual fee as well. To obtain the fideicomiso, you will need
your accepted purchase offer, a photo ID and 10% of the purchase price. Monetary
transactions are handled through the bank.
Taxes
The predial (property tax) is 0.1% of the assessed value,
paid annually. The value of the real estate is determined at the time of sale.
There is a 2% sales tax.
Closing Process
The closing process takes between 30 to 45 days. The
buyer pays closing costs, which are usually about 6% of the purchase price. 2%
is for sales tax and about 4% is for other fees such as title search, attorneys
fees, and filing of legal documents.
The Notario Publico
The closing of a real estate transaction requires
the services of a Notario Publico (Notary). The Mexican Notario Publico is an
official who possesses greater rank and responsibility than the Notary Public in
the United States. The Notario Publico is an attorney representing the Mexican
government. He is responsible to both the buyer and the seller to insure the
legality of the contract, and to the government for the collection of taxes and
capital gains for the real estate transaction. The Notario Publico finalizes the
real estate contract and records the transaction with the Public Registry. A
real estate agent may be involved in the transaction, but it should be noted
that realtors in Mexico are not licensed or regulated as they are in the United
States.
The Notario Publico charges a fee for his services and the bank charges a fee
as well. These fees should be competitive and are based partly on the value of
the property. Typically, a realtor will work with one Notario Publico who will
work with one bank, but there is no reason why the buyer can't shop around,
compare fees, and select her own bank and Notario.
The Lawyer
Technically, it is not necessary to have the services of a
lawyer in addition to the Notario Publico. However, for additional assurance
that your interests are being protected, it may be advisable to hire your own
lawyer.
Documents and Information
They buyer will need to provide his address
and telephone number in the country of origin, occupation, marital status, and
nationality. If married, the same information is required of the spouse. The
buyer's passport and tourist visa are required as well as the name, nationality,
address and telephone number of any secondary beneficiary to the trust.
Property Ownership Through A Corporation
A Mexican corporation may be
100% foreign-owned and may purchase property in a restricted zone without a
fideicomiso. Property owned by a corporation is commercial property and will
have much higher water, electric, telephone, and tax rates. A Mexican
corporation may not own a single-family residence.
In a corporate transaction there is usually a preliminary sales agreement or
an "agreement to agree". The preliminary sales agreement includes the price,
terms, and closing date. A formal sales agreement is executed at the time of
closing. Escrow, the process of having a third party hold the deed in trust
during the transaction, is not used in Mexico. The buyer should be cautious
about making any initial deposits.
Property Management
Condo-owners usually pay a monthly fee for
maintenance of the property. For the owners of other property who may be absent
for extended periods, property management agents are available to handle upkeep
and bill-paying while the owner is away.
Insurance
American title insurance is available for Mexican real estate,
but is not commonly used. The cost of title insurance depends on whether the
property is covered by a "master title commitment".
Property insurance is available in Mexico and the rates are relatively low.
Financing
In the past, real estate transactions in Mexico were all cash
deals. More recently, different types of financing have become available.
A Few More Thoughts
Business deals are processed slowly in Mexico. It
may be necessary to make personal visits to resolve details that one might think
could be handled by telephone. As is the case in other countries, some Mexicans
may not approve in general of the sale of their lands to foreigners. Be a good
neighbor.
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The information on this page is provided to acquaint the
reader with the process of foreigners buying property in Mexico. It is not
a substitute for qualified, up-to-date legal advice at the time of
sale. |
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Comments
We Did It!
Dear Tom, We do not expect you to remember us, since you
probably correspond with millions of people a day, but we are a couple from
Santa Barbara California, who lived in the mountains with solar power only
(maybe that will ring a bell) and asked you for info regarding moving to the
Oaxacan coast. You recommended checking the Chacalapa area, etc. Anyway, we are
writing you today to let you know we did it! We bought property in the San Agustinillo area and have
built a small posada, which is almost done now, we really appreciate all the
information you provided us and eventually would like to have a link to your
page if possible. Anyway, our place is across the street from the ocean in a
palm grove, the rooms have kitchens, purified water, hot water and fans, we are
planning to open this November and are anxious to have our first guests, if
anyone asks for info on a place that is a step up from a palapa or hammock send
them our e-mail address! And if you should ever consider to visit this way come
as our guest of honor! - Thanks for all you have done for folks like us and we
leave you with our best wishes.
Jeff and Ana
tierrapin@hotmail.com
October 2000
Been There
My wife and I have the first house completed on the new
Fracc. Carrizalillo. Since we have moved in, we have had many inquiries about
how to purchase the lots and go thru the Notario Publica process. So, we thought
we would let the readers of Tom's page know that we are available for advice and
questions about that process. If you are planning a trip, or would just like to
correspond, feel free to contact us via e-mail or phone.
Gene Butler y Darlene Rivera
genedar@hotmail.com
011-52 (9)
582-2646
June 2000
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