Real Estate in Mexico

México Bienes Raíces

Translator

Purchasing Real Estate in Mexico has changed dramatically over the past few years for non-Mexican nationals. In 1994, the federal government of Mexico liberalized ownership provisions of all properties within the constitutionally protected area known as the prohibited zone.

The restricted area

Because the Mexican Constitution prohibits foreigners from purchasing or owning real estate within 100 kilometers (60 miles) along all natural borders or 50 kilometers (30 miles) along all coastlines, a new, safe method of holding Title was created. This new instrument allows ownership through a Mexican Property Trust called a Fideicomiso.

Fideicomiso or Mexican Property Trust

Title to all real estate in the prohibited zone being acquired by foreign purchasers can only be vested and recorded in one or two ways: 

In a Mexican Bank Trust (fideicomiso) for all residentially declared property. Through the Ministry of Foreign Affairs, the Federal Government can authorize a trust institution to act as trustees in acquiring real estate whose beneficiaries are foreigners.

In a Mexican Corporation for all non-residential real estate. 

Fideicomiso is a trust agreement (initial term of 50 years) much like an estate trust, giving you all the rights of ownership. The Bank (of your choice) acts as the Trustee and you are the Beneficiary of the Trust with the right to use, occupy and possess the property, including the right to improve it and sell it. The buyer acquires all the benefits of a direct owner, including the ability to lease, or transfer the right of the property to a third party or pre-appointed beneficiary. The trustee bank does not hold a fideicomiso as an asset of the bank. On average you can obtain your Trust within sixty days. 

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The first step is to get your Trust established

At the end of the initial term, the beneficiary has the following options: Assuming there is no change in the Mexican Government's present policy, the trust agreement might be renewed for an additional period of more than fifty years. In case the authorities fail to grant such an extension, the trust will have to be terminated by selling the property. The beneficiary's interests will be adequately protected. The beneficiary can at any time during the term of the trust agreement or at its termination, arrange for the sale of the property to any person legally qualified to purchase the real estate.

There is no gray area concerning foreign acquisition in the restricted zone of Mexico. It should be noted that Mexican Banks, acting as trustee for a foreign buyer in a fideicomiso, make no warranty or guarantee of the title to the property in the trust nor do they provide any restriction in the event of a title defect. 

Legal Title

The transfer of real Estate is administered by Federal, State and Local laws. A Buyer should always ask the Seller for a copy of the public deed (Escritura Publica) vesting title to the Real Estate along with a copy of the Lien Certificate (Certificado de Libertad de Gravamen) on the property that should indicate the owner of record, surface area and classification of property type, legal description, and whether there are any liens or encumbrances filed of record against the property. Buyer can also request a certificate of no tax liability (Certificado de no Adeudo) from the local authority.

Title Search

The Public Notary in Mexico (Notario Publico) is responsible for the title search in Mexican transactions. However, the notary typically only examines the current deed and a current lien certificate, resulting in the possibility of a short or incomplete title history of the property. It is recommended to consult a Mexican Counsel and a U.S. Title Company to provide an opinion on the status of title. 

Title Insurance

It is highly recommended to purchase a Title Insurance. U.S. Title insurance is available for properties in Mexico purchased by U.S. Citizens.  

Stewart Title Insurance Company    Fidelity National Financial     First American Title Insurance

Real Estate Contracts

Most real estate transactions in Mexico will have at least two contracts: first, an offer and acceptance (oferta) and/or a promissory agreement (contrato de promesa); and, second, a purchase & sales agreement (contrato de compraventa). Real Estate contracts in Mexico must be recorded before a notary public and, to be binding on third parties, they must be filed with the public registry of property. Once there is a written acceptance to the offer, it is recommended that the Buyer's Attorney draw up the sales contract or promissory agreement. Buyer should insist that his attorney assume this responsibility.

Escrow & Earnest Money Agreements

Foreign buyer should always exercise caution and use common sense when it comes to his or her money. Before releasing funds to a Seller, be sure you received your trust first. A U.S. bonded Title company can provide escrow services with individual interest-bearing money market account. 

Notario Publico

In Mexico, all real estate transactions and the legal conveyance of any type of property involve the participation of a Notario Publico. Appointed by the governor of the state and the executive branch of the federal government for a particular state, notarios are attorneys who must pass extensive examinations in order to receive lifetime appointments.

Closing

Prior to the closing, the Notario will examine documents of the selling party to ensure their accuracy and legitimacy; verifying title; searching the public records to determine the status of seller's title to the property and the existence of liens against the property. The Notario is also responsible for the collection and payment of all applicable property taxes and government transfer taxes.

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Buying Tips

- Determine if the seller has legal ownership of the property and if it can be transferred legally.

- Hire Mexican counsel of a title insurance company to search the ownership status back to the sovereign.

- Have your legal counsel review the buy/sell agreement, which usually determines the transaction's terms and conditions. If financing, be sure to make provisions to allow for the loan application process.

- Arrange for a title company to handle the escrow of funds.

- Obtain a property ownership insurance policy to protect against recording errors, liens, encroachments, taxes, fraud, misrepresentation, and other ownership issues.

- If the property is a condominium, examine the documents creating the condominium by-laws defining the owner's rights, obligations and restrictions.

Buyers should consult U.S. and/or Mexican counsel regarding real estate transactions

Useful Link:  National Law Center for Inter-American Free Trade

GLOSARIO de BIENES RAICES

GLOSSARY of REAL ESTATE