Mexico Trucker Online

A Fideicomiso (trust) is required to own property near the beach.  Foreigners cannot hold property near the Mexican coast in their name. To handle this problem, the major banks provide a trust service for which the buyer pays an initial fee of about US$2,000 to $4,000 and annual fees of $150 to $500, depending on the price of the property and upon the bank.  These are very rough estimates; the fees change all the time. The bank then holds the deed in trust for a specified time.  This can be renewed or terminated for a fee.

The banks examine the legal paperwork very carefully, hence the usual Acta de Posesión that most of the natives have (the unregistered document issued by a local elected commission) is not acceptable to the bank.  Nor is the somewhat more formal Escritura Privada where the property has at least been registered with a county judge.  Only the Escritura Publica, a grand document researched and written by a Notaria Publica, is acceptable.  Only with the Escritura Publica are you sure that you have a free and clear title.  Since there are many stories of land being sold multiple times, in my opinion the Escritura Publica, held by the bank in a Fideicomiso, is well worth the money.

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.

In closing
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.