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Rules of the Game
~ Learn about Real Estate in Mexico
A good
understanding of the trust issue (Fideicomiso) allows a protection
mechanism for foreign buyers. This understanding provides the basis for
realizing that investing in Mexico is a wise, safe and rewarding endeavor
that allows you to enjoy your chosen lifestyle.
Ensuring that
all aspects of your chosen property are in proper order avoids any legal
or financial complication when you decide to sell your property to upgrade
or realizing a return on your investment. At Pisces Real Estate we will
assist you in not only realizing the dream of the lifestyle owning
property in Los Cabos affords, but guide you through the process to ensure
all is in order with your purchase.
Remember to
only utilize a reputable Real Estate firm in Los Cabos. This one simple
step will ensure that you are guided through the steps to a secure
transaction for your investment.
Real Estate in
Mexico
All too often
citizens of the United States, Canada and other countries assume that
property purchases in Mexico are carried out automatically in a manner
similar to their native countries. The first rule of any property purchase
in Mexico is, always work with a Real Estate Brokerage firm. Purchasing
property in Mexico different than in other parts of the world and a
professional Real Estate Agent is your safest way to success.
We are here to
protect your investment and ensure that you are satisfied with your
transaction. Our evaluation of a potential property of interest will guide
you to determine if that is the right investment for you. Your best
interest is our primary concern.
We take the
time to show you how Mexico's real estate transactions function and how
the supporting legal system has responded to the industry's needs. It is
essential that you have an idea of how thissystem works and what to expect
when considering an investment in Mexico. We are at your service at any
time for consultation.
Mexican Real
Estate law
and how it
relates to foreign investment
Article 27 of
the Mexican Constitution regulates the ownership of its territory by
establishing that “in a zone of 100 km. (62 miles) along any border or 50
km. (31 miles) along the coast, foreign entities cannot acquire direct
ownership of the land and waters.” Until recently, foreign investors were
allowed ownership of real estate only located outside of the “Restricted
Zone”.
Recognizing
the demand by foreign interests for ownership of real property, and the
importance of making these desirable properties available to foreigners
for the potential positive impact on the economy, the Mexican government
implemented a series of Foreign Investment Laws beginning in 1973,
modified in 1989 and modified again in December of 1993 to incorporate the
provisions of the NAFTA treaty.
Creation of
the Land Trust (Fideicomiso)
For those who
wish to acquire property for residential usage, and who have a valid entry
visa, current Mexican law requires that title to the property be
transferred to a Mexican bank. It is necessary to establish an individual
land trust (fideicomiso) in which the foreigner becomes the beneficiary of
that trust. The bank handles all of the paperwork including filing the
permits with the Ministries of the Interior and Foreign Affairs. In
general, the bank has the responsibility to the government and the new
owner to ensure precise fulfillment of the Trust agreement, assuming full
technical, legal and administrative responsibility in fulfilling all
requirements in protecting the interests of the beneficiary, you!
The bank owns
the real property rights, and the beneficiary (equitable owner) owns the
personal rights to use, rent, modify or transfer his rights to a third
party. Ownership of these personal rights is evidenced through a deed
prepared by a Mexican Notary, signed by the representative of the trustee
bank and duly registered with the appropriate local authorities.
The Foreign
Investment Law of 1993 stipulates a term of 50 years for the Trust with
opportunity to renew the trust for multiple 50 year increments. The filing
for this renewal must take place on the forty ninth year and between the
sixth and seventh month prior to expiration. By requesting renewals every
50 years a property may be held by a family or business entity in
perpetuity.
Since by law,
Mexican banks enjoy government protection against bankruptcy, the Trust is
indirectly guaranteed by the government . As a practical matter, even in
unrestricted zones many foreigners prefer to hold their property in Trust.
Protection of the purchaser interest
All real
estate transactions are processed through the office of a “Notario”, a
qualified government appointed lawyer who acts on behalf of the government
to ensure the proper transfer of all real estate transactions. Among the
officials many important duties is to register with the appropriate
government agencies the deed transferring rights to the new beneficiary.
This is the single most important step in protecting a foreigners
investment in Mexico since it remains the ultimate proof of ownership if
the property is ever disputed.
The
purchase/sale document, which includes either deed of rights, or transfer
of rights of beneficiary in a property, is generally valid between the
parties to a transaction. It most likely contains a description of the
property, price to be paid to the seller, and any special terms or
conditions negotiated in the sales process. IT WILL NOT however provide
valid notice to third parties unless it is recorded in the Public Registry
office of the municipality in which the property is located.
Until the
buyer is formally named as a beneficiary in a public document before a
Mexican Notary, title to the rights in the property remain with the last
legal registered owner. While the seller holds title to the property it is
his asset; he may mortgage it or sell it again, it may be liened for
satisfaction of a judgment; or in testate. In such a situation, there may
not be any remedy for the purchaser who neglected to correctly register
the deed.
To
ensure proper registry of the property, an official appraisal of the
property, notarized bank instructions, a property tax certificate and
certificate of no liens must be obtained. Sellers Capital Gains Tax and
Buyer's Acquisition Tax (2% of the sales price) must be paid in
conjunction with registering the deed by both the tax office (Treasury)
and the Public Registry. If this process is not completed the buyer is not
fully protected.
Contact
Marco Ehrenberg
for more information
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