Los Ayala
Buying Property in Mexico
Buying Property in Mexico
"Un Poquito"
"Just a Little Bitty Thing" - Mexicans downplay happenings, events, ideas and other intangibles - really
anything that might attract too, much attention and results in disharmony. The culture is to add intimacy to relationships and to reduce the importance of things to the point that one need not; or should not be concerned with them.
"Just a Little Bitty Thing" - Mexicans downplay happenings, events, ideas and other intangibles - really
anything that might attract too, much attention and results in disharmony. The culture is to add intimacy to relationships and to reduce the importance of things to the point that one need not; or should not be concerned with them.
Magical
Buying Property in Mexico?
Investing in Mexican Real Estate - Things to Know
Investing in Mexican Real Estate - Things to Know
Mexico has been a preferred destination for Canadians and Americans for decades and still is; not only for leisure and travel, but for purchasing real estate either for retirement purposes or just snow birding. Beautiful beaches, warm people, affordable living…just like a dream.
But sometimes the dream of buying a property in Mexico can turn into a nightmare; you have heard so many stories…you could even end up losing your money and your property…but why?
The process of purchasing Real Estate in Mexico is certainly different than the process in Canada and the United States, and can be deceptive if not exercising enough caution. The first thing that you must keep in mind is that each country is different and in this case you are facing a completely different business culture and legal system, not to mention the language barrier.
Should you be scared and abandon your dreams? Not at all! There are so many Canadians and Americans who own property in Mexico that there must be a right way to do it; don’t you think so?
Here are some suggestions that may help you through the process:
Make sure you know who you are dealing with. In Canada and the United States there are specific rules that apply to all Developers and Realtors setting some standards so that you know what to expect from them. Unfortunately it is not like that in Mexico, where you may find huge differences from one Developer (or Realtor) to another; in Mexico being assisted by a Realtor may, or may not be enough and trusting a Developer is not always possible. On the other hand, you will find that Notaries in Mexico are usually a very reliable source of confidence since becoming a Notary Public in Mexico is very hard, actually way harder than doing so in Canada. Notaries must be licensed Lawyers and they must be appointed by the Governor of the Province. Banks are also reliable entities as they are strictly regulated and supervised by Mexican authorities; and this has become of extreme importance as you may need a Bank for your Real Estate Trust (to be mentioned herein later on)
But sometimes the dream of buying a property in Mexico can turn into a nightmare; you have heard so many stories…you could even end up losing your money and your property…but why?
The process of purchasing Real Estate in Mexico is certainly different than the process in Canada and the United States, and can be deceptive if not exercising enough caution. The first thing that you must keep in mind is that each country is different and in this case you are facing a completely different business culture and legal system, not to mention the language barrier.
Should you be scared and abandon your dreams? Not at all! There are so many Canadians and Americans who own property in Mexico that there must be a right way to do it; don’t you think so?
Here are some suggestions that may help you through the process:
Make sure you know who you are dealing with. In Canada and the United States there are specific rules that apply to all Developers and Realtors setting some standards so that you know what to expect from them. Unfortunately it is not like that in Mexico, where you may find huge differences from one Developer (or Realtor) to another; in Mexico being assisted by a Realtor may, or may not be enough and trusting a Developer is not always possible. On the other hand, you will find that Notaries in Mexico are usually a very reliable source of confidence since becoming a Notary Public in Mexico is very hard, actually way harder than doing so in Canada. Notaries must be licensed Lawyers and they must be appointed by the Governor of the Province. Banks are also reliable entities as they are strictly regulated and supervised by Mexican authorities; and this has become of extreme importance as you may need a Bank for your Real Estate Trust (to be mentioned herein later on)
Keep your ultimate goal always in the forefront of your mind. The key point when buying a property in Mexico is making sure that you will receive both: physical possession and legal title to your property; this is your ultimate goal. Generally speaking you are not an owner of a property unless you have received the legal title deed to it, which is called an “Escritura” and issued by a Notary Public in Mexico.
Obtaining an Escritura is the result of a process that may seem long and complicated if compared to the equivalent process in Canada or the United States. The Conveyance process cannot be considered as concluded unless you formalize it before a Notary Public and, if buying on, or near the shores, unless you settle a Real Estate Bank Trust (or sometimes a Corporation).
The “Conveyance Process” may take from six weeks to several months depending on different aspects, such as the legal situation of the property or its location, among others. Finally, make sure you supervise that the transfer of the title is registered on the Land Title Registry.
Do not assume anything. Never get involved in Real Estate transactions in Mexico without having enough information about the legal background on the Developer and about the legal situation on the land where the property is located. You may end paying, in full for the property, and never receive a title deed (or even physical possession).
It is also highly recommended to perform a due diligence on the land, and on the seller before paying any significant amount of money. You will be told that when the time comes, a due diligence will be performed by the Notary before arranging the title transferring, however, what if you had already paid a significant amount of money and something comes out to be wrong? It may be too late!
Have a previous due diligence performed to verify that:
a) The identity of the seller is legitimate by verifying the existence and validity of identification documents approved by the Mexican government for each case; in case of Marriage, check the appropriate Certificate; in case of a corporation, verify that such entity is dully constituted;
b) The seller has legal ties to the property by the means of a valid and unencumbered title.
c) The seller is entitled to perform legal acts and specifically for entering into a Contract of Purchase for the property. If the person signing the contract is acting on behalf of the seller, make sure he has a sufficient power of attorney; if the property is a joint or common tenancy make sure that all owners agree to the sale and sign; and in the case of a corporation verify that the person acting in its behalf has enough legal powers to do so;
d) The previous transferring of the land title have been dully performed.
e) There is the existence of an original property deed.
f) The property is dully registered on tax registries and there are no taxes or charges for water services pending at least for the last years for which you are liable;
g) There are no previous payments pending for utilities and public services (telephone, electricity, gas, phone, etc.) pending at least for the last years for which you are liable;
h) There are no liens attached to the property (for example; an unpaid mortgage loan). Obtain a certificate of no liens on the property (“Certificado de libertad de gravamen”); this is extremely important since under Mexican Law, liens are passed on with title of the land;
Understand what you are signing. Before signing any document make sure you receive both, the Spanish version and the English version of the document, and make sure the terms in both are the same. Don’t let the seller rush you; don’t sign anything you are not convinced of. Focus on the most significant matters: terms of payment, inclusions and exclusions, deadlines and cancellation penalties.
Also, if you are buying Real Estate in the “Restricted Zone” (50 kms from shores or 100 kms from borders) you are required to do so via a Real Estate Bank Trust. Make sure you review and understand the Trust Agreement and that it is written according to the specific information and special terms or conditions that you provide. Make sure that the Trust Bank in Mexico obtains the necessary permit from the Ministry of Foreign Affairs and verify your correct name on it.
Then supervise that the property is transferred to the Bank Trust, with you as the prime beneficiary, and finally make sure that the bank trust gets registered on the Ministry of Economy Registry (Foreign Investment Section).
Don’t let your money go…yet. It is desirable to hold the payment of the full price of the Real Estate (or at least a significant amount) until the Title has been transferred to the Buyer before a Notary Public in Mexico; however, the Seller may not want to transfer the Title before the whole price is paid to him. So, what can you do? An alternative is to open an “Escrow account” to have an impartial third party holding the money and to release it only when the Seller transfers the Title to the Buyer. Escrow accounts are not used very often in Mexico, however they are a very good option as they give the Buyer the certainty that the Title will be transferred and give the Seller the certainty that the money will be paid.
Although it has been mentioned that a Due Diligence will be performed by the Notary on the Real Estate property it does not cover you if in the future someone claims to have previous rights on the land. You can arrange to cover yourself in such event by obtaining a Title Insurance on your Property. Generally speaking, in case of a dispute, the Insurance Company will represent you in court and if you happen to lose the case, the Insurance Company will pay you back (specific terms and conditions apply).
Long story short, don’t panic! Instead, do your homework and enjoy your dream life in Mexico.
Obtaining an Escritura is the result of a process that may seem long and complicated if compared to the equivalent process in Canada or the United States. The Conveyance process cannot be considered as concluded unless you formalize it before a Notary Public and, if buying on, or near the shores, unless you settle a Real Estate Bank Trust (or sometimes a Corporation).
The “Conveyance Process” may take from six weeks to several months depending on different aspects, such as the legal situation of the property or its location, among others. Finally, make sure you supervise that the transfer of the title is registered on the Land Title Registry.
Do not assume anything. Never get involved in Real Estate transactions in Mexico without having enough information about the legal background on the Developer and about the legal situation on the land where the property is located. You may end paying, in full for the property, and never receive a title deed (or even physical possession).
It is also highly recommended to perform a due diligence on the land, and on the seller before paying any significant amount of money. You will be told that when the time comes, a due diligence will be performed by the Notary before arranging the title transferring, however, what if you had already paid a significant amount of money and something comes out to be wrong? It may be too late!
Have a previous due diligence performed to verify that:
a) The identity of the seller is legitimate by verifying the existence and validity of identification documents approved by the Mexican government for each case; in case of Marriage, check the appropriate Certificate; in case of a corporation, verify that such entity is dully constituted;
b) The seller has legal ties to the property by the means of a valid and unencumbered title.
c) The seller is entitled to perform legal acts and specifically for entering into a Contract of Purchase for the property. If the person signing the contract is acting on behalf of the seller, make sure he has a sufficient power of attorney; if the property is a joint or common tenancy make sure that all owners agree to the sale and sign; and in the case of a corporation verify that the person acting in its behalf has enough legal powers to do so;
d) The previous transferring of the land title have been dully performed.
e) There is the existence of an original property deed.
f) The property is dully registered on tax registries and there are no taxes or charges for water services pending at least for the last years for which you are liable;
g) There are no previous payments pending for utilities and public services (telephone, electricity, gas, phone, etc.) pending at least for the last years for which you are liable;
h) There are no liens attached to the property (for example; an unpaid mortgage loan). Obtain a certificate of no liens on the property (“Certificado de libertad de gravamen”); this is extremely important since under Mexican Law, liens are passed on with title of the land;
Understand what you are signing. Before signing any document make sure you receive both, the Spanish version and the English version of the document, and make sure the terms in both are the same. Don’t let the seller rush you; don’t sign anything you are not convinced of. Focus on the most significant matters: terms of payment, inclusions and exclusions, deadlines and cancellation penalties.
Also, if you are buying Real Estate in the “Restricted Zone” (50 kms from shores or 100 kms from borders) you are required to do so via a Real Estate Bank Trust. Make sure you review and understand the Trust Agreement and that it is written according to the specific information and special terms or conditions that you provide. Make sure that the Trust Bank in Mexico obtains the necessary permit from the Ministry of Foreign Affairs and verify your correct name on it.
Then supervise that the property is transferred to the Bank Trust, with you as the prime beneficiary, and finally make sure that the bank trust gets registered on the Ministry of Economy Registry (Foreign Investment Section).
Don’t let your money go…yet. It is desirable to hold the payment of the full price of the Real Estate (or at least a significant amount) until the Title has been transferred to the Buyer before a Notary Public in Mexico; however, the Seller may not want to transfer the Title before the whole price is paid to him. So, what can you do? An alternative is to open an “Escrow account” to have an impartial third party holding the money and to release it only when the Seller transfers the Title to the Buyer. Escrow accounts are not used very often in Mexico, however they are a very good option as they give the Buyer the certainty that the Title will be transferred and give the Seller the certainty that the money will be paid.
Although it has been mentioned that a Due Diligence will be performed by the Notary on the Real Estate property it does not cover you if in the future someone claims to have previous rights on the land. You can arrange to cover yourself in such event by obtaining a Title Insurance on your Property. Generally speaking, in case of a dispute, the Insurance Company will represent you in court and if you happen to lose the case, the Insurance Company will pay you back (specific terms and conditions apply).
Long story short, don’t panic! Instead, do your homework and enjoy your dream life in Mexico.
About the Authour...
Luis Brasdefer is the Founder of Mexico Consulting, a Canadian firm based in Vancouver, B.C. , Canada. Luis is a licensed Attorney at Law for Mexico and his credentials also include a Master in Business Administration from the ITAM.
Luis Brasdefers' vast experience includes being a Corporate and Financial Lawyer for 20 years occupying high positions in Mexico in both, the Private Sector and the Government, where his latest responsibilities include being head of the Legal Area of the Federal Treasury and Legal Vice President for one of the largest Development Banks in Mexico. Luis Brasdefer is a also a member of the Barra Mexicana Colegio de Abogados. (Mexican Law Bar Association)
For more information on buying property in Mexico
Email: Luis Brasdefer or Tel: 604-221-4422 (Canada)
Luis Brasdefer is the Founder of Mexico Consulting, a Canadian firm based in Vancouver, B.C. , Canada. Luis is a licensed Attorney at Law for Mexico and his credentials also include a Master in Business Administration from the ITAM.
Luis Brasdefers' vast experience includes being a Corporate and Financial Lawyer for 20 years occupying high positions in Mexico in both, the Private Sector and the Government, where his latest responsibilities include being head of the Legal Area of the Federal Treasury and Legal Vice President for one of the largest Development Banks in Mexico. Luis Brasdefer is a also a member of the Barra Mexicana Colegio de Abogados. (Mexican Law Bar Association)
For more information on buying property in Mexico
Email: Luis Brasdefer or Tel: 604-221-4422 (Canada)
Los Ayala Sunset
By Luis Brasdefer LL.B. MBA