Purchasing Property In Mexico
The Mexican Constitution
The Mexican Constitution regulates ownership of land within a zone 100 kilometers along a state border or 50 kilometers along the coast line (Restricted Zone). A foreigner cannot acquire direct ownership of this area. The 1993 Mexican Foreign Investment Law established a fideicomiso, whereby by a foreigner or foreign corporation can obtain the rights of ownership within a bank trust (Fideicomiso). These trusts can be established through a Mexican bank. Outside of the Restricted Zone, foreigners can acquire direct ownership without a trust, while still being required to comply with Mexican Law. Outside of the Restricted Zone, foreigners and Mexican nationals can choose to hold property under a fideicomiso, if they wish.
The fideicomiso can be established for a maximum term of 50 years, renewable. The buyer requests the Mexican bank to act as a trustee on his behalf. A permit is required from the Ministry of Foreign Affairs to allow the foreigner to acquire the specific property described. 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 or heir. The trustee bank does not hold a fideicomiso as an asset of the bank.
The fiduciary of a fideicomiso is the Mexican bank who is responsible to the buyer/beneficiary to abide by Mexican law to protect the interest of the buyer/beneficiary. A fiduciary takes legal responsibly for another person.
Only Spanish Matters
Spanish is the official legal language of For an agreement to be enforceable under the Mexican law, it needs to be written, signed and witnessed in the Spanish language. An English translation is a courtesy translation. The quality of the English translation can vary. Don’t get hung up on tweaking the English to the point of neglecting the importance of the Spanish.
The majority of purchases of single residential properties are for cash. Interest rates have not been competitive enough in the past to attract foreigner purchasers into taking out a mortgage. There are some lenders in Mexico and some in the USA who will provide mortgages on Mexican real estate. Collateral Mortgage of Birmingham, Alabama provide Mortgage financing for Mexico. Check our link to them.
When a sale is done without a mortgage lender, a survey, market appraisal, inspection, escrow account, or title insurance is not a requirement of the transaction. The buyer needs to decide in advance of the written offer, what they want to do in regard to all these issues. These items have to be brought up in the written contract if they are to become a condition of the offer.
In the restricted zone, a buyer holds the property within a fideicomiso, which requires payment for a permit from the federal government. The cost of notary fees, tax appraisal, bank administration fees, acquisition tax, can amount to 6-10% of the sales price. You can ask for an estimate of costs from the notary beforehand, to better estimate your overall costs to purchase.
A seller has the responsibility to pay or receive a waiver of capital gains. He may also have cost of the trust transfer or cancellation, as well as utility expenses to date of closing. The seller has agreed to pay commission fees if he has signed a listing or specific agreement.
A public notary is an attorney with specialized knowledge related to the transfer of real estate. The notary is appointed by the state in which he/she is authorized. The notary also handles registration documents such as powers of attorney, corporate information, wills, official witnessing, as well as collecting taxes owed to the government.
If you want to have representation in real estate legal matters, you will need to hire your own. The notary is responsible for being neutral and fair to all parties, but he cannot advise you as a client in a transaction in which he is acting as the notary. If you know the law and are fluent in legal Spanish terminology, you may want to take the risk of not having legal representation. You may also want an accountant to represent you in examining financial documents, if you are buying a property with cash flow.
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