Lake Chapala MLS Listings

BUYING REAL ESTATE IN MEXICO     

Mexican Law: Property Ownership

Mexican Law provides for private ownership of land by foreigners, and its law is very specific about the way in which land rights should be transferred from seller to buyer, and also what type of lands are not eligible for public ownership. A Notary Public (see below) will guide you through the details of these, but generally:

• Property may be purchased and owned outright with a  direct deed for residential use by foreign nationals outside of the 100km restricted land border zone, or outside of the 50km coastal zone;
• Inside of the restricted border/coastal zones, foreign nationals may own land through a fidecomiso (a trust) which is set up through a bank and provides for ownership of the land and property in all but name.

The Mexican Constitution previously banned foreign nationals from owning property that was within the restricted border zones. This old law was intended to protect Mexican soil from foreign invasion. Because the Constitution cannot be altered in this respect, the Government introduced a system of land trusts, so that foreign nationals could invest in property inside of the 'restricted' zones. 

You do not have to be resident in Mexico to own property there, so there is no need to qualify for resident status under immigration laws in order to have a property investment in Mexico.

Mexican Law on property ownership is comprehensive and provides protection for the seller and the buyer in all property transactions, provided that the law is followed, and you ensure that all necessary documentation is present and that the procedures are adhered to. Your Notary Public (see below) is an important person in this process, and he/she will guide you.

The Role of the Notario in Mexico

The Notario is the most important person you will deal with when you make a property investment in Mexico. Do not confuse the role of the Notary Public in the US with its counterpart in Mexico: they are quite different. In the US for example, almost anyone can become a Notary Public. Not so in Mexico, where the role is appointed directly by the State Governor (the highest seat in State Public Office).

The Notario has the power to witness and certify important business documents which require absolute authenticity. The appointment also holds responsibility for the management and secure storage of original records. Notario’s must be Mexicans of at least 35 year in age, they must have a degree in Law, have 3 year's work experience at a Notario office and they must pass a stringent exam. Those who pass, in time, are appointed as Notario’s by the State Governor.

Under Mexican Law, the deed to the property must be prepared by a Notario.  As a buyer, it is your right to choose the Notario, and it should be your first port of call - or second after your real estate agent or lawyer. If you are working with a local realtor make sure that they are responsible for working with the Notario to ensure that the closing on your property is done correctly and smoothly. In addition, should you choose, you can engage the services of an attorney as a further safeguard in your transaction.

The Notario’s will ensure that all documentation and permits are in order so that the transaction can proceed.

Common Checks that should be made

The Notario and/or your lawyer will do a series of checks on the property and ensure that the property has a 'clean' history, and that there are no liens on the land (e.g. an old unpaid mortgage). Under Mexican law, property liens pass with the title to the property - BEWARE!

Your Notario should also check that all land taxes have been paid during the last five years (if applicable) and that utilities (electric, gas, water and phone) have also been paid during the last two years. By Law, you are not liable to debts after these times.

Other items to be checked include: Checking all buildings are on tax registers and have the required building permits, utilities were legally installed and payments are up-to-date, the property is not jointly owned, or if it is, that both (or all) owners agree to the sale, and that the seller/s has/have the right to sell.

The Notario is legally responsible to ensure that all documents are in order and that all legal procedures have been adhered to. He will do a thorough check and will not destroy his reputation by hiding any problems, or potential problems from you.

Outline of Property Purchase Procedure in Mexico

If you have realtor then he/she will likely act as an intermediary between you and the Notario/ Seller.The exact process will vary in each case, but you will follow a process that goes along these lines:

• Find a property you like; agree a price verbally;
• An agreement to sell/buy, with detailed costs, inclusions and exclusions, as well as deadlines, is set out in an initial "Convenio de Compra/Venta" (sale agreement), at which point a deposit (5-10%) is paid by the buyer and cancellation penalties are set (usually equal to the deposit) if either party pulls-out;
• If the property is inside the 50/100km coastal/border zone, you will need to set up a trust;
• Next, you seek permission from the Foreign Secretary's office (a formality) to buy land. You will be asked to sign the "Calvo Clause", which states that you will not seek foreign jurisdiction in dealings with your property transaction;
• If you are buying from a developer (e.g. a Real Estate Development) advise the Notary Public who will ensure the developer's permits are in order;
• Get a copy of the Land / Property Deeds from the seller. The Notary Public will check these out. Ask the Notary Public to check that the land is not Ejido land, as discussed earlier in this guide;
• An official appraisal of the Land (Avaluo) needs to be carried out; your Public Notary can arrange this.
• Your Notary Public (or lawyer) will ask for official documents that can include (but are not limited to): Photo ID (passport), Birth Certificates, Marriage Certificates (if appropriate), and your visa (could be a Tourist Permit) to prove that your stay in Mexico is legal;
• The seller will need to present to the Notary Public documents including (but not limited to): original property deed, up-to-date tax receipts for the property, public utilities bills (shown as paid), plus up-to-date details of land-service fees (shown as paid);
• Capital Gains Tax is paid by the seller, unless you have agreed to pay CGT as part of the buying agreement. The Notary Public will state how much this is;
• Payment is made (see note below) at the time when the deed is signed over to you, and this is done at the Notary Public's office;
• The Notary Public's and Solicitors (if applicable) fees are paid at this time as well, as well as other taxes associated with land purchase (see Taxes, below).

Payment:  Whether you are paying with cash or via some kind of financing you will need to have the agreed funds available to transfer to the seller at the Notario Public's office on the date the deeds are signed across to you. The use of a licensed realtor will enable you to keep you funds in a US bank prior to the closing and will result in the realtor disbursing all funds AFTER all paperwork has been reviewed, approved and signed by all parties involved in the transaction.