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Can I buy in Mexico?
Separating
Fact from Fiction
The "Gunslinger Days" of buying property in Mexico are over. Banking
on the words "That's the way we do business here!", and trusting "The
Seller", have given way to U.S. Title Insurance and bonded escrow
accounts.
During the last ten years, property in Mexico has become a lucrative
and viable investment, bringing with it a new breed of sophisticated
investors. U.S. title insurance, bonded escrow accounts and
comprehensive title searches are "in"... promises and handshakes are
"out".
Owning property in Mexico is easier and safer than ever, because now
there are established and well defined rules regarding non-Mexicans
owning land in Mexico. These rules are in place to protect your
ownership rights and to promote the sale of real estate to foreign
investors. The key is a safe, established and perpetually renewable
Mexican Property Trust called a "Fideicomiso".
What is a "Fideicomiso" or Mexican Property Trust?
With the advent of North American Treaty Agreement, the Mexican
Government recognized that it was critical to make foreign investment
in Mexico safer and easier than ever. Because the Mexican Constitution
prohibits foreigners from purchasing or owning real estate within 60
miles of an international border or within 30 miles of the Mexican
Coast, a new, safe method of holding title was created. This new
instrument, modeled after the one in Monaco, allows ownership through
a Mexican Property Trust, called a "Fideicomiso". This is a trust
agreement, much like an estate trust, giving you all the rights of
ownership.
The Department of Foreign Affairs in Mexico City issues a permit to a
Mexican Bank of your choice, allowing the bank to act as purchaser for
the property. The bank acts as the "Trustee" for the Trust and you are
the "Beneficiary" of the Trust. This is not an asset of the bank; they
simply act as the Trustee to hold the Trust.
Much like Living Wills or Estate Trusts in the U.S., the Mexican Bank,
or Trustee, takes instructions only from the Beneficiary of the Trust
(You). The Beneficiary has the right to use, occupy and possess the
property, including the right to build on it or otherwise improve it.
The Beneficiary may also sell the property by instructing the Trustee
to transfer the rights to another qualified owner, or bequeath the
property to an inheritor. The initial term of the trust is 50 years,
and it can be renewed for an additional periods of 50 years
indefinitely, providing for long-term control of the asset.
You have all the rights of a property owner in the U.S. or Canada,
including the right to enjoy the property, sell the property, rent the
property, improve the property, etc. This is not to be confused with a
"land lease." The property you buy is placed in a trust with you named
as the Beneficiary of the trust - you are not a lessee. If the
property you purchase is already held in a Trust, you have the option
of assuming that Trust, or having the property vested in a new Trust.
How Long Does It Take To Get A Trust?
You should work with Federal and State Notaries for all closings, and
to secure your new Trust. (In Mexico, a Notario Publico is much
different than in the United States, more like a Clerk of Courts.) On
average, you can obtain your Trust within 60 days and in some cases,
titles have actually been transferred in as little as two to three
weeks.
You would be amazed how many people have only a simple buy/sell
agreement between themselves and the seller as evidence of ownership.
This is not a safe method of ownership and is not recommended.
Rule Number 1: Always get your Trust.
When Do I Pay For My Property?
When you have clear title, exactly like you would anywhere else. By
using our U.S., bonded, third party Escrow service with Stewart Title
Guaranty, Houston Texas, your money is held in an individually
numbered, bonded and insured escrow account until your Trust is
complete and the property rights have been transferred to you.
We do not recommend that you release funds to a seller unless you have
received your Trust first. Purchasing property without receiving a
Trust is simply buying without receiving the title in your name, which
is risky and not recommended.
Fact: Until you have received your Trust, and rights to the property
have been transferred to you, the legal owner of record in Mexico is
still the previous owner.
Fact: You cannot bypass Mexican Taxes or fees by not getting your
Trust, even if you sell the property to someone else before you have
your Trust in place.
Do I Need Title Insurance?
Whether you buy real estate in the U.S. or Mexico, Title Insurance for
every property you purchase is highly recommended. You have insurance
for your car, your home and your health, why not purchase it for one
of your largest investments, your property.
Fact: U.S. Title Insurance is available for properties in Mexico
purchased by U.S. Citizens.
Fact: Just because you have a Trust does not ensure you have free and
clear title.
In a Stewart Title property search, the properties title is searched
all the way back to the Mexican Revolution. Most title searches to
secure a Trust only go back one or two owners of record.
How Can I Own My Property?
In the Trust document, you must name the Beneficiary or foreign owner
for the property. This can be you personally, multiple partners, a
foreign corporation, an estate trust, a living will, or other entity.
The Trustee of the Trust (the Mexican Bank) will take direction from
whomever you name as the Beneficiary.
Fact: You can name a U.S. Corporation as the Beneficiary of the Trust.
This is perfectly legal.
Fact: If you sell more than 25% of the shares in the U.S. Corporation,
you have created a real estate transaction in Mexico, and all Mexican
Taxes apply.
(This is Article 151 of the Mexican Revenue Code and is also declared
in the International Tax Treaty between the U.S. and Mexico. If this
is done, and you do not pay the Mexican Taxes, you will have created a
tax burden over the property for the new owner.)
Fact: You can own a property in a Mexican Corporation and take title
fee simple only if the property is for development or investment
purposes.
Fact: You cannot own property through Mexican Corporation to by-pass
the Trust process.
Fact: It is against the law for a foreigner to own property in a
Mexican Corporation for residential purposes. |
