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The "fideicomiso" is set up through a Mexican bank for a period of up to 50 years and can be renewed for 50 years. To acquire the land the purchaser must obtain a permit from the Ministry of Foreign Affairs. The buyer can lease, sell or transfer the property to another family member, and if he dies, his property can be passed to an heir. At the end of the 100 years the property can be sold.
In the trust there are three elements: The trust Settlor (Fideicomitente) which may be a physical or legal Mexican person, who is the owner of the property which is to be placed in trust; the Trustee (Fiduciario) which, by law may be only a credit institution and which holds the raw real estate; and the Beneficiaries (Fideicomisarios) the legal or physical foreign persons who are the beneficiaries of the trust who obtain the use and benefit of the property.
The bank (known as the trustee) holds the trust deed (known as the escritura) for the person or persons purchasing the property (known as the beneficiaries). This property is not part of the bank's assets and cannot be subject to any lien or attachment for any bank obligations. The beneficiary has all ownership rights to the property and may sell, lease, mortgage or pass on to their heirs as desired under law. A bank trust is not a lease.
The Mexican government established the trust agreement as a way of protecting foreigners interested in owning property in Mexico. The reasoning was that by making ownership pass through the trust process, there would be an automatic review of the transaction to ensure it was legal and unencumbered. The bank is required to check ownership, insurance and indebtedness of the property, providing further protection to the foreign owner.
Trusts are renewable at any time by filling out a simple application with the bank. It was never the intent that these properties pass back to the government at the end of the trust period. This is a common misconception and fear of most buyers. It may help in understanding the Bank Trust to compare it with the Deed of Trust, a type of financing instrument used in the U.S. People who buy homes, paying the full amount upfront, receive their titles right away. However, this rarely happens. Under a deed of trust the buyer of a house has only "equitable title," or an equity interest, with the right to use but only a restricted right to sell, until the loan is paid off, after which the owner receives the actual fee simple title. Until then it is held by a trustee, usually a bank or title company. In Mexico the Bank Trust is also held by a trustee, but the buyer never receives the actual title. Realistically many homeowners in the U.S. never receive title to their properties either, because they sell or refinance their homes before the 30-year term of their loan is complete. |
Property taxes are very low in Mexico as a whole. The property tax, known as a predial is .1% of the assessed value. Taxes are paid annually, with the assessed value determined at the time of sale. If you purchase a property with an assessed value of $100,000US dollars your annual tax rate would be $100.00US dollars. The reason taxes are so low is due to the fact that they have never been a source of revenue for the Mexican government
Real Estate Acquisition Tax (transfer tax): Individuals or companies purchasing real estate, consisting of land, or land and its improvements in Mexico, are subject to the payment of a real estate acquisition tax calculated at the rate of 2% of the value of the property (the rate may vary from state to state from 2% to 3.3%). All purchasers of real property must pay this tax whether the acquisition is carried out through a purchase and sale agreement, donation, trust, assignment, mergers of companies, split-off, or payment in kind.
Mexican real estate is subject to a 20% capital gains tax on the gross proceeds from the sales without any deduction. There is another option, net basis taxation up to 35% (depends on the state and the interpretation of the notary). Under this tax plan, gain is calculated by deducting from the gross proceeds (1) the original cost of acquisition, (2) the cost of improvements, (3) notarial expenses and other costs of sale, including appraisal costs, and (4) commissions. The original cost is separated between land cost and cost of buildings, with at least 20% allocated to land. The cost of buildings and any other improvements is then decreased at 3% per year between the date of acquisition and date of sale, but the cost is not decreased below 20% of the original amount. The cost of the land is increased based on changes in the National Consumer Price Index.
Formula for capital gains tax:
AV2(appraised value 2) -AV1(appraised value 1) ?Improvements - Cost of the Sale=Taxable Amount x 35%=Tax Due
Your FM2 or FM3 can help you to avoid capital gains taxes when selling your property. If someone proves they were living on their property for two years in Mexico, they can avoid paying any type of capital gains.
Individuals in the restricted zone, who are residents of Mexico (have an FM3), and who rent their rights in trust property (fideicomisos) must make provisional payments on their Impuesto Sobre la Renta (Tax on Rents) for income generated from cash deposits, credits, exchanges coming from rents or sub-rentals. The calculation will be based on one of two methods; one option is to pay 1% (on average, based on state) of the gross amount received during a three-month period, or you can opt to pay around 35% (on average, based on state) of your net profit.
In order for any authorized expense to be deductible, the taxpayer must obtain an official invoice, which is known as a FACTURA. This receipt must be printed on the press of a government-authorized printer and will contain the RFC number (taxpayer ID number) of the individual or company issuing the receipt.
Authorized items for deductions are the following:
- Property taxes, as well as any contributions or local taxes for improvements, planning or public works expenditures.
- Maintenance costs that are not related to improvements or additions; water payment when not paid by the tenant who occupies the property
- Interest paid for loans obtained for the purchase, construction, or improvements of the property
- Employees directly employed at the rental property. Salaries, commissions and /or fees are deductible, as well as taxes and benefits paid on those salaries.
- Insurance premiums on the properties
- Investment in construction, including additions and improvements (these expenses are amortized at the rate of 5% per year for construction and 10% for installation expenses or improvements.
Mexican residents must file a declaration with authorities by the 17th of each month. An annual declaration is due no later than April 1st the following year and the difference between provisional payments made and total tax due, based upon global Mexican income, is due with the annual return.
Mexico has signed a number of treaties to avoid double taxation with other countries and their benefit can be applicable depending on the type of transaction. Taxes that are paid on Mexican income are generally deductions on U.S. and Canadian income. It is wise, however, for the foreign taxpayer to check with his or her personal accountant to determine how to declare these foreign tax payments. |
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One of the first things you should request when purchasing property in Mexico is a copy of the lien certificate (certificado de libertad de gravamen) on the property. It should indicate the owner of record, surface area and classification of property type, the legal description, and whether there are any liens or encumbrances filed on record against the property. The buyer can also request a certificate of no tax liability (certificado de no aduedo) from the local taxing authority.
Legal Steps To Purchase Real Estate In Mexico:
1. Offer and acceptance and/or promissory agreement
In accordance with Mexican Law, a letter of intent fulfills the requirements for it to be considered to be a valid contract, with the condition that there has been mutual consent on the part of both the seller to transfer a specific property and the buyer to acquire it.
2. Title Search and Conditions of the Property
This will ensure that none of the information of the Public Registry of Property and Commerce regarding the property is overlooked.
3. Requirements for closing and formal execution of a standard real estate Transaction in Mexico:
Certificate of No-Encumbrances: This certificate will enable the Notary to assess that the property does not have any lien or encumbrance, or any claim pending over it, and thus can be transferred with a clean title. It is obtained directly at the Offices of the Public Registry of Property and Commerce and basically it must contain at least the following information: I) the number of years of documented history made on the property; II) the surface area of the property in accordance with the records; III) the metes and bounds of the property; IV) the name of the owner; V)classification of the property (urban or rural); VI) a legal description of the property (such as if it is owned in a trust or by several owners); VII) the name and signature of the registar and VIII) the official seal of the Public Registry of Property and Commerce.
Certificate of No-Tax Liability: This certificate will enable the Notary Public to assess that the property tax has been paid prior to the transfer of the property.
Property Appraisal and Site Survey: In accordance with the Real Estate Law ("Ley de Catastro"), it is mandatory to carry out a site survey on the property and do an official appraisal. The appraisal must be done estimating the commercial value of the property, considering its surroundings, a market survey and zoning regulations.
4. Notary Public and Public Registry of Property and Commerce
The function of the Notary Public is to act as an extension of a Judge or the Government. His duty is to ensure that a real estate transaction is formally executed in compliance with all legal requirements. Upon the execution of the transaction, the deed of title must be recorded at the Public Registry of Property and Commerce of the domicile in which the real estate, subject matter of the transaction, is located.
A Mexican "notario" is an attorney who, after passing rigorous examinations, is commissioned by the government as a public notary. A notario holds high office for life, unless he or she is removed for cause. The notario fulfills a public function delegated by the government. Although licensed as an attorney, the notario is not in a position to provide either of the parties with legal advice. The notario's responsibilities include collecting and reviewing the sales contract, property tax and water payment receipts; ordering a bank appraisal: freezing the property's file at the local public registry (no documents may be recorded in a property's file during three consecutive thirty-day periods); reviewing the property's file to verify the legal ownership and search for liens, encumbrances or anything that could affect the title (as the majority of public registries are not automated, this procedure can take from 60 to 90 days); requesting the public registry to issue a "Certificado de Libertad de Graveneres" (Certificate of Freedom from Liens and Encumbrances); and performing the closing at this office where the notario handles the transfer of the deed, tax withholding on the underlying real estate transaction, and the recording of the documents at the public registry.
The Most Common Choices For Purchasing Real Estate In Mexico:
1. General Purchase Sale Agreement
A purchase sale agreement occurs when one of the contracting parties obligates itself to transfer the ownership of property and the other agrees to pay a certain price in consideration of the property rights. The contract is perfected and binding between the parties as soon as the property and its price are agreed upon, even when the property has not yet materially been delivered and the price paid. All such contracts must meet specific requirements in accordance with Mexican law in order to exist and be valid.
There are two types of elements to the contract:
A. Essential Elements: The essential elements of any purchase sale agreement: consent which is granted by the seller's agreement to transfer the real estate to the buyer, and in turn, the buyer's consent to pay a certain price; and object which is the purpose of the title transfer of the real estate on the one hand, and the payment of a certain price as consideration of the transfer.
B. Validity Elements: The validity elements are: legal capacity that refers to the legal rights of the parties to enter into the contract; and legal form, which are the formalities with which a transfer complies in order to be perfected. For example, real estate transactions must be in writing, and in order for such to be binding before third parties, they must be recorded at the Public Registry of Property and Commerce. Basically, the fundamental obligations of the seller in a purchase sale agreement, are: a) to deliver the property being sold to the buyer; b) to guarantee the quality of the property; and c) to guarantee the title (with cure in case of eviction).
On the other hand, the buyer's principal obligation is to comply with the payment of the price in the terms place, and form agreed in the agreement.
2. Installment Sales Agreements withholding transfer of title:
In this kind of agreement, the seller reserves title of the property until full payment of the sale price is made, but the buyer may use and enjoy the real estate until full payment is made. Usually, this kind of agreement includes installment payments. There are some advantages in using this kind of agreement: First, the agreement can be recorded at the Public Registry of Property and Commerce as being enforceable and binding before third parties. Second, the seller is not able to sell the property while the purchaser is in compliance with the sales agreement, usually meaning that he is current in his payment obligations to the seller. Finally, the obligations of the parties are subject to what in Mexican Law is commonly known as "Condicion Suspensiva" (suspensive condition), which conditions the agreement to full payment of the price to the seller.
3. Irrevocable Real Estate Trust Agreement:
This is better known as a "fideicomiso" and is the most common instrument for the acquisition of real estate property within the restricted zone, usually for residential purposes. The seller, "trustor", will transfer property to a Mexican bank institution, the "trustee", by means of an irrevocable trust agreement. The trustee will hold the property on behalf of a designated beneficiary (usually the buyer). The bank is obligated to administer the real estate only for the benefit of the beneficiary, who holds the right of use and enjoyment of the real estate, as an owner. The bank holds title to the property but the beneficiary is entitled to use it and even sell the property held in trust to any eligible buyer, providing that he instructs the bank to do so. | | |
Uncle Sam Has Something To Say About Your Mexican Home.
By Raoul Rodriquez-Walters
Like many a traveller, you've come to Barra de Navidad, let's say from from Portland , Oregon , looking for an escape from the cold and the office. A little romance in a tropical paradise would be nice too! What you did not expect was to fall in love with the city and its charms: the beaches, the ambiance, the view. Before you know it, you and your spouse are discussing the possibility of purchasing some property in Barra de Navidad. A myriad of questions come up in the conversation. One of the questions you should ask is: How will property ownership in Mexico affect my U.S. taxes? This article will be a brief rundown of what you can expect in this regard. In my next article I will touch on the Mexican side of the tax equation.
Use: Vacation Home
Once you have purchased your home, the use you give it will largely determine the tax consequences as far as the IRS is concerned. After further discussions with your spouse, you decide that you cannot afford to move to Mexico just yet, but you will keep the house in Barra de Navidad for family vacations. If you use your property strictly as a vacation home, real estate taxes, casualty losses, and mortgage interest can be deducted on your federal return as itemized deductions.1(Numbers refer to footnotes at the bottom)
You may also decide that in order to help pay for the house you will rent the property out when not using it. In this case, there are special tax rules if you plan to rent your home to others for two or more weeks a year, as well as keep it for personal use at other times. How much of rental income is includable as income on your U.S. tax return, and how depreciation, maintenance expenses, operating expenses, mortgage interest, property taxes, insurance, and so forth, are allocated between personal use and rental use on you tax return, revolve around how many days the property is used for each purpose.
Use: Strictly Rental Property
Several years after you purchased your Barra de Navidad property you can almost afford to retire to Mexico . However, you decide that you owe it to yourselves to check out other places for retirement before making a final determination. You therefore instruct your property manager in Barra de Navidad to rent the house out for at least 12 months.
If the property in Barra de Navidad is to be used strictly as a rental, then the usual rules that apply in the U.S. rental real estate apply here. You may take deductions on Schedule E of your U.S. return for mortgage interest, insurance, operating expenses, repairs, maintenance, etc. and offset those expenses against gross rental income.
Furthermore, if you actively participate in the management of the property, you may be able to use up to $25,000 of your real estate losses to offset other income on your U.S. tax return.
If you qualify, the benefit of a $25,000 deduction can provide significant tax relief. The key is the definition of "active participation." To actively participate, you need to be involved in the management of the property in a bone fide manner, and own at least 10% of the property in question. You can have a property manager do most of the work, but you will have to make all major management decisions such as rental terms, capital expenditures, repairs, and approving tenants.
Use: Principal Residence
After trying out several other cities out for size you decide that Barra de Navidad is really it! You pack up and move to Barra de Navidad.
If your home in Barra de Navidad will indeed be used as your principal residence, the usual deductions that would apply to a principal residence in the U.S also apply as far as the U.S. tax authorities are concerned. You may deduct foreign property taxes, and mortgage interest expense if you itemize on your U.S. tax return.
Selling your Principal Residence
Eventually you may decide to sell the home in Barra de Navidad. Currently, you may exclude realized gains up to $500,000, for married couples filing jointly, and $250,000 for single taxpayers. In order to exclude up to $500,000 in gains you will need to have owned and used the house as your principal residence for at least two of the last five years.
In general, these exclusions may not be used more than once every two years. There is an exception to this rule if you move due to a new job, health reasons or other "unforeseen circumstances". In these cases the exclusion is prorated.
Other Taxes
Estate and gift taxes are another two U.S. taxes to be aware of. Under current U.S. law, if you are a citizen or resident of the U.S. , your Mexican real estate will be included in your gross estate for tax purposes if you hold title to the property, or if title is held through a Mexican trust.
If you give your property away, say to a family member, or allow them to live there rent free, these are considered gifts. If the value of the gifts is greater than $10,000, you will be subject to gift taxes.
Summary
As you can see there are several scenarios that you need to keep in mind depending on the use you give to the property. Please consider that this has been a very general discussion, and your particular situation could be more complicated. I urge you to consult your tax advisor in order to get the full picture based on your unique situation.
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FM-3
This document is issued by immigration either in Mexico or at your Mexican Consulate office. This is basically a non-resident work or business permit. While Sea Side Reservations does not provide the service of applying for this item we can recommend good resources of those who do this service. If you would like to contact an agency directly you can E-mail: estelahalmada@hotmail.com
You will need several items in order to obtain your FM-3 and you will need to plan your application at a point when you can return somewhere around 2 weeks to pick it up.
In order to save you a trip make sure to have the required items when you come to Barra de Navidad for your FM-3.
FMT (Tourist Visa) you can get this at the border in the white office on the west side of the road, or at the immigration office in Manzanillo. This is a temporary permit to be in Mexico .
Copy of your Power Bill (from your Mexican property)
Your US passport
Passport style photos, We suggest having these done in Barra de Navidad since immigration will reject them if not correct. The photo shop on the Cholla Bay road knows exactly what needs to be done. Just ask them to for “FOTOS PARA EFFE EMME TRES” they will take care of you. |
The work required to keep something in proper condition or upkeep- is just part of the territory when you own rental property. Although maintenance isn't anyone's favorite job, you can enhance your investment by making needed repairs promptly and maintaining the entire property in the best possible physical condition.
Although owning and operating rental property clearly requires ongoing physical maintenance, many rental owners are not prepared for the work involved. If you have a background and experience in maintenance and repairs, you may welcome the opportunity to do some of the work yourself. Otherwise we suggest letting the professional at your property management company handle the work for you.
Besides the benefits in marketing and keeping your property rented, you are required by law to properly maintain and repair your rental properties. In plain English, it means that, you must keep the rental property in a safe and habitable condition.
Recognizing the Importance of a Maintenance plan.
One of the most common reasons that dissatisfied tenants leave a rental property is the failure to respond to the tenants' basic requests for maintenance. But you can use this your advantage when you show you well-maintained rental unit by informing your prospective tenants about your system for promptly addressing maintenance issues.
If your management company has a solid maintenance plan in place, you will consistently get more night per year and fewer refunds.
Additionally, when you're working with a maintenance plan, you can control your expenses and keep them to a minimum. You greatly reduce the need for emergency or extraordinary repairs (which always cost more money). And you have the names of contractors and suppliers on hand so that you can have the proper repair done the first time (instead of having to fix a botched repair).
Because Repeat, satisfied tenants are the key to financial success in a managing rental properties, The need for an established and responsive maintenance system that properly maintains the premises in order to avoid operating losses.
A poorly maintained property will lead to higher tenant dissapointment and tenants of progressively lower caliber, who are willing to accept the poor condition of the property.
A tenant can also use the poor condition of the withhold rent , vacate in the middle of a vacation or dispute credit card charges.
Take a proactive approach to maintenance. At least once a year, conduct an annual rental unit inspection walkthrough. You should do this over the course of a couple days while spending a weekend or few weekdays in your property. This standard policy will protect you from claims of poor maintenance, allow for repairs when problems are small and keep your good tenants satisfied.
While your property manager and their maintenance team may do a great job. Sometimes it is hard to find the small bothersome problems with out actually staying in the unit and using the amenities.
For example: We had a maid who does a very good job. Her cleaning is impeccable along with her ability to observe and report maintenance issues. One day we had a renter come in and explain that their coffee maker was not working and needed an immediate replacement.
Why didn't the maid find the problem?
Simple…
She unplugged it, cleaned it, and put it away in it's proper place. Maids don't usually have the time to make a test pot of coffee. Sometimes it takes the owner spending the night using the amenities to find all the items that need corrective action. A good maintenance plan includes regularly scheduled exterior property inspections. A customized property inspection checklist for each rental property is a good management tool. The frequency of the inspections will vary, but they should be performed at least quarterly.
Being prepared for the Different Types of Maintenance Issues.
Maintenance isn't just a matter of fixing a leaky faucet here and there, rental properties require several different types of maintenance and you're sure to run into each of them at one time or another. Although each type in a unique way.
My first employer in property management taught me the saying, “ To own is to Maintain” . It's something worth keeping in mind when you find yourself having to do maintenance work on your rental property.
Emergency Maintenance.
Your Vacation Property Manager should be prepared for emergency maintenance request at all hours of the day.
When your property manager gets a maintenance call from a tenant, first they need to determine whether the urgent maintenance request really is an emergency. An emergency repair is work that must be done immediately in or to prevent further property damage or minimize the change of endangering people or legitimately ruining the tenants vacation experience.
The most common maintenance emergencies typically involve plumbing or electrical problems.
a maintenance emergency, we immediately advise the tenant of what steps to take to limit any further damage. For example, if a pipe is leaking, we tell the tenant to shut off the water at the angle stop under the sink or at the water meter, this can prevent further water damage. Instruct tenants not to use appliances or electrical systems that are malfunctioning until they have been inspected or repaired.
If a fire, flood or gas leak, emergency ever occurs at your vacatuib rental property or if a natural disaster hits the area, having a company that is able to react quickly to shutting off the utilities may be imperative.
Owners should prepare charts and simple diagrams for each rental property indicating where to find all utility shutoff locations and the tools necessary to operate them- as well as instructions letting tenants know which situations warrant shutting them off.
Preventive Maintenance
A sound preventive maintenance program can increase your cash flow and reduce the number of maintenance emergencies at your property. Preventive maintenance is the regularly scheduled inspection and maintenance performed to extend the operating life of a building system of a property. This often includes annual maintenance surveys or inspection of the interior of the rental units.
One great example of preventive maintenance is regularly lubricating the motors and replacing the filters in heating and air conditioning systems. When performed annually on a service contract, this preventive maintenance is very inexpensive and the lubricant motors and clean filters lessen the strain on the equipment so they will last longer and operate with greater energy efficiency.
Preventive maintenance can often address problems when conditions are still minor, thus saving significantly over future emergency repairs or replacement.
The cost of maintenance labor is also reduced because maintenance personnel can work more efficiently by having all the necessary tools, parts and supplies on hand. According to a study by the Institute of Real Estate Management (IREM), 80 percent of the cost of most maintenance repairs covers labor and only 20 percent covers the actual parts and supplies.
Be sure to give your Vacation Rental Management Company written notice before beginning maintenance work that will effect the peace and privacy of any of your guests. A temporary shutoff of utilities (particularly water) will often be necessary in emergencies or while performing preventive maintenance and repairs at your rental property. Advising your tenants in advance can minimize the inconvenience for your tenants.
Corrective Maintenance
Although planning and performing preventive maintenance work is usually cheaper that fixing or replacing items, the reality is that if something breaks it must be fixed or replaced in a timely manner .
The most common maintenance request from tenants are for corrective maintenance. If your Agent responds professionally and in a timely manner, He will earn you a reputation as a good rental property owner.
Even with the best preventive maintenance programs, corrective maintenance is a normal part of any maintenance program. Anything in a rental unit can and eventually will break or need attention in a normal usage, including toilets and sinks that become clogged, doors that stick and appliances that malfunction. The key to tenant satisfaction is often dependent upon whether you have a system for efficiently accepting and responding to tenant maintenance requests.
Although the telephone, a pager or even an answering service or machine are still the best ways to communicate an urgent maintenance request, e-mail is becoming more popular with both owners and Agents for many non-emergency maintenance situations. E-mail works well for owners, who often prefer not being interrupted by a phone call at a potentially inconvenient time and it works well for tenants, who appreciate being able to send the e-mail at any time of the day or night instead of having to wait until normal business hours to get a hold of you. Upon receipt of the e-mail you can reply with a confirmation or ask for more details.
Custodial Maintenance
Custodial maintenance is the regular day to day upkeep of the rental property and the most frequently occurring type of maintenance. The curb appeal and physical appearance of your property and grounds depend on regular patrolling and cleaning. In single family rentals, the tenant typically handles this duty and specific responsibilities should be included in your lease or rental agreement. In larger rental properties an onsite manager should be responsible for daily inspection and cleaning of the property.
Keep a list of routine maintenance items, including washing windows, hosing down parking areas, driveways and walkways and doing other tasks that will keep the interior and exterior of the rental property clean and presentable, don't forget to keep the trash bin areas and free of litter as well.
The number one complaint of tenants and the bane of all rental owners, is deferred maintenance. Not really a type of maintenance at all, deferred maintenance is the result of obvious repairs that are not properly addressed in a timely manner. Common examples are peeling paint, broken screen doors, overgrown landscaping and minor roof leaks in the garage. Although every property has some deferred maintenance, your goal as an owner is to keep it a minimum.
Cosmetic Maintenance
Properties with great curb appeal are easier to manage and generate higher returns on your investment. So if you're willing to spend money to improve and upgrade the appearance of the exterior and the individual rental units, you'll reap the rewards. Examples of cosmetic maintenance or upgrades include replacing old countertops, installing new light fixtures, repainting, installing new window covering and decorating with wallpapers.
One of the most common complaints tenants make is that their Vacation Rental is not what they expected. That the property is not up to date in it's furnishings, the exterior is not being painted regularly, and the place looks overall unkept. There is not faster way for a property management company to become frustrated and avoid renting your property than to have excessive complaints that you as the owner will not correct. Remember they are the ones on the front lines getting the complaints, taking the abuse if your property is not allowed to be properly maintained.
Handling Rental Property Maintenance
Even though your Property Management Company may be assertive in properly maintaining your rental property through regular property inspection and diligent interior maintenance, there will always be an ongoing need to make repairs. |
Purchasers of Mexican real property can now receive Owner's Policies of Title Insurance that can be issued on both sides of the border from various companies to both U.S. and Mexican buyers. Most title insurance policies today are U.S. contracts of indemnity guaranteeing ownership rights as vested in a fideicomiso (bank trust) for residential property acquired by foreign buyers in the prohibited zone, or for properties held in a Mexican corporation for non-residential purposes (i.e. industrial and commercial). Mexico is not unlike the U.S. in that there is a definitive legal framework for ownership of land by foreigners known as the New Foreign Investment Law (Dec. 28, 1993) and as mandated under Article 27 of the Mexican Constitution. In addition, there is formality and compliance in the development of real property. Regulatory statutes and procedures are mandated on a state-by-state basis and require a series of official approvals, permits, and authorizations, coupled with public disclosure and written notification by the governing public agency.
American title Insurance is available for Mexican real estate whether acquired directly or through a trust. The cost of the insurance depends on whether the property you are purchasing is covered by a master title commitment. The best way to protect yourself is to get title insurance. Most Mexican companies don't sell it, but Houston based Stewart title Guaranty, Lawyer's Title, and Fidelity National Financial does. The insurance runs about $4 to $7 for every $1,000 of property value, versus $3 to $4 in most of the U.S. In addition to title insurance, property insurance is also available in Mexico and the rates are relatively low. |
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