Home >> Index >> Real Estate >> Buying Property In Puerto Escondido, Oaxaca

Buying Property In Puerto Escondido, Oaxaca

By Barbara Schaffer
May 2009
Web: www.barbaraschaffer.com
Main Index
Maps
Planning and Zoning in Puerto?
Real Estate
Retirement in Mexico
Living in Mexico
Spanish Vocabulary - Legal
Consumer Protection
    Medical in Mexico
The Peso
Telephone Calls
Living in Mexico
Puerto Escondido, Oaxaca
Visitors' Comments
AboutHomeLinks

Someone took a friend of mine to see a beautiful piece of property on the Oaxaca coast that was for sale. My friend was interested until he met the neighbors. Actually, the neighbors met him. The neighbors were the "comuneros" and the parcel belonged to their community. This was not a colony of lost hippies or a religious compound, but rather members of an indigenous community who had the final say on who could live on their land. My friend was disconcerted; it all seemed too complicated, and he decided not to buy.

Most of the land in Oaxaca State is communal, but not all communities take such an active hand. If you were to buy land near the Point of Zicatela, for example, you would only need the approval of the land office (Bienes Comunales) in Santa María Colotepec. If you are a foreigner, different rules apply. If, for example, you buy private (non-communal) land, you need the approval of the Foreign Ministry in Mexico City.

Foreigners cannot own land within 50 km's of the coastline; so states the Mexican Constitution. However foreigners are allowed to administer property and have all the rights and duties of a property owner ( the right to sell, build, live, pay taxes) as long as the property is held in trust by a Mexican bank. The trust (fideicomiso) is for 50 years and is renewable. In case of death it passes to your designated heir.

The problem for foreigners who wish to own land in Puerto is that you can only get a fideicomiso on property that has a title (escritura), and communal lands, by definition, do not have titles. Ownership of communal land is established by an "Acta de Posesión" (Certificate of Possession) which is registered at the county land office. Since a foreigner cannot possess land on the coast, except through a bank trust, a Certificate of Possession has no validity if it is in a foreigner's name.

Laws that were designed to protect native communities from virtual expropriation by large plantation owners, as occurred before the Mexican Revolution (1910-1917), and which were further refined in 1992, were not made to accommodate the needs of foreigners wishing to live or invest in the Oaxaca coast.

One solution to this problem is expropriation by the federal government, as occurred in Huatulco and in Bacocho, Rinconada, and Carrizalillo. Once the land was expropriated, it was subdivided and sold as private lots. Expropriation is a drastic and unpopular measure.

Otherwise the situation is a classic case of market forces opposing laws designed to protect communities from the market. Enter the lawyers and office holders, and -- for a price -- accommodations, sometimes of doubtful legality, are made.

One way around the law, and it's not cheap, is to set up a Mexican corporation. Mexican corporations may be 100% foreign owned, but they must have a lucrative purpose; in the case of real estate, rental income, for example.

Technically, you cannot use your corporate status to purchase a house you use as your residence, unless you also rent out part of the property or use it for some other business. Nonetheless, forming a corporation is considered a much safer solution than the other, illegal option, of buying land through an intermediary (presta nombre). In this case, the land is registered in the name of a Mexican national, who rents it back to you. The intermediary can transfer some rights to you by giving you power of attorney. This option is not for the faint-hearted.

Fideicomisos

Fideicomisos are issued by banks through notaries. A notary is a lawyer who is licensed by the state to attest to certain legal documents, such as wills and property titles. At present, there are 2 notary offices in Puerto, but any licensed notary in Mexico can help you with a fideicomiso.

Although all fideicomisos offer the same basic services, every bank is free to charge whatever it wants. Notaries may choose to only work with only one or two banks. The system is analogous to independent mortgage brokers in the U.S. who may, in fact, work with just one lender. Realtors may also steer buyers to a particular notary.

Three banks offering fideicomisos are HSBC (although it is not now soliciting new fideicomisos on residential properties), Scotiabank and Banco Santander. Banco Santander historically has the lowest rates, but you may have to find a notary in Huatulco.

If you have an HSBC dollar-denominated fideicomiso, you might be surprised this year to discover that the bank no longer accepts cash payment in dollars, although in years past you had to pay in dollars. The reason is "a change in policy," according to Octavio Gómez, the bank's Fiduciary Manager for southern Mexico. The bank will, however, accept payment in dollars by personal check or by international bank transfer. In any case, branch banks will not accept any payment until it is authorized by Mr. Gómez, whose office is in Puebla.

Since older HSBC fideicomisos have a clause indexing the initial $500 U.S. annual payment to the U.S. Dept. of Labor's Consumer Price Index, it is impossible, according to Gómez, to make a payment before it is due, as it is adjusted according to the month and year of issue. Branch banks do not have this information. So Gómez encourages clients to call or e-mail him before attempting to make payment. Tel. (222) 229-8179/ 8189/ 8181. Octavio.gomez@hsbc.com.mx

HSBC is currently outsourcing the business of fideicomiso collections to the Nezter collection agency. But some clients feel safer dealing directly with the bank. If Nezter contacts you, you can always opt to make your payment to HSBC instead.

Scotiabank is definitely more user friendly. The fideicomisos are peso denominated and adjusted to a Mexican consumer price index. You can pay with a U.S. or Canadian credit card or by bank transfer and have the payments deducted from your account automatically each year.

| Top of page | Main index | What's new |
The Pacific Coast of Mexico www.tomzap.com Tom Penick:  tom@tomzap.com