1973   A constitutional amendment known as the Foreign Investment Law allowed foreigners to purchase real estate anywhere in Mexico, except the restricted zone. The restricted zone consists of areas within 100 km (64 miles) of international borders or within 50 km (32 miles) from the coastline (at high tide).

1993   Mexico amends the constitution to allow foreigners to purchase real estate within the restricted zone by means of a fideicomiso (bank trust).

1994   The NAFTA trade agreement between the United States, Canada, and Mexico is passed. A constitutional amendment allows corporations to be 100% foreign-owned. (A corporation may own property in a restricted zone without a fideicomiso.)

The agreement must show the amount actually to be paid including the down payment which is paid at the signing of the agreement. For tax purposes - or to avoid paying more taxes than necessary - the seller may request that the declared purchase price be less than the actual purchase price. (The capital gains tax is 15%; 28% for foreigners.) In this case, both amounts must appear in the purchase agreement. (If the purchase agreement is written by a notary and the declared price is not the purchase price, be sure to request that the document not be notarized, i.e. entered into the public record.)

The date of initiation of closing must also be declared. My purchase agreement allowed for three weeks to lapse before the title transfer process would be initiated with a notary. This was the amount of time that the seller would need to get a certificate of non-encumbrance (certificado de no gravamen) from the deed office and that the buyer might need to get his papers in order. If the sale does not go through because the seller does not present the paper work to the notary by the agreed upon date, he must return the deposit to you.

Remember: an oral agreement is as good as the paper it's written on.

Barbara Joan Schaffer
http://www.barbaraschaffer.com/
10/15/07

The bank is required to check ownership and insurance, and to verify that the property is free of liens. A trust is granted for a 50-year period. The trust is renewable at any time (for another 50-year period) by submitting an application to the bank. If the 50-year period expires without renewal, the owner has another 10 years in which he may submit an application to renew the trust. If property is purchased that already has a fideicomiso, the existing trust may be transferred to the new owner and will be good for the remainder of its 50-year period, or the trust may be renewed. If property is already in a fideicomiso, probate and transfer tax are avoided when the property is transferred.

There is a fee of about US$350 (varies from bank to bank) to obtain the fideicomiso and an annual fee as well. To obtain the fideicomiso, you will need your accepted purchase offer, a photo ID and 10% of the purchase price. Monetary transactions are handled through the bank.

The Notario Publico charges a fee for his services and the bank charges a fee as well. These fees should be competitive and are based partly on the value of the property. Typically, a realtor will work with one Notario Publico who will work with one bank, but there is no reason why the buyer can't shop around, compare fees, and select her own bank and Notario.

The following is a statement from Notario 14, Lic. Hugo Manuel Felix Garcia, Puerto Escondido, Oaxaca, taken from the Visitors' Comments that offers some insight into the Notario-Buyer-Seller relationship:

The ultimate test of a Notario is whether or not the sellers Title Deed holds up if challenged. We are proud of our record of having no property title successfully challenged over a period of 40 years, our position as Counsel to our Peers in this profession and our status as Notario to the Office of the President of Mexico in Oaxaca. In my experience there are a few major categories of customers who are most frequently dissatisfied with their Notarios.

a) Property Sellers who seek to have an unwitting foreign purchaser pay the Sellers Capital Gains Taxes.

b) Sellers and their Agents who seek to pass on a greater future Capital Gains Tax liability to an innocent Purchaser by documenting the current sale value of property below its market price.

c) Sellers who seek to accomodate a sale via a 'Presto Nombre' by putting the property in someone else's name. This is fraught with risks i.e. it is quite possible that the Purchaser's heirs could lose the property if the Purchaser's final Will and Testament is challenged upon death by the Presto Nombre.

d) Delay in completing the documentation which can either be the fault of the Notario or other participants in the title transfer process. (We humbly apologize if any customers experience was below the high standards which we set for ourselves.)

In most instances of a) to c) above the Purchaser has found their dream property and has had many hours of relationship building with the seller and realtor/advisor before approaching the Notario, who may have just spoiled the party. His intervention is understandably not welcomed by an unsrupulous Seller/Realtor/Advisor and often only after thoughtful reflection by the Purchaser. The buyer may not initially understand that the unhappiness and complaints of his/her new found fair weather 'Amigos' arose from an equitable rebalancing of scales of justice (or tax expense) by the Notario under the Tax and Title laws of Mexico in favor of the less informed newcomer.

In a corporate transaction there is usually a preliminary sales agreement or an "agreement to agree". The preliminary sales agreement includes the price, terms, and closing date. A formal sales agreement is executed at the time of closing. Escrow, the process of having a third party hold the deed in trust during the transaction, is not used in Mexico. The buyer should be cautious about making any initial deposits.

Property insurance is available in Mexico and the rates are relatively low.

Jeff and Ana
tierrapin@hotmail.com
October 2000

Gene Butler y Darlene Rivera
genedar@hotmail.com
(954) 582-2646 (Mexico)
June 2000