The process of buying a home south of the border is a bit different. So, to prepare you for the process, here’s a primer on terms to know if you are buying Mexican real estate.
Ejido
Farming land owned by a legal entity, or group, called the Ejido. Collective land that can now be privatized. Foreigners cannot acquire rights to Ejido property. Through a proper process, the Ejido can sell to a Mexican individual. The Mexican can then sell to a foreigner.
Escritura Publica
The document issued by the notary to transfer ownership of property. The escritura is a public deed. If there is bank trust for foreign ownership it is described in the escritura. In the escritura the bank defines its authority and sets out its fees. The time to negotiate the terms of this agreement is at the beginning of the purchase process.
Fideicomiso
This is the Mexican bank trust that holds residential property for foreigners. Foreigners are granted the rights of ownership such as possession, right to construct and to tear down, rent and sell through the fideicomiso.
Mexican Corporations
Corporations can hold title within the restricted zone for non-residential real estate. This type of corporation cannot establish residency requirements, so it is not exempt from capital gains tax. Building and selling condominiums or building commercial buildings are examples of uses permitted. Foreign condo buyers will require a trust in the restricted zone for their residential ownership.
Notario Publico
A notario is an attorney with a specialized education who is appointed by the Mexican State to transfer real estate. There are a limited number of public notaries appointed per state. The responsibility of the notary is to search the title in a Mexican transaction. Their fees are separate from the government charges for establishment of a bank trust. The notary is responsible for collecting money due the government, such as taxes and capital gains. The notary is not responsible for handling the money of the buyer to the seller.
Apostille
This is the document that authenticates signatures to a document that are not signed in the presence of the notary. The apostille is notarized by the secretary of state where the person signing resides. This is how a document from the U.S. can become a legal document in Mexico.
Certificado de Libertade Gravamen
The notary checks with the public offices to determine if there are liens filed against a property. This lien certificate should show the owner of record, the surface area and classification of property type, the legal description and whether there are lines or encumbrances filed of record against the property.
AMPI (Asociacion Mexicana de Profesionales Inmobiliarios, or Association of Professional Real Estate Persons)
AMPI is the Mexican equivalent of the National Association of Realtors and the Canadian Real Estate Association. Not all real estate agents in Mexico are members of AMPI. AMPI has its own requirements and dues are required for membership.
Contrato de Promesa
A promissory agreement. It is not a contrato de com-praventa.
Evalua
Evaluation of taxable value established in pesos. The evalua is not a market evaluation.
Capital Gains
This is the amount of tax, if applicable, owed by the seller upon the sale or transfer of property. This tax is derived from the difference in Mexican currency versus Canadian or U.S. dollars purchases that give the gain or the loss for the seller. A seller needs to check his/her tax status before he/she puts property up for sale. He/she will be expected to have accepted the tax liability before he/she accepts an offer.
Licensing
There is currently no licensing requirement to sell real estate in Mexico. Private individuals or groups, such as AMPI, create their own requirements for membership in an effort to raise real estate sales professionalism.
Finiquito
This is the final bill or settlement. Without a finiquito, payments and penalties can continue. Without a finiquito from Social Security, liability for payments to construction workers can continue long after completion of the home.
Restricted Zone
In 1994, the federal government of México liberalized ownership of property within the constitutionally protected area knows as the restricted zone. This area includes 10 kilometers along all-natural borders, 50 kilometers along coastlines and all of Baja California. The Bay of Banderas is a restricted zone. Ownership of property is held within a bank trust for non-Mexicans.
Federal Maritime Zone
The area of land owned by the government adjacent to the tide line. Any usage or structure such as terrace, pools or bedrooms located within the federal land will have to have a concession title to approve use of federal land.
Condominium Act
In 1995, The New Civil Code of the State of Jalisco established the legal aspects of the condominium. In this act, the roles of the administrator, the executive committee of owners and the required homeowners’ meetings were established. The setting and administration of maintenance fees and resolution of conflicts between owners is also addressed in this act. This law is very important for condominium owners to read and understand.
Contrato de Compraventa
This is a purchase sales agreement. Real estate contracts recorded before a notary public become binding to the parties of the agreement.
Certificado de no Aduedo
This is the certificate of no tax liability issued by the local taxing authority or Office of Catastro. Predial is the name for property tax.
Escrow of Monies
There are limited ways that money can be escrowed legally in Mexico. Several of the banks have legal departments empowered to escrow purchase money for a sales transaction. Some U.S. based title companies have Mexican offices and authorization to hold escrowed funds. The escrowed funds can be kept by these institutions in U.S. dollars.
Law in Mexico
Mexico belongs to the North American continent and is not part of South America. The law has evolved from Spanish and French law, which is very different from the English Common Law that influences the laws of the United States.
