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The Language, Practices and Laws of Buying Real Estate in Mexico  

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Puerto Vallarta south shore
Credit: Ric Hendee

If you are planning to purchase property, you should be acquainted with the language, practices and laws of buying real estate in Mexico.

To get you started, here are the key terms you should understand:

Ejido

Farming land owned by a legal entity or group called the Ejido. It is collective land that can be privatized.  Foreigners cannot acquire rights to Ejido property, but through a proper process, the Ejido can sell to a Mexican individual. The Mexican can then sell to a foreigner.

Temporary or Permanent Visas

Immigration visas for foreigners that are issued for retirement or work purposes to non-Mexicans. Persons with these visas can stay in Mexico longer than the six-month tourist visa permits. These documents establish residency. The temporary visa is renewable for four years. The permanent visa does not require renewals. I

Escritura Publica

This document is 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 as a guarantee trust. 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

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 and rent and sell through the fideicomiso. It is good for 50 years and renewable.

Notario Publico

A notario publico 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 for foreigners. 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 for Americans 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. Canadians do not use apostilles but require recognition of lead documents for use in Mexico from the Mexican Consulate.

Certificado de Libertade Gravamen

The notary checks with 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 required for membership.

Contrato de Promesa

This is a promissory agreement. It is not a contrato de compraventa.

Evalua

An evaluation of taxable value established in pesos. The evalua is not a market evaluation.

Capital Gains

A familiar term you know, this is the amount of tax, if applicable, owed by the seller upon the sale or transfer of property.

Licensing

There is no licensing requirement to sell real estate in Mexico. Individuals or groups such as AMPI create their own requirements for membership, in an effort to raise professionalism for the safe sale of real estate.

Finiquito

A finiquito 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. And a finiquito can be used to end employment and ongoing financial liability of a homeowner with their house staff. We call this a no-lien certificate. They are good for a limited amount of time.

Restricted Zone

In 1994, the federal government of Mexico liberalized ownership of property within the constitutionally protected area known 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 (fideicomiso) 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 or pools or bedrooms, located within the federal land will have to have a concession title to approve use of federal land.

Mexican Corporations

They 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 for corporations. Foreign condo buyers will require a trust (fideicomiso) in the restricted zone for their residential ownership.

Condominium Act

In 1995, The New Civil Code of the State of Jalisco established the legal aspects of the condominium. In this act, the role of the administrator and the executive committee of owners is determined for the required homeowners’ meetings. The setting and administration of maintenance fees and the resolution of conflicts between owners are also addressed in this act. This law is very important for condominium owners to read and understand.

Contrato de Compraventa

This is your purchase sales agreement. Real estate contracts recorded before a notary public become binding to the parties of the agreement.

Certificado de no Aduedo

The certificate of no property 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.

This article is based upon legal opinions, current practices and my personal experiences in the Puerto Vallarta-Bahia de Banderas areas.  I recommend that each potential buyer or seller of Mexican real estate conduct his/her own due diligence and review.

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