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Real Estate 
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Buying a property in Mexico should be a dream come true; do not let it turn into a nightmare.
The process of purchasing Real Estate in Mexico is completely different than the one in Canada and can be deceptive if not exercising enough caution. Here are some suggestions that may help you to avoid some headaches:
PROFESSIONALS
In Canada there are specific rules for Developers and Realtors and generally speaking you know what to expect from them. Unfortunately it is not like that in Mexico, where you can find huge differences from one case to another; in Mexico being assisted by a realtor may not be enough and trusting a Developer is not always possible.
On the other hand, you will find that Notaries in Mexico are usually a very reliable source of confidence. Becoming a Notary Public in Mexico is way harder than doing so in Canada. Notaries must be licensed Lawyers and they must be appointed by the Governor of the Province. Also, Banks are reliable entities as they are strictly regulated and supervised by Mexican authorities and this is an advantage of extreme importance as you may need one for your Real Estate Trust (to be mentioned herein later on)
LEGAL TITLE
The key point when buying a property in Mexico is making sure that you will receive both: physical possession and legal title to your property. Generally speaking you are not an owner of a property unless you have received legal title deed to it (an “Escritura” issued by a Notary Public in Mexico).
Do not get involved in Real Estate transactions in Mexico without having enough information about the legal background on the Developer and on the legal situation on the land where the property is located. You may end paying in full for the property and never receive a title deed (or even physical possession).
Obtaining an Escritura is the result of a process that may seem long and complicated if compared to the equivalent process in Canada. The Conveyance process cannot be considered as concluded unless you formalize it before a Notary Public and, if buying on the shores, unless you settle a Real Estate Bank Trust (or sometimes a Corporation).
The “Conveyance Process” may take from six weeks to several months depending on different aspects, such as the legal situation of the property or the location, among others.
DUE DILIGENCE
It is highly recommended to perform a due diligence on the land and on the seller before paying any significant amount of money. When the time comes, a due diligence will be performed by the Notary before arranging the title transferring, however, it may too late if you had already paid a significant amount of money and something comes out to be wrong. Your due diligence should verify that:
a) The identity of the seller is legitimate by verifying the existence and validity of identification documents approved by the Mexican government for each case; in case of Marriage, check the appropriate Certificate; in case of a corporation, verify that such entity is dully constituted;
b) The seller has legal ties to the property by the means of a valid and unencumbered title.
c) The seller is entitled to perform legal acts and specifically for entering into a Contract of Purchase for the property. If the person signing the contract is acting on behalf of the seller, make sure he has a sufficient power of attorney; if the property is a joint or common tenancy make sure that all owners agree to the sale and sign; in case of a corporation verify that the person acting in its behalf has enough legal powers to do so;
d) The previous transferring of the land title have been dully performed
e) There is the existence of an original property deed;
f) The property is dully registered on tax registries and there are no taxes or charges for water services pending at least for the last five years (period for which you are liable);
g) There are no previous payments pending for utilities and public services (telephone, electricity, gas, phone, etc.) pending at least for the last two years (period for which you are liable);
h) There are no liens attached to the property (for example an unpaid mortgage loan). Obtain a certificate of no liens on the property (“Certificado de libertad de gravamen”); this is extremely important since under Mexican Law, liens are passed on with title of the land;
PURCHASE CONTRACTS.
Before signing any document make sure you receive both, the Spanish version and the English version of the document, and make sure the terms in both are the same. Don’t let the seller rush you; don’t sign anything you are not convinced of. Focus in the most significant matters: Terms of payment, inclusions and exclusions, deadlines and cancellation penalties.
BANK TRUST
If you are buying Real Estate on the “Restricted Zone” (50 kms from shores or 100 kms from borders) you are required to do so via a Real Estate Bank Trust. Make sure you review and understand the Trust Agreement and that it is written according to the specific information and special terms or conditions that you provide. Make sure that the Trust Bank in Mexico obtains the necessary permit from the Ministry of foreign affairs and verify your correct name on i.
Then supervise that the property is transferred to the Bank Trust, with you as the prime beneficiary, and finally make sure that the bank trust gets registered on the Ministry of Economy Registry (Foreign Investment Section).
ESCROW ACCOUNT
It is desirable to pay the full price for the Real Estate (or at least a significant amount) only once the Title has been transferred to the Buyer before a Notary Public in Mexico; however, the Seller may not want to transfer the Title before the whole price is paid to him. An alternative is to open an “Escrow account” to have an impartial third party holding the money and to release it only until the Seller transfers the Title to the Buyer. Escrow accounts are not used very often in Mexico, however they are a very good option as they give the Buyer the certainty that the Title will be transferred and give the Seller the certainty that the money will be paid.
TRANSFER OF TITLE ON PROPERTY
As I mentioned already, make sure that the transfer of the property is properly done and that the title deed is issued by a Notary Public. This is the final and most important stage on the purchasing process.
Finally, supervise that the title transferring gets registered on the Land Title Registry.
TITLE INSURANCE
Although it has been mentioned that a Due Diligence will be performed by the Notary on the Real Estate property, it does not cover you if in the future someone claims to have previous rights on the land. You can arrange to cover yourself in such event by obtaining a Title Insurance on your Property. In case of a dispute the Insurance Company will represent you in court and if you happen to lose the case, the Insurance Company will pay you back (specific terms and conditions apply).
DISCLAIMER: The information contained in this web site is only intended as to provide some basic tips and although deemed to be reliable is not guaranteed. Mexico Consulting and Luis Brasdefer are not responsible for any decision taken based on such information.
Sincerely,
Luis Brasdefer LL.B. MBA
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