Buying condo property in Mexico as a foreigner is an easy and straightforward process.
But you still need to do your due diligence and also hire a real estate expert.
Before you even get into the process of buying any property or condos in Mexico, you need to establish your property objectives. You might be searching for a property to call your home or maybe you just want to make an investment. The final purpose of your property will help you determine how to go about buying it.
What is “Ejido”?
In the year 1917, the government made a declaration that every land in Mexico would be “ejido”, meaning communal land utilized for agricultural purposes and farmed by the locals. This essentially meant that owning private property was no longer an option. But currently, not every land in Mexico is ejido. Thus, it is crucial to ensure that the land you go for isn’t in this category.
In 1973, the Mexican government passed the Foreign Investment Law which enabled foreigners to buy real estate property anywhere in Mexico, but with the exception of the coastal land and border land. This refers to both 50 of the coastal region and 100 km of international borders. The law was further amended in 1993 to allow for the sale of property in the restricted areas via a fideicomiso. For clarification, fideicomiso refers to a trust agreement made with a bank in Mexico.
What is Fideicomiso?
It enables a foreigner to buy and hold property with the same privileges as a citizen. A single fideicomiso allows you to buy as many properties as you want in Mexico. More importantly, you will possess the property with continuance, and leave the property to your heirs in a will. In addition, you have the option to transfer the trust to another interested foreign buyer in case you plan to sell.
A fideicomiso normally lasts for 50 years but it is renewable, either by you or your heirs. A fideicomiso can be held by a single or multiple individual or even by an entity, for instance an LLC. The cost of this arrangement ranges anywhere from US$500 to US$1,000 while maintenance fees can range from US$500 to US$700 per year.
Purchasing Property in Mexico Via A Corporation
As a foreigner, you can also hold land in a restricted area through a Mexican corporation. The corporation can be entirely owned by foreigners. You should only think about a corporation if you are purchasing real estate specifically for business or investments. In case you are looking to subdivide the land for development purposes, then a Mexican corporation is practical.
However, it is worth noting that corporations have more stringent restrictions and reporting requirements than fidecomisos. You are required to submit income and expenses reports on a monthly basis. Then, it should be completed by a certified accountant after which it is sent to the Mexican Department of Treasury. Any property that is held in a corporation is classified as commercial property. Thus, it is subject to additional taxes.
The cost of establishing a corporation varies depending on the lawyer used. But the basic required amount is $50,000 Mexican pesos, which translates to about US$ 2,800 according to the current rates. Additionally, you will have to settle the certified accountant’s fees in order to keep it (US$600 to US$800 annually).
You should keep in constant consultation with your attorney in regard to reviewing the legal status of the property primarily on the preparation of contracts, title search, and starting up your corporation.
Steps to Purchase Property In Mexico
- Offer and Acceptance For Purchasing A Property In Mexico
Start with an official offer. Verbal agreements are recognized under the laws in Mexico. But it is crucial to ensure that you have a written offer and acceptance, as this helps to avoid any conflict on terms and conditions. The offer should be presented in the form of an “Offer to Purchase” contract. Be clear on the key terms of the sale. Do not forget to include price, payment plans, and details on a sincere money deposit. When buying property in Mexico, it is also a standard practice to include a deadline for the seller to accept the offer.
Ensure that you write down all offers to minimize any chances of confusion or conflict.
Once the seller accepts your offer, make an earnest money deposit. This payment must be held by the buyer’s attorney or real estate agent. Remember to add a clause in the offer that guarantees the deposit in the event that either a final sales agreement or a promissory agreement is not executed in a set duration of time. Write down who got the deposit. In case the seller needs it to be non-refundable, then ensure that you do not put up more than you are ready to lose.
- Promissory Agreement
After making the deposit, the promissory contract or “contrato de promisa” will be drawn up. With the promissory agreement drawn up, both the seller and buyer become legally bound to a specified timeframe to execute the buying agreement. It locks in the fundamental terms. In the meanwhile, both the buyer and seller should take care of the necessary paperwork. Finalizing the purchasing process takes some time. It also provides enough time for both the buyer and seller to plan out the details for the final purchase agreement.
According to the law in Mexico, the promissory agreement binds both the buyer and seller. Neither of the two parties can pull out of the deal if all the terms and conditions are met to put into effect the purchase contract.
After inking the promissory agreement, the seller will reach out to your bank – from your fideicomiso. This then kicks off the trust application. Your lawyer will then request a trust permit from the Ministry of Foreign Affairs.
You are now halfway the process of owning property in Mexico.
In the meantime, your attorney should be monitoring the property’s legal status. Most importantly, he or she should go over the title, right of transfer, and also the purchase contract. Your attorney will also have to request documentation from the seller. In addition, a certificate of no tax liability, a certificate of no encumbrances, and property appraisal.
The documentation needed by the buying party is minimalistic. You just need a copy of your driver’s license or passport. In addition, a recent utility bill indicating both your names and home address. The documentation for corporations is also usable. Avail the documents to a notary and have them filed at the public registry.
Once everything is up to par, your lawyer and the notary will work with the bank. Here the trust documents will be drafted and finalised.
- Purchase/Sales Agreement
By this stage, the buyer and the seller should be in a position to execute the purchase/sales contract or “compraventa” and commence the closing process. The title of the property is also transferred to the fideicomiso.
By now, the Ministry of Foreign Affairs should have given the bank office the permit. Your lawyer will be able to draw up the drafts for the closing deed. Afterward, a notary and bank trust office will go over the final draft of the deed together with your attorney.
- Closing and Title Transfer
To begin with, ensure that all the information is correct. Next, once all the closing paperwork has been prepared, you will receive a notice indicating the due date and the final closing costs due. Lastly, you will be required to sign the deeds, settle the payments, and transfer the title to the bank.
The seller might opt to use their own real estate lawyer for this step. If this is the case, then they will have to pay this separate legal fee.
The notary will then issue a notarized copy of the closing deed. This will serve as your initial proof of ownership and you can utilize it to install utilities under your own name.
In the course of the three months following your closing date, the Public Registry will issue the final deed that contains an electronic folio, together with a copy of every certificate and payment of rights.
When purchasing property in Mexico, receiving the property, and getting your title occur in different stages. They can happen on separate dates meaning that you do not necessarily assume ownership of the property immediately at closing.
Prior to taking possession of the property, insist on getting a personal walkthrough to ascertain that the property is in excellent condition and all contracts have been fully executed.
- Delivery of Unit
Lastly, inspect the property to make sure that you are receiving a property that is in great condition. After you are satisfied with the property, you will ink a delivery statement. This officially documents the delivery date of your property.
Remember that your lawyer is able to handle the whole purchase process.
Consequently, you will not be required to be in the country for every step of the process. Finally, when you grant your attorney a power of attorney, they will offer you the necessary assistance throughout the sale process. This means each and every step of the process up to the signing of the closing deed. And there you have it; all you need to acquire a property in Mexico. Hope this article has been of much benefit to you.