For your first Baja real estate purchase, we recommend using a pair of experienced professionals to help you close – a Baja real estate agent with experience in closing transactions and using escrow accounts, and a reputable closing coordinator who will keep in contact with all involved parties and help with all necessary paperwork. This combination is very important in making sure that title and ownership will be transferred from seller to buyer in the fastest, most economical manner possible. You may find an attorney who promises to do that for you, but beware: while he may be able to do it, lawyers tend to take much more time (more than 60 days) and charge much more for their services. For those reasons, we can guarantee that you will have a better closing experience if you stick with an experienced Baja real estate agent and a reputable closing coordinator.
Next, you need to investigate whether you are purchasing property in a fraccionamiento or a condominium regime with a homeowners’ association (HOA). Fraccionamientos have much looser regulations and rely on government agencies and utility companies for all services, while owners are directly responsible for the development and maintenance of a condominium regime. Each HOA has its own reputation to consider as well, so be sure to talk to other owners in that community to see what they have to say.
Foreign citizens who wish to buy property within designated regions of Mexico are required to obtain a “Fideicomiso” (fee-day-co-me-so), which functions as a Mexican Property Trust.
In 1994, amendments to the Constitution permitted foreigners to purchase and own real estate in Mexico located within the “restricted zone” which is all land within 60 miles of a national border and within 30 miles of the Mexican Coast, which includes all real estate in Los Cabos. This Law permitted ownership through a property trust or (“Fideicomiso”).
The way the Fideicomiso works is the Mexican Government issues a permit to a Mexican Bank of your choice, allowing the bank to act as purchaser for the property. The bank acts as the “Trustee” for the Trust and you are the “Beneficiary” of the Trust. The “Beneficiary” rights are very similar to Living Wills or Estate Trusts in the U.S.
The bank, as trustee, takes instructions only from the beneficiary of the trust (the foreign purchaser). The beneficiary has the right to use, occupy and possess the property, including the right to build on it or otherwise improve it. The beneficiary may also sell the rights and instruct the trustee to transfer title to a qualified owner.
Many people refer to the trust arrangement in Mexico as a lease agreement… this is not true. The home or property that you buy will be put into a trust with you named as the beneficiary of the trust – you are not a lessee. You have all the rights that an owner of property in the U.S. or Canada has, including the right to enjoy the property, sell the property, rent the property, improve the property, etc.
The initial term of the trust is 50 years. An investor can renew the trust for an additional period of 50 years within the last year of each 50-year period, and this process can be continued indefinitely, providing for long-term control of the asset.
Contact Jose Aguilar For all your Real Estate Law questions.