PROPERTY OWNERSHIP IN MEXICO In 1972 the government of Mexico initiated a legal process of entitlement to protect foreigners known as the Fideicomiso. Simply put, the government issues a permit to the Federally Chartered Bank of your choice. This allows the bank to hold title to the real estate as the "Trustee" for you, the "Beneficiary". The law authorizes Mexican banking institutions as trustees to take instructions only from the beneficiary of the Fideicomiso (the foreign purchaser). The beneficiary has the right to occupy, develop, improve, mortgage, and enjoy the property. The beneficiary may also will or sell the rights and instruct the trustee to transfer title to a qualified owner. In 1993, the term of the Fideicomiso was extended to 50 years, with renewable periods. The renewal must be applied for within this 50 year term. This renewal process can be continued indefinitely, providing for long-term control of the asset. Thousands of people from countries around the world own real estate in many parts of Mexico. FACTS ABOUT MEXICO - OFFICIAL NAME: United Mexican States
- CAPITAL AND LARGEST CITY: Mexico City
- AREA: 1,978,000 sq Km ( 760,000 sq mi)
- MAJOR CITIES: Mexico City (25 mil), Guadalajara (8.5 mil) and Monterrey (5 mil)
- POPULATION (1995): Estimated 95 million
- POPULATION DENSITY: 75.2 persons per sq km
- DISTRIBUTION: 69% Urban, 31% rural
- ANNUAL GROWTH (1995): 3%
- ETHNICITY: 60% Indian-Spanish (Mestizo), 40% European descent
- RELIGION: Roman Catholic (97%)
- GOVERNMENT: Federal Democratic Republic
- DOMINANT POLITICAL PARTY: P.R.I. - Institutional Revolutionary Party
- GOVERNMENT LEADER: Ernesto Zedillo Ponce de Leon (P.R.I.)
- LEGISLATURE: National Congress
- POLITICAL SUBDIVISIONS: 31 States and 1 Federal District (Mexico City)
- TOTAL GDP (1995): $ 325.8 billion
- LABOUR DISTRIBUTION: Agriculture
- TAL GDP (1995): $ 325.8 billion
- PRINCIPAL TRADE PARTNERS: Canada, United States, European Community and Japan.
- CURRENCY: The Peso. 1 Peso = 100 centavos (cents)
- OFFICIAL LANGUAGE: Spanish
- MEASURES: Metric System
- CLIMATE: Tropical in the south, temperate in the central highlands, and dry to the north.
- TIME ZONE: Central Standard Time, with the exception of the States of Baja California, Sonora, Sinaloa and Nayarit, which follow Pacific Standard Time. As of 1996 Mexico observes daylight-saving time.
- MINIMUM WAGE (1995): $ 25.50 Pesos (about $ 3.75 US) per day.
- LOCATION: Mexico is the Southernmost country of North America, and the Northermost country of Latin America. It shares a 3,234 km border with the United Sates. It is bounded on the west by the Pacific Ocean, on the east by the Caribbean Sea and the Gulf of Mexico, and to the south by Guatemala and Belize. Mexico is the 13th largest country in the world. About 20% percent of its total area is cultivable, 52 percent is suitable for livestock and 28 percent is forested.
GENERAL INFORMATION OF MEXICO México (pronounced MEH-hee-coh by Mexicans) is a land of sharp contrasts. It is boundaried on the North by the United States of America, to the south by Guatemala and Belize, to the east by the Gulf of Mexico and to the west by the Pacific Ocean. Towering mountains alternate with broad plateaus, and scenic highlands give way to unexplored jungles in this country that lies in both the Temperate an Torrid Zones. Its 761,603 square miles (1,972,552 sq. Km) are roughly triangular in shape with two jutting peninsulas--Baja (Lower) California and the Yucatan. Its coastline along the Pacific Ocean totals more than 4,400 miles (7,100 kms), as compared to some 1,760 miels (2,830 km) along the Gulf of Mexico and the Caribbean Sea. Central Mexico is an elevated plateau dominated by high mountains, many of which are of volcanic origin. In the north this plateau drops steeply to the wide valley of the Río Grande, called the Río Bravo in Mexico. The east coast is low and flat, but in some localities, notably the state of Veracruz, the lofty mountains are so near the coast that they command the landscape. Another low, sandy shoreline characterizes the northwestern part of the country, with the plateau rising sharply behind it. Rainfall is heavy along the coast of the Gulf of Mexico, but on the northern Pacific slope and its interior region, where precipitation is scant, irrigation is needed. Peninsular Baja California, although generally arid in character, encompasses a more varied terrrain than is commonly believed. The backbone of Baja comprises several westward-sloping mountain ranges. Sierra de San Pedro dominates the north; Sierra la Giganta, the south. In the former, Picacho del Diablo attains an elevation of 10,073 feet (3,070 m), the highest point on the peninsula. Near the center is the parched Desierto Vizcaíno, but other areas are more lush, particularly the agricultural north and the tropical south. The Sierra Madre, extending northward from Nudo de Zempoaltépetl in the state of Oaxaca, is divided into two great mountain ranges: The Sierra Madre Oriental and the Sierra Madre Occidental form the eastern and western edges of the plateau region. The highest peak is the volcano Pico de Orizaba, or Citláltepetl (see-tlAHl-teh-petl), which rises 18,850 feet (5,747 m.). Popocatépetl (po-po-cah-TEH-petl) volcano is 17,883 feet (5,451 m), and Iztaccéhuatl (ees-tahk-SEE-wahtl) is 17,338 feet (5, 285 m). In the same mountain chain Nevado de Toluca rises to 15,032 feet (4,582 m) and Cofre de Perote reaches to 14,018 feet (4,273m). There are hundreds of other volcanic peaks in Mexico; in the state of Michoacán alone there are more than 80. Mexico also boasts the Western Hemisphere's youngest volcano: Boquerán, on the island of San Benedicto about 250 miles south of Baja California, was created in 1952. Other recently active volcanoes include Paricuín, now dormant, and the Chichonal. Born in the fall of 1943 when a cornfield suddenly erupted, Paricutín grew more than 1,700 feet in 10 months. As recently as April 1982 the long-dormant volcano El Chichonal spewed as much as a billion tons of ash and rock across a 6.2-square-mile area near Teapa in southern Mexico. The height of the mountains is accentuated in the interior by deep valleys and canyons, some more than 1,600 feet below the general level of the plateau.In these valleys the luxurious vegetation and climate is tropical. The plateau above is fairly level, sloping gradually up from an elevation of about 3,600 feet at the U.S. border near El Paso to between 8,000 and 9,000 feet in the states of Mexico and Puebla. Mexico City, more than 7,000 above sea level, lies in a great basin completely surrounded by mountains. Some of the many lakes throughout the country's mountain areas are summer resorts known for their beauty. With more than 6,000 miles of shoreline, Mexico has four distinct coastal regions. To the northwest, the Sea of Cortés (Gulf of California) meets desert; to the west the Pacific crashes against the foot of the Sierra Madre Mountains; to the southeast white sand and coral reefs characterize the Caribbean; and to the east the Gulf of Mexico invades the flat coastal terrain, creating many palm-lined lagoons. Mexico's river system, neither varied nor extensive, includes few rivers that are navigable for any distance. The main rivers are the Río Bravo del Norte (Río Grande), most of which lies in U.S. territory; the Coatzacoalcos, in the isthmus region; the Grijalva and the Usumacinta, whose headwaters are in the mountains of Guatemala and whose currents mix in the state of Tabasco shortly before draining into the Gulf of Mexico; the Balsas, which rises in the state of Puebla and drains into the Pacific between the states of Michoacan and Guerrero; and the Lerma-Santiago, which begins near Toluca and Mexico City and flows into the Pacific in the state of Nayarit. The climate of Mexico ranges from tropical to cool temperate. The seacoasts and the lower altitudes of the interior, with their tropical jungles and swamps, are hot. The mean annual temperature in these areas ranges from 77º to 82º F (25º to 28º C.), with maximums rising to 100º (38ºC.) and in some coastal areas to 105º (41ºC). The temperate zone is found at altitudes ranging from 3,000 to 6,000 feet (900 to 1,800 m) with mean temperatures of 63º to 70º F (17º to 21º C). From about the 7,000-foot (2,100 m) elevation upwards is the cool zone, with a mean temperature of 59º to 61º F (15º to 16ºC). In the lower cool region are the largest population centers. Rainfall occurs between the months of May and October throughout most of the country. Cloudbursts or prolonged downpours are rare. These summer rains cause little inconvenience and tend to refresh the atmosphere. It seldom rains during the rest of the year, and Mexico has more hours of annual sunshine than many other countries. Major urban centers--particularly Mexico City--can, however, be plagued with smog during the dry winter. The big cities by importance and population are:
MEXICO CITY MONTERREY, NUEVO LEON GUADALAJARA, JALISCO TIJUANA, BAJA CALIFORNIA The most important touristic zones are:
BAJA CALIFORNIA, CANCUN, ACAPULCO, IXTAPA, MAZATLAN, PUERTO VALLARTA, OAXACA, GUANAJUATO, VERACRUZ, MERIDA, YUCATAN, CUERNAVACA & SAN MIGUEL DE ALLENDE The political system is Federal Democratic as the Republic is comprised of free and sovereign states. The monetary unit is the Peso, which is a floating currency. The system of measurement is metric decimal. The religion of the most of the people who live in Mexico is Roman .Ccatholic, although there are many protestant and other sects. Typical Mexican food derives from Indian, Spanish, French and even Moorish and Chinese influences. Many dishes are hot and spicy, and even familiar foods taste distinctive when cooked with the Mexican touch. The nation's favorite festive dish is mole de guajolote. Guajolote is turkey, and mole (MOH-leh) is a rich, thick sauce made from various chiles, ground peanuts, spices, sesame seed and chocolate. More prevalent dishes are those made of either frijoles (beans) cooked in various ways or rice combined with vegetables, chicken livers, plantains or eggs. Guacamole is a salad that consists of mashed avocado seasoned with onion, hot peppers and tomato. It is often served with granada (pomegranate) and totopos (fried tortillas). Corn, is a staple of the Mexican diet. The tortilla, also common in Central America, is a thin pancake made of coarse cornmeal and appears in many guises on a Mexican menu. Tacos, tortas, pozole, quesadillas, enchiladas and others. Typical Mexican desserts are fruit pastes called ates (AH-tehs); cajetas (kah-HEH-tahs), chongos and jamoncillos, cocadas. Mexican beers are appreciated throughout the worlsd, and the domestic wines are becoming quite good. From the several varieties of the maguey (mah-GAY) plant, a cactus-like jack-of-all-trades, are produced aguamiel and pulque (central Mexico), mezcal (Oaxaca), tequila (Jalisco), comiteco (Chiapas), charanda (Michoacán), zotol (Chihuahua) and bacamora (Sonora). GENERAL INFORMATION ON MEXICO Mexico, the United Mexican States (in spanish Estados Unidos Mexicanos), is a federal republic situated in North America. It is bounded on the north by the United States; on the east by the U.S., the Gulf of Mexico, and the Caribbean Sea; on the south by Belize and Guatemala; and on the west by the Pacific Ocean. Mexican federal jurisdiction extends, in addition to Mexico proper, over a number of offshore islands. The area of the country is 1,972,547 sq km, (761,604 sq mi). The Land Most of Mexico is an immense, elevated plateau, flanked by mountain ranges that fall sharply off to narrow coastal plains in the west and east. The two mountain chains, the Sierra Madre Occidental to the west and the Sierra Madre Oriental in the east, meet in a region called La Junta in the southeast. At La Junta the two ranges form the Sierra Madre del Sur, a maze of volcanic mountains containing the highest peaks in Mexico. The Sierra Madre del Sur leads into the Isthmus of Tehuantepec, which lies between the Bay of Campeche and the Gulf of Tehuantepec. The prominent topographical feature of the country is the central plateau, a continuation of the plains of the southwestern U.S. Comprising more than half the total area of Mexico, the plateau slopes downward from the west to the east and from the south, where the elevation varies from about 1830 to 2440 m (about 6000 to 8000 ft) above sea level, to the north with an elevation of about 1070 to 1220 m (about 3500 to 4000 ft). The coastal plains are generally low, flat, and sandy, although the Pacific coast is occasionally broken by mountain spurs. Baja California, a long, narrow peninsula extending about 1225 km (some 760 mi) south from the northwestern corner of the country, is traversed by mountains that are a continuation of the coastal ranges in the U.S. state of California. The Yucatán Peninsula, which forms the southeastern tip of the country, is low and flat, averaging about 30 m (about 100 ft) in elevation. Mexico has few major rivers, and most are not navigable. The longest river is the Rio Grande (called the Río Bravo del Norte in Mexico), which extends along the Mexican-U.S. border. Other important rivers include the Pánuco, Grijalva, and Usumacinta in the south and the Conchos in the north. Mexico has few good harbors. Tampico, Veracruz Llave, and Coatzacoalcos (Puerto México) are major Gulf of Mexico ports. Pacific ports include Acapulco de Juárez, Manzanillo, Mazatlán, and Salina Cruz. Lake Chapala, in the west, is the largest inland body of water. The Valley of Mexico contains several shallow lakes. The Climate Mexico is bisected by the Tropic of Cancer; therefore, the southern half is included in the Torrid Zone. In general, climate varies with altitude. The tierra caliente (hot land) includes the low coastal plains, extending from sea level to about 914 m (about 3000 ft). Weather is extremely humid, with temperatures varying from 15.6. The rainy season lasts from May to October. Although sections of southern Mexico receive from about 990 to 3000 mm (about 39 to 118 in) of rain a year, most of Mexico lacks adequate rainfall. Rainfall averages less than 635 mm (25 in) annually in the tierra templada, about 460 mm (about 18 in) in the tierra fría, and about 254 mm (about 10 in) in the semi arid north. Natural Resources The mineral resources of Mexico are extremely rich and varied. Almost every known mineral is found, including coal, iron ore, phosphates, uranium, silver, gold, copper, lead, and zinc. Proven petroleum and natural-gas reserves are enormous, with some of the world's largest deposits located offshore, in the Bay of Campeche. Forests and woodland, which cover about 23% of the land, contain such valuable woods as mahogany, ebony, walnut, and rosewood. About 13% of the land is suitable for agriculture, but less than 10% receives enough rainfall for raising crops without irrigation. Flora and Fauna Because of the wide range of temperature, the native flora of Mexico is extremely varied. Cactus, yucca, agave, and mesquite are plentiful in the arid north. The tierra caliente is thickly grown with an immense variety of plants, which form a dense tropical jungle in some areas. The trees in this zone include valuable hardwoods, as well as coconut palms, gum trees, and almond, fig, and olive trees. On the mountain slopes grow oaks, pines, and firs. Arctic vegetation is found at the highest altitudes in Mexico. Mexican fauna also varies according to the climatic zones. Wolves and coyotes are found in the north. The forests on the mountain slopes are inhabited by ocelots, jaguars, peccaries, bears, and pumas. Fur-bearing seals are found on the coasts. A wide variety of reptiles includes turtle, iguana, rattlesnake, and lizard. Birds, including sea and game birds, are numerous. Along the coast and in the estuaries of rivers fish abound. Population The Mexican population is composed of three main groups: the people of Spanish descent, the Indians, and the people of mixed Spanish and Indian ancestry, or mestizos. Of these groups, the mestizos are by far the largest, constituting about 60% of the population. The Indians total about 30%. The society is semi-industrialized. The population of Mexico at the 1990 census (preliminary) was 81,140,922. The estimated population density in 1990 was 41 persons per sq km (107 per sq mi). About 73 percent of Mexicans lived in urban areas. Political Division Mexico consists of 32 administrative divisions -- 31 states and the Distrito Federal (federal district), which is the seat of the federal administration. 1.Aguascalientes,
2.Baja California,
3. Baja California Sur,
4.Campeche,
5.Coahuila,
6.Colima,
7.Chiapas,
8.Chihuahua,
9.Distrito Federal,
10.Durango,
11.Estado de Mexico,
12.Guanajuato,
13.Guerrero,
14.Hidalgo,
15. Jalisco,
16. Michoacán,
17. Morelos,
18. Nayarit,
19. Nuevo Leon,
20. Oaxaca,
21. Puebla,
22. Querétaro,
23. Quintana Roo,
24. San Luis Potosi,
25. Sinaloa,
26. Sonora,
27, Tabasco,
28. Tamaulipas,
29. Tlaxcala,
30. Veracruz,
31. Yucatán,
32. Zacatecas. The National Flag The meaning of the colors of the Mexican flag is:
Green: Hope. Fertility of the soil.
White: Purity.
Red: For the blood shed during Independence. According to the legend, the Aztecs in search of their promised land, were told by their god Huitzilopochtli, that when they would find the eagle devouring a serpent on a nopal cactus treee, they were to settle down in that place and found Tenochtitlan, which is today Mexico City. Principal Cities The capital and cultural center of the country is Mexico City, with a population (1980) of 9,981,000.
Other important cities are Guadalajara (2,178,000), a vital mining center;
Monterrey (1,702,000), an industrial area and railroad center;
Puebla (771,000), one of the oldest cities in the country and a pottery manufacturing center; Ciudad Juárez (680,000), a commercial and manufacturing center; Leon (596,000), the center of an agricultural area;
and Tijuana (542,000), a tourist as well as an industrial center. Religion Roman Catholicism is the faith of more than 90 percent of the people. Mexico's long tradition of official anticlericalism ended in 1991 with the passage of constitutional changes granting legal status to religious institutions and allowing parochial schools. Protestants represent a small but growing minority in Mexico. Language The prevailing and official language is Spanish, which is spoken by the great majority of the population. Indian languages number about 13, with many different dialects, the chief of which is Nahuatl (see American Indian Languages), or Aztec. Other major dialects include Maya, spoken in the Yucatán Peninsula, and Otom', common in central Mexico. Successive governments have instituted educational programs to teach Spanish to all of the Indians. Real Estate Title Protection in Mexico New Rules The North American Free Trade Agreement and the December 1993 passage of the new Foreign Investment Law in Mexico are causing U.S. developers, lenders, and investors to look more favorably at real estate investment in Mexico. The Foreign Investment Law liberalized foreign ownership in Mexican companies. It now allows direct foreign ownership of title to land in the restricted zone (50 km inland along the coast and 100 km along the border for commercial, industrial and hotel development, provided that foreign ownership is held through a Mexican corporation. Title to residential properties in the restricted zone can only be held by foreigners through a Mexican bank trust (fideicomiso). An initial bank trust term can be up to 50 years but it may be renewed upon expiration for another 50 years. With the increase in real estate activity, a not-so-foreign industry has emerged - title insurance on Mexico land. The land registration, property recordation and title certification process in Mexico is good, a system very similar to the recording process used in the United States. The majority of Mexican states have multi-recording districts and each municipality has its own recording clerk. Title Search A title search in Mexico is usually done through a Mexican law firm. Underwriting requirements include a title history examination back to 1917, or to the sovereign of the land. The attorney verifies ownership and searches for liens, encumbrances and anything else that could affect the title. After the search is completed, the Mexican law firm prepares its legal opinion on the status of title. This includes the owner of record, easements, liens, restrictions and anything else pertinent to the property ownership, including all of the documents in the chain of title. The title examination process can normally be completed within 30 days. "Ejido" claims or expansions. Iabor liens, fideicomisos, property regularization and permitted use questions can pose different issues then those typically found in the U.S. However, any title defect or "hidden risk" (secret heir, misrepresentation, etc.) that can occur in the U.S. can also occur in Mexico. The insurance underwriter examines the title opinion to determine the coverage to be issued by the title company. Commitments can be modified through endorsements and affirmative coverages with the underwriters' approval. The title company works closely with its customer and the customer's attorney to customize the policy. Arbitration in U.S. The policy is modeled after U.S. ALTA form policies. Usually the state of the insurer's domicile will govern the title insurance contract. Thus arbitration, if necessary, is handled in the U.S. under U.S. Iaw, rather than in Mexico. This may increase the comfort level of a U.S. purchaser or lender. The title commitment can be issued within 15 days of receipt of the legal opinion from Mexican counsel. The title policy will be issued immediately upon mutual agreement of the title company and the insured, simultaneously with recordation of the deed (escritura pública). There are no geographic or property-type restrictions on title policies issued on real estate in Mexico. In the majority of cases, insuring a property will cost about 1% of the value of the property. Prudent Decision Purchasing title insurance is a prudent decision. Without title insurance, if a title defect arises and the buyer suffers a financial loss it may be very difficult to recover such loss in a Mexican Court from anyone, no matter what the circumstances. During the next several years, the title insurance industry will expand its importance in Mexico as development activity increases. This expansion will assist in the creation of a flourishing Mexican mortgage industry and a secondary mortgage market system similar to those in the U.S. Investors in mortgages will require the assurance that title to the real property backing the mortgage securities is valid and insured by a financially sound title insurance company. The availability of title insurance will help to increase the flow of foreign capital into the country and thus contribute to Mexico's economic expansion. by Mitch Creekmore & Hector Barraza, Stewart Title Guaranty Company - Mexico Division, Houston. Copyright National Law Center for Inter-American Free Trade 1997 MEXICO REAL ESTATE LAW: AN OVERVIEW Gerrit M. Steenblik © 1997 Gerrit M. Steenblik Arizona State Bar Certified Specialist in Real Estate Law Jennings, Strouss & Salmon, P.L.C. Two North Central Avenue, Suite 1600 Phoenix, Arizona 85004 (602) 262-5846 Perspectives: Mexico is the world's most populous Spanish-speaking county, and its capital, Mexico City, is the world's largest urban concentration. By the year 2000 most of Mexico is expected to be open to foreign investors of all nationalities. NAFTA merely gave the U.S. and Canada a headstart. With over 6,000 miles of coastline and spectacular archaeological sites, Mexico's potential for resort and tourism development is almost unlimited. Real Property: In Mexico real property is defined to include the following: (1) the land and the improvements (including new buildings or new floors added to the mortgaged buildings): (2) plants, trees and fruits which have not yet been separated by harvest; (3) objects attached to the improvements which cannot be separated without damage to either the improvements or the object; (4) statues, paintings and other ornamental objects placed upon the property in such a way as to reveal an intention to attach them permanently; (5) objects which the owner keeps upon the property to propagate birds, fish, bees, etc.; (6) machinery and implements used directly and exclusively for the activities conducted upon the property; (7) fertilizers and seeds necessary to cultivate the property; (8) electrical apparatus and accessories which are attached to the land or improvements; (9) sources of water and aqueducts or pipelines for transporting water or other liquids or gasses on rural property; (10) animals used for breeding purposes; (11) working animals which are indispensable for the cultivation of the property; (12) improvements constructed in waterways, rivers or lakes with the intent that they remain at a fixed point; (13) rolling stock of railroads, telephone and telegraph lines and radio stations, and (14) any other in rem rights. An appraisal of the real estate, however, may not take into account the value of anything other than what appears to be immovable. The Mexican nation is deemed to be the owner of all minerals and substances which exist as deposits beneath the surface. "Finca rustica" is defined as rural property located outside of the city limits. The development of rural property may require the approval of the Federal Ministry of Agrarian Reform. "Finca urbana" is real estate located within the city limits. The Restricted Zone: The so called "restricted zone" includes all of Baja California and all other land located within 100 kilometers (about 62 miles) from Mexico's international borders or 50 kilometers (about 31 miles) from its coastline. The restricted zone constitutes approximately 40% of Mexico's land mass and much of its most valuable real estate. The Federal Zone: The federal maritime land zone ("la zona federal maritimo terrestre") consists of the first twenty meters of beach-front property on firm traversable ground. The twenty meter distance is measured from the high tide line or from the first point above that line where the slope is no more than 30 degrees. Within the federal zone, the government controls water rights and limits vehicles, certain activities and the construction of improvements that could endanger people using the beaches, interfere with free passage, or cause pollution. The federal zone is intended to remain public land and to be enjoyed by everyone; however, the Mexican constitution allows the government to grant "concessions" for use of the federal zone. Ejido Property: After the Mexican revolution in 1917 large tracts of previously privately owned land were made available to agricultural cooperatives ("ejidos"). Originally, the land was owned by the federal government and the members of the ejidos were allowed and required to use and work the land. Neither the ejido community nor an individual "ejiditario" could sell the land, lease it or use it for collateral until after Mexico adopted its new agrarian law in 1992. Therefore, a contract to purchase or lease ejido land entered into before 1992 is invalid. The new agrarian law requires the ejido communities to establish procedures whereby their members may obtain private ownership of their respective parcel ("pequeña propiedad") of the ejido property. Until parcelled off to individuals, all of the ejido property is deemed to be owned by the ejido as a legal entity. An ejido community also may transfer ownership of a portion of its property -- known as its "common use" property -- to a partnership, corporation or joint venture in which either the ejido itself or its members participate. Ejido property is not registered in the public registry. Evidence of its title will need to be obtained from, and transfers must also be registered with, the Ministry of Agriculture. Water Rights: In Mexico, water is deemed to be part of the public domain -- the property of the nation. According to Article 27 of the Mexican Constitution, waters are an integral part of the property through which they flow; thus, water rights are incorporated into the real property rights. Historically, an owner could exploit the water from his property but could not sell water rights without selling the property. Recently Mexico has vested the authority over its waters in a National Water Commission which may control the use and the cost of water. Foreign Investment in Real Property: The Mexican Constitution and the 1973 Foreign Investment Law prohibited "direct" foreign ownership of land or water within those border and coastal areas known as the restricted zone except through a title holding "fideicomiso" -- a bank trust. Until recently, a fideicomiso for restricted zone property could last not more than 30 years. After that, the trustee had to sell the property to a "qualified" buyer (a Mexican citizen or another trust). Indirect ownership through a Mexican company owned by foreign investors also was prohibited. In 1989, Mexico promulgated new regulations to allow the 30-year trust term to be renewed at least once. As a result of further reforms in 1993, the term of the trust may now extend to 50 years, and the trust may be renewed indefinitely for additional periods of up to 50 years each. The 1993 new foreign investment law also allows ownership of "non-residential" real estate within the restricted zone through a foreign-owned Mexican corporation, provided that formal approval is obtained from the Secretariat de Relationes Exteriores (SRE). Otherwise, all foreign individuals and foreign corporations as well as Mexican corporations which include any foreign investment may hold title to property within the restricted zone only "indirectly" through a bank trust arrangement known as a "fideicomiso". Notaries: A Mexican "notario" is an official who has been trained and licensed as a lawyer, and then, after passing rigorous examinations, commissioned as a public notary. A notary holds high office for life unless he is removed for cause. The notario fulfills a public function delegated by the government. Although licensed as an attorney, the notario is not in a position to provide either of the parties with legal advice. The notario drafts documents, verifies the facts therein and records the documents with the public registry. The notario's fee generally ranges between 1% and 2% of the value of the asset and the total amount which the buyer pays to the notario (including taxes) is usually approximately 6% of the price. Escrow Arrangements: Escrow arrangements as we know them generally do not exist in Mexico. It is important to place deposit money with a reputable Mexican or U.S. attorney to be held in a trust account. A bank may also perform this service but will charge a setup fee and a commission based on the amount of money held. Real Estate Loan Documents: Mexican real property security laws will govern the enforcement of remedies, and real estate litigation, including foreclosure sales, will occur in the Mexican State where the property is located. A mortgage of real property ("hipoteca") creates a security interest in all articles deemed to be real property under Mexican law, including natural accessions. Unless otherwise agreed in writing, it does not encumber industrial production from the property or rents that have already matured when payment is requested. Recourse liability is the general rule, and Mexico does not have anti-deficiency, single action, or security-first rules. Moreover, under Mexican law, there are no usury limits, and both due-on-sale clauses and prepayment penalties, if properly drafted, can be enforced. A mortgage cannot last for a period longer than 10 years unless the longer period of time is set forth in the mortgage; and a mortgage on a building alone does not include the surface area of the land. As yet there is no concept of lender liability in Mexico. Foreclosure: Mexico does not have procedures for nonjudicial foreclosures such as trustee's sales. In general, a borrower's rights under hipoteca cannot be terminated except through judicial process. A foreclosure sale takes place by public bidding. The price is based upon an expert valuation, and the lowest allowable bid is two-thirds of that appraised value. Bidders must pre-qualify by making a deposit of ten percent of the appraised value. Until the termination of the foreclosure sale, a debtor may redeem the mortgaged property by paying the debt and accrued costs. After the foreclosure sale, a debtor does not have the right of redemption. Mortgage Alternatives: Because of the risk that a buyer or borrower, through appeals, may delay the final outcome of a foreclosure process, some sellers and lenders prefer not to use a mortgage. One common security device is the "fideicomiso" where a Mexican bank acting as a trustee ("fiduciario") holds legal title and has fiduciary responsibilities to the borrower or buyer and to the lender or seller. Fideicomiso: The parties of this bank trust agreement are the seller or the lender of the property ("el fideicomitente"), the bank which acts as trustee ("el fiduciario"), and the buyer or borrower ("el fideicomisario") which is the beneficiary. The beneficiary retains the use and enjoyment of the property, and the trustor agrees not to revoke the trust so long as there is no default. The trust agreement must clearly define the procedures that will apply in the event of a default. For example, after notice and a cure period, the trustee, which still holds legal title, may either reconvey to the trustor or sell the property at auction as provided in the agreement. A fee for registration of the fideicomiso must be paid to the Ministry of Commerce. The amount will vary depending upon the duration of the trust. If foreign ownership is involved, a registration fee also must be paid to the Ministry of Foreign Investment. Both of these fees are collected by the notario. In addition, the bank will charge a fee for review and acceptance of the trust, an annual administration fee, a fee for any contracts executed by the trustee, and a fee based upon the recorded value of the property or the sales price. The purpose and effect of the fideicomiso is somewhat different when it is used for a sale of real property located in the restricted zone. In that case, the purchase price is generally paid in full, the seller does not retain a right to revoke the trust, and the conveyance to the trust is deemed to be a completed transfer. In the restricted zone, the fiduciario holds the title solely to satisfy the requirements of the Mexican Constitution. Title Insurance: At this time, title insurance is not available in Mexico for Mexican citizens or corporations, including a Mexican subsidiary of a U.S. corporation. Instead, Mexicans usually rely upon a notario's title search and the opinion of a Mexican attorney. Certain U.S. companies, however, are now beginning to offer title insurance on Mexican real estate interests to non-Mexican investors and lenders. These title policies will typically have additional coverage limitations which are not common in the U.S., and the cost also will be greater. An application fee of at least $3,000 is paid up front for the lawyer's title search and for copies of the documents which are necessary in order for the company to issue a title commitment. A survey will also be required and will cost at least $750.00. The title search and survey requirements usually mean that the turnaround time for the issuance of a commitment is considerably longer than we expect in Arizona, but obtaining such a commitment is a valuable part of a buyer's due diligence. Under these policies of title insurance, the obligations of the title insurer will be decided under U.S. law and in the United States. Otherwise, the only defense or recourse against title defects is to litigate in Mexico. The policy premium is due at the closing. For an owner's policy, the premium cost is approximately $8,750 per million dollars of coverage. For an additional lender's policy on the same transaction, the premium will be approximately $300.00 per million dollars of coverage. By comparison, in Phoenix the premium for a $1 million Owner's ALTA policy is between $2,800 and $4,000. Title Searches and Title Documents: Title to real property is evidenced by an "escritura publica" which must be signed before a notario and recorded in the local public registry-- "el registro publico de la propriedad". Therefore, except in the case of ejido property or federal zone property, the public record of a parcel of real estate can be obtained from the local public registry. An official stamp attached to the last page of a document assures the parties that the instrument has been duly recorded and also provides the necessary filing information. Title documents will include the chain of title, the meets and bounds description of the property (including, in some cases, the name of the owner of or the nature of abutting properties) and the public registry filing information. In general, the public registry will not provide information regarding concessions that have been granted in connection with the land. When the title search is done by an attorney, it usually reflects at least the three prior owners. In many instances, it may be worthwhile to trace the chain of title back further. Real Estate Documents: In general, contracts relating to real estate (including sales, leases, mortgages, etc.) must be in writing, and the document must be in the form of a public instrument. A preliminary "promissory agreement" ("contrato de promesa") is commonly used as the basic document for a purchase and sale. In the promissory agreement the parties establish their respective conditions, and, upon satisfaction of those conditions, agree to execute a final public agreement -- either a sales agreement, a real estate trust, or an assignment of the beneficial rights in a real estate trust. The promissory agreement, which is a private contract between the parties, should never be used as the final agreement, although by signing it and exchanging consideration the parties do create a binding obligation. Subdivision Development: A subdivision of land for development purposes is referred to as a "fraccionamiento". A developer must obtain governmental approval for a "fraccionamiento" and, by obtaining such approval, the developer becomes obligated to install the offsite improvements (grading, drainage, water, electricity, streets, etc.). Co-Ownership. If property to be sold is held in co-ownership, the "certificate of no encumbrances" which is obtained from the public registry should so indicate. One co-owner may not sell or encumber the property or even his undivided interest in the property without the consent of all of the other co-owners. Moreover, a co-owner of property is required to notify all other co-owners of the potential sale through a notario or the courts and to allow each to exercise a right of first refusal. The co-owner with the greatest share in the property has the first preference; if any other co-owners have equal percentages, their order of preferences is determined by lot unless it has been agreed otherwise in their contract. Easements: Under Mexican law, easements ("servidumbres") are expressed in terms of servient properties and dominant properties. A variety of easement rights are created by law, including the right of an adjoining owner to access to a public roadway over adjoining lands, the right of the owner of rural property to transport livestock through neighboring properties to watering places, the right of an owner to use adjoining land in order to harvest fruit from trees overhanging a boundary, the right of an owner to move building materials through one building to another in order to perform repairs, and the right to establish telephonic communication or to conduct electric power across the property of another and to maintain those facilities. These easement rights are not reflected in the public registry. Possession of Land: Mexican law creates a presumption that the person in possession of property is entitled to continue in possession and has all related ownership rights. This presumption is designed to prevent a breach of the peace. Before acquiring any real estate, it is important to verify that no one is in possession of the property. Adverse Possession: In Mexico, the concept of adverse possession is referred to as "prescription". The possession must be under claim of ownership, continuous, quiet and public. Acquisition by prescription occurs when real property is possessed for five years either in good faith or by evidence of possession recorded in a public registry. In the case of bad faith, the period is ten years. Prescription does not operate as to either ejido or federal zone lands, and does not run between husband and wife, between parents and children, between or among co-owners, between an incapacitated person and his or her guardian, or against soldiers in active service in time of war. Time-Share Properties: Time-share contracts are required to be registered pursuant to federal standards known as Normas Oficiales Mexicanas, which are enforceable throughout Mexico. A time-share purchase, is not considered to be an investment in real estate, and even if the property is located within the restricted zone, a fideicomiso is not required. Condominiums: Various states of Mexico have adopted local statutes to govern condominiums and these may vary significantly from one state to another. A condominium owner ("condomino") is the individual or legal entity who owns and is entitled to the exclusive right to possession of the premises and has a co-ownership right to the common areas. The condominium owner's interest in the common areas is proportional to the respective original values of the units as determined in the condominium's title documents. Common walls and floors that separate only particular individual units are deemed to be owned by the contiguous owners. When a condominium development includes staircases, courtyards or gardens, the related maintenance expenses may be allocated in the condominium documents primarily to those benefitted. BASIC GUIDE FOR
FOREIGN INVESTORS IN MEXICO
IMMIGRATION ISSUES To facilitate the entry of foreign investors, officials, professionals and/or technicians involved in any financial or economic activity in Mexico, authorities in Mexican Consulates abroad are empowered to issue the corresponding visas. Citizens or legal permanent residents of Canada and the United States may remain in Mexico for a maximum period of 30 days by obtaining the FMN immigration form, free of charge. This form is extended to "business visitors", "directors", "technicians" and "transferred personnel". The characteristics and requirements of this visa are as follows: A. Business Visitors To negotiate or sign business contracts, carry on performance checks, look for investment alternatives, or otherwise invest in the country directly. B. Directors To attend meetings of the board of directors of companies legally incorporated in Mexico as appointed by the stockholders' meeting. C. Technicians To provide specialized services previously agreed upon or contemplated by technology transfer, patent or trade mark agreements, machinery and equipment purchase contracts, technical training or any other contracts related to the production process in a company incorporated in Mexico. D. Transferred Personnel Foreigners hired by any parent company, subsidiary or affiliate aiming to perform managerial, executive or consulting duties in a Mexican company or who provide specialized knowledge on the activities of such company. The requirements for the FMN Form are: - A letter in Spanish from the parent company stating the reason for the staff to be transferred into Mexico.
- Evidence of the appointment as director.
- A letter of invitation issued by the company, professional chamber or public agency stating the reason for the person to enter into Mexico.
- Valid Passport.
The FMN Form may also be obtained directly from immigration personnel at any port of entry in Mexico, upon presentation of these documents. Before the 30 day term is over, visitors who require a longer stay may apply for an FM3 non-immigrant visitor form, issued by the National Immigration Institute. The FM3 form authorizes the performance of uncompensated activities in the country for up to one year, to be renewed subject to payment of the corresponding duties. The Secrets of Buying Mexican Real Estate There are so many unusual stories circulating about buying real estate in Mexico that we want to begin by setting the record straight. This is the first in a series of articles on how to buy real estate in Mexico by our editor and publisher, Michael Foor, MA, J.D., LLM. A Mexican by birth or naturalization can freely buy real estate anywhere in Mexico. Now, everyone else can also buy real estate if the liberalized laws of Mexico are followed. Border and Coastal Zone Foreigners can buy property directly in Mexico's interior. However, the Mexican Constitution of 1917 designated the area within 100 kilometers (62 miles) of Mexico's borders and within 50 kilometers (31 miles) of the coastline as off limits to direct real estate ownership by foreigners. For many years this area was known as the Prohibited Zone. Because of recent beneficial legislation the area is now referred to as the Restricted Zone. Although direct ownership of real estate by foreigners in the Restricted Zone is not permitted even now, a foreigner can purchase the right to hold, occupy, use, improve, develop, rent and sell real estate by purchasing a beneficial interest in a bank trust which holds the legal title to the property. Technically it may not be outright ownership of the dirt under their feet, but it sure feels like it to the thousands of Canadians and other North Americans living in their own homes along Mexico's pristine beaches. Bank Trust Ownership With bank trust ownership, the bank holds legal title to the real estate and acts as trustee while the beneficial interest in the trust is owned by the foreign individual. The trustee bank is obligated to deal with the property only for the benefit of the beneficiary. The bank takes its instructions from the beneficiary owner. The beneficiary may be a foreign individual or other foreign legal person such as a corporation. This bank trustee arrangement is very similar to the way a trust works in the U.S.A. and Canada. The trust exists strictly for the benefit of the beneficiary who is for all practical purposes the owner of the underlying property. The owner' s beneficial interest in the property may be passed on by will or inheritance, it can be used as collateral for a loan and the property can be freely enjoyed, rented or sold all as determined by the owner beneficiary. Direct Ownership The Foreign Investment Law of 1993 went even further and authorized the out- right ownership of nonresidential real estate in the Restricted Zone by a Mexican corporation which can be 100% foreign owned. This includes real estate purchased for development; which will be sold off to foreigners for residential use. The corporation is considered Mexican and therefore the foreign shareholders can own the land directly through this Mexican person. Notary Public A Notary is needed to close any sale. In Mexico, a Notary Public is a quasi-governmental official who reviews all documents of importance with respect to the sale of real estate. A Notary Public in the United States typically has minimal training and responsibility. In the U.S.A, a notary typically attests to the fact that a person has signed a document. The training, function and responsibility of Notary Public in Mexico is completely different. In Mexico, a Notary Public is appointed by the governor of a Mexican state for life. In order to seek appointment, the person must be a Mexico licensed attorney. This involves attending law school in Mexico, obtaining a law degree, passing an exam and being admitted to the bar in Mexico. To hope for appointment, the prospective Notary Public must then work as an apprentice for several additional years with a Notary Public. A notary does not act as an escrow service. The Notary Public' s job is to see that certain formalities have taken place. Although a notary is always an attorney, it is not the notary's job to provide any party with legal advice. Any buyer or seller who wants legal advice should hire a separate lawyer licensed in Mexico. Public Registry In Mexico, deeds, usually known as public instruments, can be researched at the local Public Registry of Property; which is open to the public. There is a Public Registry of Property in most cities and towns in Mexico of any significant size. The Public Registry of Property is a government office in which documents are taken for registration so that third parties may research the ownership of land titles and liens on such titles. A Public Instrument must be finalized and signed by a Notary Public. The Public Instrument will typically list the parties involved in the transaction including the notary, seller, buyer, and the trustee bank It will also identify the property. Once the Public Instrument is finalized and signed by the notary, by the seller, by the bank as trustee (if a bank trust is involved) and by the buyer (who will also be the trust beneficiary if a trust is used), the purchase price changes hands and the transaction is considered closed. Title Insurance Although title insurance has not been utilized in Mexico to a great extent, it is now available for purchase by foreigners through title insurance companies in the U.S.A. There are many U.S.A. companies that provide title insurance on real estate transfers; which occur in the U.S.A. Now at least three U.S.A. title insurance companies are providing title insurance services for Mexican real estate transactions. In the U.S.A. virtually all real estate purchasers and lenders are protected by title insurance. As more foreign lenders begin funding loans on sales in Mexico, more title insurance policies will be issued on Mexican real estate transactions. Purchasing title insurance is a good investment when buying real estate anywhere. To the extent of the policy's terms, the buyer is protected from unforeseen problems with the title to the property. Knowledgeable Advisors The acquisition of real estate in Mexico can be straightforward and simple, but common sense and the laws of Mexico must be considered if a buyer wishes to obtain good title and avoid problems. Mexico has a well developed legal system and a buyer should approach it with care and respect. A good real estate agent with a lengthy track record of success in Mexico and an excellent reputation is your best friend in buying property. The safest approach is to also obtain the advice of a Mexico licensed attorney regarding legal and tax issues. Next time, we will explore some of the myths regarding real estate in Mexico. Copyright National Law Center for Inter-American Free Trade 1997 |