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HOW
FOREIGNERS CAN PURCHASE PROPERTY IN PUERTO
PEÑASCO, MEXICO.
In Puerto Peñasco,
Sonora. Mexico, foreigners can purchase Real
Estate without any complications. In many
aspects buying a home in Mexico is just like
buying a home in the United States. We do have
to remember that Mexico is a country governed by
civil law and the manner in which you will
purchase property is different from which you
are accustomed to in the United States.
HISTORY
By law, in 1917
the Mexican Constititution in it’s article 27
specified that “In a zone of 100 kilometers
along the border or 50 kilometers along the
coast, a foreigner cannot acquire the direct
ownership of the land” these area is known as
the restricted zone. But in 1993, thanks to the
North America Free Trade Agreement (NAFTA) and a
Mexican government with a full open mind about
bringing foreign investments to keep activated a
fast growing economy, the Congress decide that
the Mexican foreign investment law should
allowed foreigner to own direct Title to
property for Commercial purposes but still,
restricted direct Title ownership for
residential purposes in a manner consistent with
constitutional provisions.
The “Fideicomiso”
or Trust (equivalent to an American beneficial
Trust) can be constitute by any foreigner or
Mexican citizen through a Mexican Bank in order
to purchase Real Estate anywhere in Mexico,
including the restricted zone. The Bank as a
matter of normal course, obtains the permit from
the Minister of Foreign Affairs to acquire the
chosen property in trust. This trust can be
established for 50 years and automatically
renewed every 50 years.
TYPES OF
OWNERSHIP
According to the
Constitution of 1917 of the Mexican United
States, there are three types of Ownership in
Mexico.
1. PRIVATE
PROPERTY.- This is when a property is assigned
to a person, either individual or corporation
(paragraph 1, Article 27 of the Constitution).
2. PUBLIC
PROPERTY.- It is attributed to the State, since
it is an entity with its own legal capacity and
which is exercised through its different bodies
and authorities, as regards the Federal, State
and Local governments.
3. SOCIAL
PROPERTY.- It is the property basically
attributed to agrarian communities, as legal
persons of social rights, in case of the EJIDOS,
population nuclei with community population and
land located within the different colonization
districts. For example, the Law for Agrarian
Reform, the Law of Human Settlements, the
General Law of the National Property, that
refers to the Federal maritime-land zone, the
Law of Foreign Investments and the Organic Law
of Federal Public Administration, there being
the possibility that presently, this societal
type, which in the case of Sonora comprises a
large area of the land located on beaches, that
tends to be used for tourist purposes, may be
converted into private property, once all the
requirements set for the Agrarian Law and its
regulations in force, have been satisfied. It is
important to establish that within or without
the restricted area, foreign nationals shall
require the Department of Foreign Affairs to
authorize the corresponding acquisition, whether
through the execution of a waiver agreement or
the acquisition of Real Estate outside the
restricted area, or the issuance of a permit to
acquire trust rights on Real Estate located
within the restricted zone. These documents are
important, specially in the case of the trust
because they shall be the bases of the
beneficiary rights and obligations, including
the way how the Real Estate residential purposes
shall be used, as well as the possibilities to
lease, improve and eventually transfer it,
hence, the importance of this permit to which we
refer. The Constitution and State laws in the
State of Sonora are very important. The Civil
Code specifically states that foreign nationals
shall be subject to the state laws, specially in
the case of Real Estate. An essential
requirement for foreign nationals to acquire
property rights for said property to be
considered “private property”.
PROPERTY
OWNERSHIP IN MEXICO
• Non-Restricted
zone: Foreigners may directly own real property
located in the interior of Mexico
• Restricted zone:
Foreigners may not directly own real property
located in the restricted zone. Instead,
foreigners may obtain renewable fifty-year
beneficial rights to residential property in the
restricted zone through a Mexican Bank trust (Fideicomiso).
The restricted Zone comprises all property
within 50 kilometers (31 miles) from the coast
and 100 kilometers (62 miles) from the
international land borders. (Area will soon
include extended coverage).
• Commercial: If
the property will be used strictly for
commercial purposes, foreigners may incorporate
a Mexican business entity, which can obtain fee
simple title to the commercial property.
GENERAL
EXPLANATION OF CLOSING COSTS FOR A REAL ESTATE
TRANSACTION
Bank Trust - the
banks charge a fee depending upon the area in
which you purchase. For example, if you purchase
in Cholla Bay, you will have a flat rate because
that particular subdivision is titled in a
master trust. If you were to purchase in other
areas such as Diamond Village or a condo, you
may pay 3 - 5% of the sales price (the banks
rates fluctuate quarterly) for your trust alone
because the trust must first be initiated.
Notario Fees - A
notario is an attorney with special
qualifications and appointed by the government
to a specific area. A notario is the only person
legally able to register real estate
transactions. Any notario may register your
property. However, is it best to use a notario
experienced in your specific purchase location.
The notario's fees are usually based upon sales
price or possibly the location of the purchase
depending upon the amount of work that is
involved in the transaction. For example, in
Cholla Bay, a lot purchase in generally under
$100,000 so the notario fee will probably not
exceed $500. Anything over $100,000 will be
estimated at 0.5% of the sales price (this rate
quoted by Francisco Manzo Talyor, Notario 26 of
Sonoyta in September 2004).
Public Registry
Fee - The amount may fluctuate but is currently
0.7% of the sales price. (Puerto Penasco,
Sonora, Mexico 2004)
Transfer Tax -
This amount is currently 2% of the sales price.
Appraisal - The
appraisal fee is estimated at $350 because that
is the average price for a home appraisal. If
you purchase a lot, the fee may be lower but it
also depends upon whom you hire to do the
appraisal. An appraisal is time sensitive (only
valid for 6 months). This should be obtained
after all you paperwork has been approved by the
notario you are working with.
Misc. Fees - There
are several other small fees that may be
included depending upon the type of sale, but
they are usually minimal if any.
Capital Gains -
There is a possibility of a 10% capital gain "to
the buyer" if the seller's appraisal is higher
than the value. The payment may be negotiated
with your seller if this is a concern.
Title Insurance -
In Mexico, title insurance is not required but
highly valuable. This insures your investment in
case of fraud. |
