Key of NAFTA. Gives US investors greater trust in Mexico.
Title Insurance increases confidence.
Mortgage financing and in some cases construction financing and equity development.
Searching for higher cap rates in Mexico.
Political Front. Election of Calderon, who will serve for 6 years has also given high optimism.
Real estate – many of the rules find their origin in the Constitution of 1917. More detailed rules can be found in the Mexican Foreign Investment Law and its Regulations. On line in English.
The Restricted Zone: 100 kilometers (about 62 miles) from Mexico’s international borders and 50 kilometers (about 31 miles) from its coastline.
a) residential – use a trust; and
b) commercial – use a Mexican company. Regulations to FIL. High Penalty.
Ejido Property: The Agrarian Law of 1992 permitted the privatization of these communal farms.
No 99 years leases. Buying of possession certificates.
Privatization process, vote of 75% of ejiditarios. Hard to do. Then title is issued. Review this in the Agrarian Registry.
The Federal Zone: The federal maritime land zone consists of the first twenty meters of beach-front property on firm traversable ground. The twenty meter distance is measured from the high tide.
Free use and access to beaches.
You can obtain beach concessions. Important to ask for in due diligence.
2000 meter rule when property borders the beach area.
Water Rights: In Baja California common issue is dry river beds or washes (“arroyos”). (“Ley de Aguas Nacionales”).
Depending on size of the river bed, federal property can be 5 to 10 meters to each side. Important to review in the due diligence process.
Environmental Impact Study
In order to make a development, studies to be made with the Ministry of the Environment – rules can be found in Ley Gral de Equilibrio Ecologico y la Proteccion al Ambiente.
Also state rules can apply.
Be sure to have enough time in due diligence.
Trust: Fideicomiso. The 1993 new foreign investment law requires ownership of residential property through a trust, which requires a permit from the Ministry of Foreign Affairs.
Again, some recommend Mexican company. Also loses the chance of the income tax exemption on homes. Current corporate tax rate at 28%.
Asset Tax from 1.8% to 1.25%. Start Yr 4. Non-deductible. Amparo and lack of jurisprudence.
Notaries: Very different from US. State law prohibits use of “notario publico” in
Texas to prevent confusion. Article at pikofflaw.com.
Expensive Closing. Budget around 5% for closing costs. Remember 2% of which is the transfer tax. Generally low property taxes.
Promise to Purchase Agreement. Down payment – escrow?
Closing before Mexican notary public.
Presales are common and pose a challenge. Builder uses your money to build your home. Hard to find construction financing. Delivery vs. Title issues and penalties.
Why High Mortgage Rates? Challenge for lenders:
a) Labor Union Priority; and
b) Tax liens.
Usual documents in closing:
a) certificate of no liens;
b) certificate of no debt;
c) proof of water paid;
d) preventive notice from notary public. Careful these can expire. Houston case; and
e) Perhaps power of attorney – apostille stamp from Secretary of State in Austin.
Corporate flat at 28%.
Sale of residence by foreigner is 25% of gross or one third of profits, you choose.
Declare full price in promise to purchase public deed.