HOW TO BUY REAL ESTATE IN MEXICO

Dear International Living Reader,

During our recent exploration of Mexico (which subscribers can read about in-depth in their April and May 2003 issues of International Living),we discovered that the Latin practice of adding sentimental value into the price of property is alive and well in this country.

Establishing a baseline for property values in any particular area is practically impossible when an owner/seller factors in the number of years the land has been in the family and how many children have been conceived in the house. All deals on land for sale by owner are case-by-case affairs, and value is almost solely in the eye of the beholder.

Patience and caution are required to research any market in Mexico seriously. Mexico seems more familiar and friendly to North Americans than countries farther south, but clear title should never be taken for granted. There is a lot of ejido, or tribal/communal land on the market that is often misrepresented as land with clear title.

Sometimes ejido land can be successfully sued for and titled in court, but it's a long process that can take years and is not guaranteed to come out in the buyer's favor. This was the case with the infamous Baja development where people who had bought lots and built houses had them suddenly confiscated by the Mexican government. The developers had illegally developed ejido land, and they are now apparently in jail, but that's little consolation to the folks who lost their investments.

Do not confuse ejido land with fideicomiso. A fideicomiso is a bank trust instrument that allows non-Mexicans to invest in zones otherwise restricted to ownership by nationals (for example, areas within 62 miles of Mexico's national borders or within 30 miles of its shorelines). These zones are considered strategic to Mexico's national defense and are kept out of foreign hands.

Fideicomiso was instituted as a practical way to let foreigners invest in and use such strategic land...which, of course, includes all of Mexico's beachfront property. Under the fideicomiso law, a bank authorized by the Mexican government acts as trustee, holding the title of land in restricted zones for the beneficiary of the trust, the foreigner who invests in it. The trust provides the beneficiary the same rights of use, transfer, or assignment as an actual owner, yet the title remains with the bank. Mexican law currently states that fideicomiso trusts can last up to 50 years and may be renewable indefinitely at the beneficiary's request.

It makes many people nervous not to hold the title to their investment in their own hands, but to our knowledge the Mexican government has never nationalized fideicomiso land or restricted the rights of fideicomiso beneficiaries to do whatever they want with their land as long as it is within applicable local laws. The banks acting as fideicomiso trustees must be sanctioned by the Mexican government, but they act on behalf of the beneficiaries, not the government.

Dan Prescher and Suzan Haskins
for International Living in Mexico

P.S. As we mentioned, subscribers to the print edition of International Living can learn more about buying, living, and investing in Mexico in their April and May issues. Of particular use in these articles is our Mexican property rolodex. One of the most important contacts in this rolodex is Tuey Murdock of First American Title Insurance Company; e-mail: tmurdock@firstam.com.