Taken By the Fifth

Date: 10/09/2005

International Living Postcards-- Saturday Edition

Saturday, Sept. 10, 2005
Paris, France

"Nor shall private property be taken for public use, without just compensation."
- The Fifth Amendment

Dear International Living Reader,

Don't governments of other countries steal property at will from foreign investors?

Readers ask us this question all the time. Sure, they wonder…these tropical paradises sound great…but what guarantee do I have that the government won't decide to boot me off my land someday?

In fact, you have no guarantee. But you enjoy no such guarantee anywhere…not even, some readers are surprised to hear…the good ol' US of A.

The few incidents people refer to involving foreign investors' property being expropriated by the government of the country where they decided to buy are not cases of foreign governments ripping off gringos. They are the consequence of gringos investing after insufficient (or no) due diligence. Foreign investors buy wrong sometimes. They buy ejido land or rights of possession land or leased land. In fact, they never own the land, for you can never own rights of possession land, for example…you buy instead the right, simply, to possess it…until the rightful owner comes back (maybe, someday) to reclaim it.

Furthermore, you don't have to travel to foreign shores to risk encountering an over-empowered government locking its greedy sights on your land.

The U.S. Supreme Court recently expanded--to an outrageous level--local government's power of eminent domain.

What this means for you (to quote Justice Sandra Day O'Connor) is that "nothing is to prevent the state replacing any Motel 6 with a Ritz-Carlton, any home with a shopping mall, or any farm with a factory."

The current rise in house prices in America is the biggest bubble in history. Mortgages for more than 100% of the value of the mortgaged property are not uncommon. Investors are happy to rent for a loss, banking on capital appreciation to make up the difference. Never before in the United States have you paid so much for your home and yet suffered so little protection of your property rights.

Looking beyond U.S. borders…and liking what you see…is not unpatriotic and it is not dangerous. It's just smart.

Lief Simon
Real Estate Editor, International Living