October 26, 2015

Puerto Peñasco Mexico / Rocky Point

 

 

Ownership of property in the interior of Mexico

Americans and other foreigners in Mexico may obtain direct ownership of property in the interior of Mexico. However, under the Political Constitution of the Mexican United States, foreigners cannot own property outright within the restricted zone. Instead, a real estate trust must be set up to hold title for the foreigner. Since foreigners are not able to enter into contracts in buy real estate, they must have a bank act on their behalf, much as a trust is used to hold property for minors because they also cannot contract. The following is a brief outline of the law regarding such trust, known as “fideicomisos”, but potential buyers should always get advice and have all real estate transactions overview by a licensed Mexican attorney.

Normally, there are three to four players involved in any real estate transaction in the restricted zone:

  • A real estate company
  • The buyer’s lawyer
  • A bank
  • A public notary

All four are helpful in their respective areas in assisting with real estate transactions. Transactions outside of the restricted zone do not involve a bank since it is not necessary to establish a real estate trust in those areas. Otherwise the transactions are much the same.

Because of the similarities of real estate transactions in general, it is easy to assume that the basic terms and principles which are familiar in the United States also hold true in Mexico. This assumption becomes easier to make when United States real estate terminology is adopted for transactions in Mexico. Much of the paperwork is similar, if not exactly the same, as that used in the US. Although, there are many aspects of Mexican real estate transactions that are identical to procedures carried out in the United States, there are many aspects that are completely different. As a rule, a foreigner should assume nothing.

Mexican real estate transactions are not carried out in the same manner as United States real estate transactions. The buyer must retain professionals to assist in the transaction. Mexico has yet to regulate real estate transactions.

There are good reasons why the real estate industry in the United States is highly regulated. Until the real estate industry is regulated in Mexico, there will always be some real estate companies who prefer that buyers know as little as possible about real estate transactions. After all, a buyer cannot ask questions if he does not have any knowledge of the laws.

A Mexican attorney should be involved to draw up contracts and to review the conditions and terms of sale. Additionally, an attorney can do a title search and point out any problems or alternatives a buyer may have. The buyer should always have his or her own attorney rather than using the attorney of the seller or some attorney used by a real estate company free of charge. As the old saying goes, you get what you pay for, and usually if someone’s services are offered free of charge you are probably paying for them in some other way. Legally, only a licensed Mexican attorney should provide advice on the law. If an attorney is licensed in Mexico he should be able to produce a “cédula profesional.” This document is a registered license to practice law in Mexico and includes a photo of the attorney and his signature. To be sure that an attorney is licensed in Mexico, a foreign buyer should ask to see the attorney’s license, or have the attorney’s license number included in a retainer agreement before employing any services. I have this document and also I have a license from Supreme Court of Arizona as a “foreign legal consultant”. That means I am a person admitted to practice Mexican law in USA and am in good standing as an attorney or counselor at law or the equivalent in Mexico, and has been issued a certificate of registration as a foreign legal consultant.

American attorneys are not licensed to practice law in Mexico and should not give advice on Mexican Law.


THE RESTRICTED ZONE AND “FIDEICOMISOS”

The Political Constitution of the Mexican United States declares that the Mexican nation has original ownership to all land and water in Mexico, as well as minerals, salts, ore deposits, natural gas and oil; but that such ownership may be assigned to individuals.

The Political Constitution of the Mexican United States prohibits direct ownership of real estate by foreigners in what has come to be known as the “restricted zone.” The restricted zone encompasses all land located within 100 kilometers (about 62 miles) of any Mexican border, and within 50 kilometers (about 31 miles) of any Mexican coastline. However, in order to permit foreign investment in these areas, the Mexican government created the “fideicomiso,” (FEE-DAY-E-CO-ME-SO) which is, roughly translated, a real estate trust. Essentially, this type of trust is similar to trusts set up in the United States, but a Mexican bank must be designated as the trustee and, as such, has title to the property and is the owner of record. The Mexican Government created the “fideicomiso” to reconcile the problems involved in developing the restricted zone and to attract foreign capital. This enabled foreigners, as beneficiaries of the trusts, to enjoy unrestricted use of land located in the restricted zone without violating the law.

A “fideicomiso” is a trust agreement created for the benefit of a foreign buyer, executed between a Mexican bank and the seller of property in the restricted zone. Foreign buyers cannot own real estate in the restricted zone due to Constitutional restrictions. The bank acts on behalf of the foreign buyer, taking title to real property. The bank, as trustee, buys the property for the foreigner, and then has a fiduciary obligation to follow instructions given by the foreigner who is the trust beneficiary. The trust beneficiary retains and enjoys all the rights of ownership while the bank holds title to the property. The foreigner is entitled to use, enjoy, and even sell the property that is held in trust at its market value to any eligible buyer.

In order to allow foreigners to enter into the agreement, Mexico requires all foreigners to apply for and obtain a permit from the Ministry of Foreign Affairs prior to contracting to acquire real estate in Mexico. This is currently done by the trustee/bank at the time a real estate trust is set-up.

Given the changes made for 1997 in the foreign investment Law, and the fact that a buyer can now apply for and obtain a trust permit in a matter of days, it is always better to secure the trust permit from the Ministry of Foreign Affairs before entering into any contract.

The bank, as trustee, must get a permit from the Ministry of Foreign Affairs to establish a real estate trust and acquire rights on real property located within the restricted zone. The purpose of the trust is to allow the trust’s beneficiary the use and exploitation of the property without constituting real property rights. The beneficiaries of the trust (fideicomisarios) may be:

  • Mexican corporations with foreign investment
  • Foreign individuals or legal entities

The law defines “use” and “exploitation” as the right to use or possess the property, including its fruits, products, or any revenue that results from its operation and exploitation by third parties or from the bank/trustee.

A real estate trust is not a lease. The beneficiary can instruct the bank to sell or lease the property at any time. The beneficiary can develop and use the property to his liking and benefit, within the provisions of the law. Generally, the law allows most activities engaged in by foreigners.

According to a the Mexican jurisprudence, you must have obtained the Mexican constitutional agreement or permission to that fraction I of article 27 of the Political Constitution of the Mexican United States refers, before the Secretariat of Foreigner Relations to be able to acquire real estate, at the time of that his contract goes to formalize before notary public.

The Fraction I of article 27 of the Political Constitution of the Mexican United States establishes that the Mexican State can grant the dominion to foreigners on earth, waters and their agreements, as long as they agree before the Secretariat of Foreigners Relations upon considering itself like national respect to such goods; and they are committed not to invoke, regarding these, the protection of its governments, because on the contrary they will lose them in benefit of the nation. However, of analysis of arranged in this rule constitutional, in relation to articles 10-A and 39 of Law of Investment Foreign, as well as 66 and 67 Law General of Population, comes off that foreigners must show they have obtained agreement or permission to that article refers mentioned constitutional before the Secretariat of Foreigners Relations to be able to acquire real estate, at the time of that his contract goes to formalize before public notary, because these civil employees are the unique ones who have the obligation to make sure of the migratory quality of those, as well as to relate and to insert in the appendices or registries, the corresponding authorizations in order to formalize the act legal which according to the law it requires, which is translated as well, in that it is not needed the corresponding authorization for the celebration of the deprived contract of transaction, but until the moment for formalizing it by means of the public writing that to the effect is granted before the public notary.

Registry No 187797, Location: Ninth Time, Source: Judicial weekly magazine of the Federation and its Gazette, XV, February of 2002, Page: 27, Thesis: 1a. XI/2002, Matter (s): Constitutionalist, Administrative.


Litigation issues about property located in Puerto Peñasco, (Rocky Point) Sonora, Mexico.

 

The article 104, Section I of the Political Constitution of the Mexican United States, follows that order commercial disputes arising on the implementation and enforcement of federal laws which only affect private interests, the jurisdiction is concurrent and therefore can hear the trial courts both federal and local law enforcement the common, the choice of the actor. Moreover, articles 1092 and 1093, the Commercial Code, we find that in commercial matters of the court shall have jurisdiction to litigants who have been referred expressly or impliedly (express submission clause) and that there is express submission when stakeholders clearly and definitely to waive immunity granted by law.

In most of the legal issues in Rocky Point about real estate matter, whether in contract commercial parties did not specify the jurisdiction of the court to which competition for adoption and the jurisdiction is a concurrent, for litigating proposes you have safe your right to attend the judicial authority between the federal or local court at your election.

However, when a commercial contract provides that the parties agree to submit to the jurisdiction of the courts of the city where he was held, but fail to point to the jurisdiction of such courts, in this case refers to an issue of territorial jurisdiction that defines the character of the jurisdiction of the courts, even though the place which hosted the meeting of minds only resident judge of the common order, and noted that if the jurisdiction of the court whose jurisdiction is subject are equally federal courts have jurisdiction of the local’s, as both have jurisdiction over that territory.

Therefore, if a commercial contract only says that the parties submit to the jurisdiction of the court at a given location without specifying its jurisdiction, must be safeguarded the right of the actor to go to federal or local court of your choice. Registration No. 164576, Location: Ninth Period, Instance: First Board, Source: Judicial Weekly of the Federation and its Gazette, XXXI, May 2010, Page: 536, Thesis: 1a. / J. 17/2010.

In order to provide you the most highly standards in the performance from the judicial system in Mexico, if you must sue a company or individual as the party into your contract, to accomplish, recover or avoid in your favor your investment in the Mexican real estate field, we strongly recommend starting the Mexican trial into a federal court. If your contract is about property in Puerto Peñasco, (Rocky Point), Nogales, Sonora Mexico could be the federal place where you would sue to the opposite party.