The
Mexican constitution states that foreigners may not own property
within 50km of any coast and 100km from any border. To enable
foreigners to purchase real estate in these restricted areas,
a trust deed (Fideicomiso) system was created through Mexican
Banks.
Foreigners purchasing property outside
the restricted areas may directly own rural and urban land
with some limitations on certain agricultural tracts. Mexican
Corporations (even ones owned by foreginers) may own property
in the restricted area, as long as it is commercial property.
THE BANK TRUST
DEED
As stated above, any real estate purchased
in the restricted areas require a BANK TRUST DEED or Fideicomiso
established with a Mexican Bank.
This trust deed assures the foreign
buyer of all rights and privileges of ownership. The Foreign
Investment Law, a constitutional amendment created in 1973
and amended again in 1994, allows the trust to be established
for a term of 50 years and is renewable any time during it
existence.
The Bank (trustee) holds the trust
deed for the person who purchases the property (Beneficiary).
The property is not part of the bank’s assets and cannot be
liened or attached for bank obligations.
The Beneficiary has all ownership
rights to the property and may lease, mortgage, pass to their
heirs or sell the property. The Mexican government established
the trust system as a protection for foreigners interested
in owning property in
Mexico.
By making ownership pass through the
trust process, there would be an automatic review of the transaction,
ensuring:
Valid ownership.
No outstanding debts of the property.
The Bank is required to check ownership,
insurance and liens against the property. Bank trusts may
be granted and extended in 50 year periods. If you purchase
property, the existing trust deed may be assigned or a new
50 year trust created. Trusts are renewable at any time by
a simple application. Trust fees are nominal. An annual management
fee is charged by the Trustee (bank).
Bank trusts are established by a Mexican
notario (notary) following the receipt of a permit by the
Minister of Foreign Affairs. This procedure is routine due
to the large number of foreign property owners. The forms
are standardized and the entire process is usually completed
by the notario as part of the closing procedure.
CLOSING PROCEDURE
Offer of Purchase and
Sale:
Once your offer
of purchase and sale has been accepted, the closing process
begins. (Note: Only contracts written in Spanish are legal
in
Mexico).
The Offer of Purchase and
Sale is validated with a
10% deposit, held in U.S. dollars by a US Title Company or
your notario. The funds are held during the time needed to
close. The balance is payable upon the signing of the trust
deed at the office of the Notario.
In
order to obtain the trust deed, your notario will need to
complete the following steps:
1.- Ensure the property is free of
liens by checking the Public Registry Office. This is guaranteed
by obtaining a no-lien certificate and tax statement from
the treasury. Additional checks are made for outstanding utility
bills, municipal taxes, and maintenance fees.
2.- Obtain a permit from the Minister
of Foreign Affairs to establish the trust deed.
3.- Prepare all documents for both
buyer and seller.
When the above has been completed,
the notario will present your representative with a statement
of remaining funds due and once paid, will present the legal
transfer papers for signing.
The entire closing process takes between
30 and 60 days. Ask us for a recommended notario.
CLOSING
COSTS
Closing costs are paid by the buyer
and depend on the value of your property. They include a transfer
tax (ISAI) which goes to the Mexican Government, an average
of 2% for legal notario fees, a registration fee of .05% of
the assessed value of your property, fees for the tax certificate,
title search fees and property appraisal, as well as miscellaneous
office expenses.
The seller pays all capital gains
taxes and real estate fees. Capital gains taxes are 35% of
the difference between assessed values at the time of purchase
and sale, with adjustments made for inflation and capital
improvements.
CAPITAL GAINS
TAXES
As noted above, the Seller pays capital
gains taxes. As a buyer you are eligible for an exemption
from capital gains tax if you establish residency for at least
six months previous to the sale. To establish residency you
must have an FM3 (Resident Tourist Visa), and utility and
phone bills in your name for six months. FM3 visas are issued
from Mexican Immigration. Pick up a copy of the Locals
Guide – Puerto Vallarta 2005, which tells you everything you
need to apply for the visa. They usually take 30 to 45 days
to obtain, once submitted.
THE
MEXICAN NOTARY
In
Mexico, certain attorneys are designed by the
government as Notaries, and their services are required for
the transfer of real estate. They are unbiased, official representatives
of the government and have a fiduciary responsibility to both
parties and sanction the contract from a tax and legal point
of view.
PROPERTY MAINTANANCE
If you are purchasing a condo, maintenance
and security are handled by the Condo Owners Association,
paid via monthly fees.
If you’re purchasing a single family
home, you might want to consider a property management company.
Property management services usually include:
- Maintenance and Repair.
- Pool Cleaning.
- Payment of Employees.
- Payment of Utilities.
- Monthly Accounting Statements
PROPERTY TAXES
Property taxes are very low here.
The property tax, known as "predial" is a mil rate
of .08% of the assessed value, paid annually, usually in the
1st Quarter of the calendar year. The assessed
value is determined at the time of the sale. Historically,
property taxes have always been low because they have never
been perceived as a source of revenue for the government.
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to Users
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The
Magic of Puerto Vallarta
There is no question that Puerto Vallarta is
the jewel of Mexican Resorts. It sits on the pristine
Bay of Banderas, the 7th largest bay in the world
and, as a result, sports a unique habitat for animals, sea
life, plant life, and humans.
Did
you know?
This
section of our website is devoted to timely information related
to living here in paradise. The articles are provided,
as a courtesy, by the LOCALS GUIDE – PUERTO VALLARTA, 2005.
For more informaton about the LOCALS GUIDE – PUERTO VALLARTA,
check out the web site at:
www.locals-guide.net
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