¿Why it’s important to have legal counseling?

In order to acquire property in Baja California, Mexico, it’s important to be represented by experienced and trustworthy:

Real Estate Professional
Licensed Real Estate Attorney

No matter the use of your property in Baja, the attorney should be involved, reviewing its legal status.

In summary, the job of the Attorney consists in the following:

• Analyzes the legal status of the property (review of title and that the seller has the right to sell property)
• Reviews the legal & non legal documents
• Prepares the written document of the official offer to the seller & protects the buyers interests in the terms & conditions
• Prepares the promissory agreement of a trust (contrato de promesa de fideicomiso); detailing the main terms of the acquisition; including deposit, price & payment plans
• Tracks down all the paperwork to complete the trust contract (documentation of the buyer and the trust permit from the Ministery of Foreign Affairs)
• Requests the seller the certificate of no encumbrances and of no tax liability and property appraisal
• Works with the Notary and the Bank to have the trust documents drafted and finalized, closing the acquisition with the transfer of the title of the property to the trust
• It is very important for the parties involved to pay attention to the details of the operation.

For example, in many cases, the seller offers a promissory agreement to sell.

Which is wrong. A foreign person cannot buy property in a range of 50 km near the ocean.

Never the less, keep in mind that an attorney can handle the entire purchase process—you don’t need to be in the country for every step.

By granting the lawyer a power of attorney, they can assist you through each stage of the sale.

Right up to the signing of the closing deed on your behalf.

Baja Real Estate

In order to acquire property in northern and southern Baja California, it’s important to take into account certain restrictions.

Therefore, in Baja Real Estate, the restricted zone according to Article 27 of the Mexican Constitution:

…is all land located within 100 kilometers of any national border and within 50 kilometers of any ocean…

Consecuently, no foreigner will be allowed to acquire direct title to land within the restricted zone in Baja Real Estate.

However, Mexico’s Foreign Investment Law allows foreigners to acquire indirect title to land in the restricted zone by one of two methods:

1. Through a Mexican corporation

2. Through a bank trust (fideicomiso)

Acquiring property through a trust

irst of all, it is important to state that a trust (fideicomiso) in Mexico is a three-party contract.

In the U.S. a trust is a English common law creation, under which one person holds legal title to property for the benefit of another person.

In Mexico, the seller (settlor/fideicomitente) irrevocably transfers to a bank (trustee/fiduciario) real property, so that a third party (beneficiary/fideicomisario) can use and enjoy such real property.

The transfer of the real property from the seller to the bank is a definite and irrevocable transfer of title.

Also, under Mexican law only an authorized Mexican banking institution can be a trustee.

The bank acquires title to the real property and is obligated to allow the beneficiary to use and enjoy the property as,he sees fit (as long as the manner in which he or she does so is lawful).

If the beneficiaries wish to rent the property to third parties they can do so by obtaining the necessary authorizations.

Beneficiaries also have the right to sell the property when they please and to receive the benefits produced by such sale.

The bank cannot encumber or sell the property without the express written consent of the beneficiary.

Investing in Mexico

The fact that Mexico’s economic growth did not reach the expected levels this year has not affected its investing growth.

Despite several factors (eg, corruption and low oil prices), Mexico’s real estate investing climate is perceived favourable.

There are structures that are typically used and have tax advantages.

In the U.S. for tax implications there are simple & complex trusts.

The feature that singles out Mexico is the common use of a trust agreements for the development of real estate projects.

Trust agreements may act as transparent tax entities or tax contributors, because they don’t acculumate income.

Particular advantages and disadvantages of a given structure depend mainly on:

• the type of real estate being developed;
• whether the resulting project is destined for the sale or lease of real estate;
• access to bank financing
• the particular tax regime of the investors (whether they are Mexican individuals or entities or foreign individuals or entities

from: www.abogadorafaeltoledo.com