By Enrique Benet Gregg
Property Overview
The Mexican real estate industry is expanding, with new developments including commercial and office space. These complexes center people, minimizing distances to employment and facilities, and increasing developer earnings and prospects. Also, the hospitality sector has developed significantly in recent years and is likely to continue growing.
Because states regulate real estate and real estate transactions, the laws and legal frameworks that apply to real estate transactions vary by place. In Mexico, legal titles to and levies on real estate are maintained by a public land registration system (Registro de la Propiedad), which varies by locality.
Certain land rights agreements linked to oil and gas developments must conform with the Hydrocarbons Law (Ley de Hidrocarburos).
The Mexican real estate industry has evolved to take advantage of the most tax effective solutions. The primary players in the real estate market are pension funds (national and international) and investment funds (national and international, public and private).
Anyone may buy property in Mexico, personally or via investment entities. There are two forms of property: private and ejido (community).
Real estate investment types
An asset purchase (directly purchasing the real estate) or a share deal (acquiring a vehicle or a business that owns the real estate) might be structured as a real estate transaction. The option is frequently based on I tax implications (analyzed case-by-case, depending on several circumstances);
Due diligence (important in specific forms of real estate development, such retail real estate) and risk assumption (purchaser assumes risks related only to the property, or to the property and the vehicle). This section focuses on private real estate asset transactions.
Buying property
In the state where the property is situated (i.e., Registro Público de la Propiedad), legal titles and liens are submitted and registered. Each state has its own public register. The registers preserve property titles and rights (derechos reales). They register property titles and real estate rights.
The land registry' most significant purpose is to safeguard third parties operating in good faith (i.e., buyers). Unrecorded circumstances cannot be used to contest the purchase of real estate or any other right in rem by a bona fide third party. Registration is open.
Agrarian regimes, unclear legal titles, and other factors often need title insurance, which may be obtained directly in Mexico. Some contingencies and third-party rights, such as leasing agreements, administrative punishments stemming from soil pollution and environmental concerns, and
Taxes on land These and other concerns uncovered during due diligence may be addressed in the asset acquisition agreement.
Real estate deals
Several factors must be addressed while transacting in real estate. Aspects of the transaction may modify them.
Condominium
A condominium (condominio) is a property that is owned by a group of people (i.e., in Mexico City, the applicable law for condominiums is the Ley de Propiedad en Condominio de Inmuebles para el Distrito Federal). A condominium has shared amenities and private properties held by many owners.
Zoning
Local governments define and approve zoning classifications and permitted uses for each property. The land registry does not verify zoning or the property's borders, surface, or physical qualities. This needs further research to assess the project's viability.
Ethical and social issues
Real estate may be subject to environmental, social, or anthropological regulation. These rules should be taken into account during due diligence.
Real estate transfer requirements
While each state has its own laws governing real estate transactions, there are certain common guidelines.
Initial drafts
Preparatory paperwork, such as letters of intent, are popular in Mexico. Ententes might contain binding clauses or secrecy requirements. Parties may sign and enforce promissory agreements. It is used when a third party or a formal requirement prevents the sale and purchase deed from being performed.
Deed of sale
A public deed must be signed before a notary public and recorded with the relevant property registry to be enforceable against other parties. Privileged sale and purchase agreements are legitimate and enforceable against third parties.
Companies must be represented by a legal representative with a power of attorney in real estate transactions. To sign the sale and buy deed, the power of attorney must be given before a notary. It must be approved by a notary public and apostilled by a Mexican consul when given abroad. Also, if given in a Washington Protocol nation, it must conform with its conditions.
Real estate rights
Rights in rem include use and occupation, usufruct, and easements. In rem rights may be held and exercised by anybody of legal age
The most prevalent rights are:
A lease
A lease agreement allows the lessee to use and occupy real estate for a set or variable fee. Lease agreements are generally regulated by their function (i.e., residential lease agreements have different terms than commercial lease agreements).
Easement deal
An easement arrangement transfers a genuine right over a servant land piece to a dominating land plot (predio dominante). As a lien (gravamen) on the servant land plot, this privilege will accompany the dominating land plot.
Usufruct rights
An usufruct agreement gives the usufructuario the right to utilize the real estate and all its products for a certain period. The usufruct is a real estate lien.