FAQs

FAQS - RE/MAX Baja Land Solutions in San Quintin BC

www.bajalandsolutions.com

1. How can a foreigner buy land in Baja?

There are currently only a couple of ways that foreigners can safely own land in Baja. The primary issue is that virtually all of Baja lies within the 'restricted zone' which is all land within 30 miles of the coast and within 60 miles of the border. By law these lands cannot be purchased by foreigners. HOWEVER, since that law proved to be so detrimental to the economy of Baja, subsequent initiatives have made it possible to circumvent the law legally(?). The first, and most common method is the bank trust or fideicomiso. This is a tool used to obtain full rights to a property while a Mexican bank holds the title. It is not a lease. The owner, or beneficiary of the trust has all the rights of ownership including right to use, sell, develop, pass on to heirs and insure through a title insurance company. He also has the right to pay property taxes. The term of a fideicomiso is 50 years and is renewable for subsequent 50 year terms. A fideicomiso costs $2,000 - $3,000 to set up and about $500 per year to maintain. This is the recommended method for purchase of a home, condo, lot, or other property that is anticipated to remain in one piece.The second method is to form a Mexican corporation which will own the property. A corporation can be fully owned by foreigners and requires only two shareholders. This could be husband and wife or any two people who agree on a sufficient number of things. One of them can hold as much as 99% of the shares, so they don't have to agree on everything. A corporation should be used for any property that may be developed or sub-divided, or for anyone who may be buying multiple properties which could all be owned under the same entity. A corporation can cost about the same to set up, doesn't have an expiration term, and can be set up to allow lots of flexibility without requiring revisions along the way as a fideicomiso would. By law, though, a corporation cannot be used to buy a residence for the purpose of avoiding a fideicomiso. It is supposed to be for property purchased for development or investment.

2. What is Ejido land and can it be purchased safely?

The Ejido system was initiated in Mexico in 1934 by President Lazaro Cardenas. Originally intended to provide land to the landless masses, it effectively deprived the masses of the benefits of property ownership. An Ejido is a constitutional and legal concept which allows groups of people to organize and jointly hold the rights to land granted by the federal government under procedures established in "Agrarian Law". Nearly all of the land in Baja was or is under the Ejido system. It was intended that the land would be "owned" and used jointly and could never be sold. Finally recognizing the detrimental results of the system, the government, in 1993, enacted changes to the Mexican Constitution which created a process whereby Ejido land could be divided amongst the Ejiditarios, (members of the Ejido), and titles of ownership created for their parcels. This system made it possible to sell land and actually remove it from the Ejido. However, in order to benefit from this system, called Procede, an Ejido must first accept the process through a vote of its membership, and then follow the rules in dividing and registering the land parcels. Unfortunately for some Ejidos, they failed to do this, sometimes for lack of interest or understanding, other times because to register meant the possibility of paying property taxes. And the sad fact is that now the opportunity to use government funds for surveying and doing all the paperwork has expired. Most Ejidos who didn't use that opportunity are now unable to afford the cost of the process and, therefore, are unable to divide and sell their land. Anyone attempting to purchase from an Ejido in this position is very likely in for an arduous and expensive ordeal that may never get anywhere.But those Ejidos who did elect and then follow the process can sell their land and the buyers can get clean titles and remove the land from the Ejido and from the control of Agrarian Law. And that is the number one question to ask when attempting to purchase from an Ejido. When an Ejido divides its land, it issues a Certificado Parcelario for the newly created parcel. This document is registered with RAN (Registro Agrarian Nacional) and becomes a certificate of ownership for the person named. While it is not a title, it gives the holder the right to apply for and receive a title. Again, that further step is usually not completed because it requires subsequent payment of property tax. However, a Certificado Parcelario cannot be sold except to a fellow Ejiditario. So when selling land under that document, the original owner must first apply for the title and wait for it to come from Mexico City before legally closing the sale.A purchase from an Ejido requires a full understanding not only of the applicable Agrarian Laws, but the individual Ejido rules and customs, written and unwritten, which may affect the purchase. If the leadership of the Ejido doesn't have the trust of the Ejiditarios, it is not likely that any transaction will be approved. For an agreement to be successful and free from future dispute, the process must follow the very formalistic rules of the Agrarian Law as well as the internal rules of the Ejido.Now for the good news. If a purchase is made from an Ejido, following all the rules, including the Ejido's internal rules, the Agrarian Law, checking the tax, civil, administrative and other registries, the land can achieve Dominio Pleno status. It is removed from the Ejido and from Agrarian Law and is truly private property under Civil Law. It can be protected with title insurance and can no longer be subject to any prior claim. In this sense, it can be safer to purchase than other types of private land.

3. Can I get title insurance on my purchase?

Yes. A few US title insurance companies are now insuring property in Mexico. The three primary players are Stewart Title, www.stewart.com.mx , Fidelity National Title, http://www.gs.fnf.com/com , and First American Title, http://www.firstam.com/

4. Can I get financing for purchasing real estate in Baja?

Yes. There are several sources for financing Mexican properties from the US. Check with www.FinanceNorthAmerica.com, Stewart Title Latin America or www.emexicomortgage.com

5. What will I pay in closing costs in Baja?

In Mexico it is typical for the purchaser to pay all closing costs with the exception of any capital gains taxes due. These costs can be quite high when figured as a percentage of the sale when the property is inexpensive. For example, a lot costing $25,000 may have closing costs of 30% of the price including a fideicomiso and the first year's maintenance. This is because the fideicomiso and some other costs are the same regardless of the price of the property. On the other hand, a $500,000 property may cost less than 5% to close under some circumstances. In Mexico, unlike the US, the buyer is expected to pay for things like an appraisal, a survey and a certificate showing that the owner doesn't owe back taxes on the property.While some items in the closing costs are fixed prices, there are a few that are based on percentage of the sale. The acquisition tax is 2% and a couple other fees are based on land value. But the charges can change annually and vary in different locations. Please ask for a good faith estimate for your specific transaction and avoid an unpleasant surprise at closing.