|
Once again national headlines this week
have run articles filled with the unfortunate news that Americans are going to
be evicted from their homes in the Mexican municipality known as "Punta
Banda" near Ensenada, Baja California. Though disturbing and sad to say the
least, we as Americans must understand that this situation is certainly not the
norm, but an aberration in a country that during the past decade has made
significant changes to its foreign investment laws. And for one fundamental
purpose. It has been Mexico's desire to promote, to enhance and to protect
foreign investment in the real estate sector. The looming evictions of
American residents at Punta Banda should clearly signal the fact that in any
country, including the United States, title discrepancies exist, lawsuits get
filed and in some rare cases, buyers lose their property. "Catastrophic
failure of title" doesn't happen often, but in the case of Punta Banda, it
clearly has occurred. In order for us as Americans to be an educated and prudent
buying public, it is extremely important, at least in the opinion of this
writer, that we understand the issues concerning the Punta Banda case and owning
residential real estate in Mexico from a general prospective. The explicit
statement that is being made here is that Americans should not fear buying
property in Mexico. Owning a house, a condo or buying a residential lot on the
beach can be a secure, legally entitled, publicly recorded and hopefully
profitable investment. However, Americans, or any foreign purchaser for that
matter, should know Mexico's laws concerning foreign ownership of residential
real estate and buyers should always seek advice about title matters on a
prospective acquisition from competent sources. The American residents at
Punta Banda are on the one hand, victims of possible fraud and misrepresentation
concerning the Ejido Coronel Esteban Cantu's ability to enter into lease
agreements for lots within the development known as the "Baja Beach and
Tennis Club." On the other hand, it would also appear that many of these
same individuals were naïve and "threw caution to the wind" ignoring
the warnings and disclosure that the ownership of the land was in dispute and
there was pending litigation to resolve the title matter. Some of the residents
have publicly stated they knew there was a possible title problem yet still
proceeded to invest in the construction of a home. Furthermore, the plaintiffs
in this case had given public notice that the ejido did not own the property,
that the land was in fact private, and that no one should build on it. At the
end of the day, the U.S. lessees must have figured that it would work out to
their benefit and they would trust in the assurances they had been given by the
developer, Carlos Teran del Rio, and the Ministry of Agrarian Reform. As we know
now though, the "catastrophe" did happen, overturning the ownership of
the land in favor of the seven plaintiffs who filed the original lawsuit in a
Mexicali tribunal court! In light of the foregoing,
why should Americans not fear buying real estate in Mexico? Quite simply, when
the Americans at Punta Banda entered into what they perceived were valid lease
agreements for their lots fourteen (14) years ago, title assurances and the
ownership protections that exist today were not readily available then.
Comprehensive title examinations complete with a Mexican legal opinion on the
status of title can be rendered by Mexican counsel on any property with no
geographic or property type prohibition. Copies of all of the documents in the
chain of title can be obtained from the public registry of property for any
given parcel or residential unit. Lien certificates, land use permits and
subdivision authorizations are examined in the process when a U.S. title
insurance company is requested to issue a Commitment for Title Insurance on
Mexico Land. Purchasers of Mexican
real property can now receive Owner's Policies of Title Insurance that can be
issued on both sides of the border from various companies to both U.S. and
Mexican buyers. Most title insurance policies today are U.S. contracts of
indemnity guaranteeing ownership rights as vested in a fideicomiso (bank trust)
for residential property acquired by foreign buyers in the prohibited zone, or
for properties held in a Mexican corporation for non-residential purposes, i.e.,
industrial and commercial. As has been stated in
previous articles by this writer, Mexico is not the "Wild West" as
many Americans think. Mexico is not at all unlike the United States in that
there is a definitive legal framework for the ownership of land by foreigners
known as the New Foreign Investment Law (December 28, 1993) and as mandated
under Article 27 of the Mexican Constitution. Moreover, there is formality and
compliance in the development of real property. Regulatory statues and
procedures are mandated on a state by state basis and require a series of
official approvals, permits and authorizations coupled with public disclosure
and written notification by the governing public agency. What is unfair about this sad
event is the negativity that the resulting evictions create. Many Americans
believe that this is the fault of Mexico and that the country is not to be
trusted. This is simply not true nor is it just. While there is blame to be
shouldered by some unscrupulous Mexican officials and government personnel,
there is also blame to be shouldered by the Americans thinking, "it can't
happen to me." They were not prepared to walk away from a potentially
"bad deal" and figured that it was too good to pass up. We the buying
public must use the same prudent logic and business acumen we utilize buying
property in the U.S. when contemplating acquisitions in any foreign
jurisdiction. That is to say, be knowledgeable of the relevant issues concerning
the property and use the available tools that exist. And don't forget that the
property can probably be insured with a title insurance policy enforceable under
U.S. jurisdiction guaranteeing your ownership rights. If you do and you choose
to go forward with the purchase, you'll certainly feel more secure in the choice
you've made and ou'll probably sleep better at night. (Arizona Journal of Real
Estate, December 2000) |
