Removing the Fear of Living in Mexico — Really? A SecondShelters Guest Post By Someone in the Know

Guest post by author, syndicated columnist and second home expert Tom Kelly

Violent crime in most of Mexico is less of a problem than in the United States or Canada. You can feel much safer walking the streets in most of Mexico than in most other cities in North America. The larger cities such as Mexico City have a crime problem like any large city, and the border areas have higher crime rates. Crime is increasing in the resort cities too, and may rise to US levels eventually. Most crime in Mexico is property crime.

Mexican people are generally friendly and helpful. They almost always return a greeting, and usually with a smile. Speak a little Spanish, and they will go out of their way to be helpful.

The border areas do have problems with crime, but some of the horror stories you may have heard are greatly exaggerated. Imagine the crime stories that could be told about one evening in Los Angeles. The best way to avoid crime in Mexico is to not get drunk and disorderly, and to use a little common sense about flashing money or valuables. These rules apply no matter what country you are visiting. In Mexico the vast majority of assaults occur outside of bars at night to people that have been drinking.

Your Home

Owning a house, a condo or residential lot on the beach can be a secure, legally entitled, publicly recorded and hopefully profitable investment. However, any foreign purchaser should know Mexico’s laws concerning foreign ownership of residential real estate. Buyers should always seek advice about title matters on a prospective acquisition from competent sources.

If there were ever a “black eye” on the face of Americans attempting to obtain Mexican real estate, it had to be the seaside development known as the Baja Beach and Tennis Club, located in the municipality of Punta Banda near Ensenada, Baja California, Mexico. National newspaper stories told the tragic tale of Americans who lost their homes because of a Mexicali tribunal court ruling that overturned the ownership of the land.

The land in question was thought to be an ejido, community property owned by no one and worked by everyone – not unlike a huge community “pea patch” in the United States that no single person owns yet many use as a garden to grow flowers and vegetables for whatever reason they please. In most cases, the ejido-cultivated land is divided into separate family holdings, which cannot be sold, although they can be handed down to heirs.

The tribunal ruled that property was not an ejido and was, in fact, private property owned by the seven plaintiffs in the lawsuit. After the ruling, many Americans could not pay the price set by the owners and had to vacate their beautiful homes.

Mistakes were avoidable

The case was disturbing and incredibly sad and still taints the perception of ownership when any norte americano considers a purchase south of the border. All non-Mexican nationals must understand that Punta Banda was not the norm, but an aberration in a country that during the past decade has made significant changes to its foreign investment laws. Mexico has a genuine desire to promote, enhance and protect foreign investment in its real estate sector.

While ejido land has caused the most confusion, privately owned land in the restricted zone can be transferred safely. Foreign buyers of Mexican properties must realize that title to real estate in the restricted zone can only be vested in one of two ways: either in a 50-year renewable Mexican bank trust (fideicomiso) or in a Mexican corporation that can solely and exclusively be owned by at least two foreign stockholders with no Mexican ownership participation. The corporation can only take title to a commercial property in the restricted zone (bed and breakfast, grocery) but not a property intended for residential use. The title to houses on the beach, villas, condominiums, townhouses or single-family lots within Mexico’s restricted zone can only be in conveyed into a fideicomiso with foreigners having renewable beneficiary interest when the property is intended residential use

Sometimes, the seller’s attitude is, “Why should I wait for my money just because you have to get a bank trust? That’s your problem; just pay me.” This attitude has been pervasive because some – not all – real estate agents support that philosophy and push what can be a premature transfer of funds. Let’s face it: The sooner the seller receives all of his or her money, the agent gets paid the commission. Why should the agent be concerned with whether the buyer gets his or her fideicomiso established once the agent has received the commission fee due from the seller? Besides, many agents will tell purchasers nothing can, or will, go wrong.

Let’s sample some of the more obvious “what ifs.” What if the seller dies before the conveyance? What if there are title defects or undisclosed lawsuits, maritime matters or lien issues? What if an agent, who receives the money via a deposit, doesn’t give the seller all that he or she expects? Then who will execute the deed? What if there are unexpected problems with obtaining a trust permit or notario problems, such as an unauthorized person acting as a notorio? Or what if the seller has sold the property twice, unknown to you or the agent? The simple truth is you have given the seller your money with little or no chance to get it back – other than a lawsuit in Mexico. Notarios publicos check all documents and provide “judicial certainty” in the transaction. Notorios should be involved before the documents are recorded, not after.

Punta Banda should clearly signal that in any country – including the U.S. – 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 occurred. In order to be an educated and prudent buyer, it is extremely important to understand the issues concerning the Punta Banda case and owning residential real estate in Mexico. Americans, Canadians or Europeans should not fear buying property in Mexico.

Tom Kelly is the co-author of “Cashing In on a Second Home in Mexico” and a nationally syndicated newspaper columnist. Tom’s new E-book “Bargains Beyond the Border: Get Past the Blood and Drugs: Mexico’s Lower Cost of Living Can Avert a Tearful Retirement” is available online at Apple’s iBookstore, Amazon.com, Sony’s Reader Store, Barnes & Noble, Kobo, Borders Books, Diesel eBook Store, and Google Editions. It mirrors a recent article by CNN on the benefits of the country, including increased rental possibilities.