Published on:
Tuesday, June 09, 2009
Purchasing real estate in Mexico requires some very specific steps to ensure that you do not lose your investment. One of these critical steps is properly registering legal title through a Mexican bank trust (fideicomiso). In this article from JD Supra, Mark Raven and Christopher McDonagh from the law firm Raven, Clancy & McDonagh describe what can cause you to lose your entire investment in Mexican real estate and what steps you can take to avoid this fate.
It is all too common for buyers of Mexican real estate to pay all or a significant part of the purchase price before receiving properly registered legal title or Mexican bank trust (fideicomiso) rights to the property. Many buyers mistakenly believe they are fully legally protected because they have a signed (but unregistered) “purchase contract” or “promise of trust agreement.”
Some buyers might believe their rights to the property are protected because they have been given possession of the property or were told by then seller or real estate agent that a “closing” has occurred and that the property belongs to the buyer at the time the seller signs a purchase contract or promise of trust agreement.
Other buyers (for example, buyers making installment payments of the purchase price under the purchase contract or seller-carryback promissory note) understand the seller won’t transfer title until the purchase price is fully paid, but might not fully appreciate the risks to their rights to the property while the seller retains title.
In reality, there are significant limitations on the buyers’ legal rights in these situations, and such buyers may risk losing any legal claim to the property. In the worst case, the buyer could also lose up to all the money invested. This is possible, because buyers do not establish ownership of Mexican property until they have properly registered legal title or Mexican bank trust rights to the property.
Until that time, the buyer’s rights are essentially to have a contractual promise by the seller that it will transfer the property to the buyer. If the seller has good and marketable title (or Mexican trust rights) to the property and authority to convey such property, and if the buyer complies with its obligations under the contract (such as paying the entire purchase price), then the buyer has a valid and legally binding contractual right to the property enforceable against the seller. However, the buyer’s right, if unregistered, is not effective against claims to the property by third parties.
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