Code of Ethics
The Mexican Association of Real Estate Professionals (AMPI) has developed a Code of Ethics which must be observed by all members of that organization. Violation of the provisions may result in (1) a warning; (2) an admonition; (3) the temporary suspension of rights, or (4) expulsion from the Association. An Honor and Justice Commission oversees compliance.
Currently Mexico does not have a national real estate license law although the states of Sonora, Sinaloa and Guanajuato require the registration of real estate practitioners. Agents working with clients in those states should verify local requirements for specifics.
In the rest of the country, there is no regulation of practitioners and any Mexican citizen can promote and offer real estate for sale. Non-Mexicans must obtain an immigration status permitting them to work in the field. This status could be a business visa for single transactions or the FM-3 (non-resident) or FM-2 (resident) status. Mexican Consulates in the U.S. and Canada can provide further information about the requirements for each different status.
No minimum educational requirements are in place though AMPI, the Mexican Real Estate Association, has signed agreements with The Normalization and Certification Board of Labor Competency (CONOCER) which establishes criteria and which tests basic proficiency in the subject matter. This is a new program which is being tested in Monterrey, Mexico and may be extended to the rest of the country.
AMPI has developed and offers a Professional Real Estate degree program available to all of its members
Article 27 of the Mexican Constitution of 1917 prohibits foreigners from owning outright residential real estate within thirty miles (50km.) of any coastline or sixty miles (100 km.) of either border. This area is known as the “restricted” zone. In 1973, however, the fideicomiso was established and approved for the purchase of real estate located in the restricted zone. For the first time since 1917, a non-Mexican could invest in a recreation or retirement home and feel safe that his or her investment was secure.
Under the bank trust, legal title is placed in the name of a Mexican bank, in trust, under a permit from the Secretary of Foreign Relations. The Mexican bank holds the title to the vacation or retirement home for the buyer/beneficiary of the trust, the non-Mexican who purchased the trust rights in the property. The bank administrates the property in accordance with the instructions of the buyer/beneficiary. The buyer/beneficiary enjoys the same rights of ownership as does a Mexican national. He may build on the property, tear down existing buildings, modify them, rent, lease or sell at anytime conforming only to internal bank regulations for this type of trust and to the general laws of the country established for all persons. Additionally, the beneficiary may finance the purchase and instruct the trustee bank to enter into the security agreement with the lender.
The trustee bank may not, without express written consent from the beneficiary, sell, transfer or encumber the property.
The beneficiary may name the parties he or she selects as co-beneficiaries and may name substitute beneficiaries upon death of the primary beneficiaries, thus avoiding probate in Mexico. Care must be taken however, in establishing the wording and terminology used in the succession of rights in conformance with applicable Mexican law.
A permit to establish a Mexican bank trust (fideicomiso) can now be obtained for a term of fifty years and can be renewed. In acquiring a property with an existing trust, the seller may assign the rights in the existing trust and the new buyer will enjoy the term established in the original trust permit. In other words, a trust established in 1995 will expire in 2045. Prior to 1993, the term of the trust was thirty years. Thus a trust established in 1990 would expire in 2010, unless extended or the original trust permit extinguished and a new permit obtained for fifty years.
The cost for the permit issued by the Secretary of Foreign Relations, including registration in the National Foreign Investment Registry is currently about $ 1,500.00 U.S. and bank trust administration fees generally range from $200. U.S. to $750. U.S. annually. There are other expenses involved in the acquisition of a property, however, and it is wise to request a written estimate prior to beginning the transfer process.
Establishing a Mexican corporation is also a vehicle for acquisition of real property. Under the 1993 Foreign Investment Law, a corporation established in Mexico is considered as Mexican under the law, even if all the shareholders are foreigners. Thus a Mexican corporation with 100% foreign ownership can acquire real property in fee simple ownership, even in the “restricted” zone. This, however, is ONLY for non-residential property: a hotel, a restaurant or other type of commercial use property. Not only is it a violation of the foreign investment law to place a retirement or vacation home in the name of a Mexican corporation, but also it is generally more costly than through a trust due to the requirement for periodic tax declarations and taxes on corporate assets.
Non-Mexicans must obtain adequate immigration documents in order to promote and transact a real estate operation on behalf of others when the real property is located in Mexico. A real estate license issued in practitioner’s state of residence will probably be required. Mexican Consulates can provide further information on the requirement.
Land Registration System
The Public Registry system in Mexico is not unlike that of the United States and Canada in that title, whether in trust or in fee simple ownership, must be registered in order to give notice to third parties as to the interest in the property. A certificate can be obtained from the Public Registry in the municipality where the property is located. This will provide information as to encumbrances on title. Title insurance is now also available in many parts of Mexico. Automated data bases are not available so an investigation of title requires review of each and every document in the chain of title. These documents should be available through the Public Registry in the municipality where the property is located but there are occasions when the Notary Public records should also be searched. Since possession is a highly important factor in establishing ownership, a physical inspection of the property being considered is essential.
Other industry professionals
Some lawyers are involved in the promotion and sale of real estate as a specialty, as are certified public accountants. A law or an accounting degree, however, is not a requirement for selling real estate in Mexico.
All deeds transferring title to real property must be executed before a Mexican Notary Public who is a quasi-public official appointed by the governor of the state in which the Notary Public is practicing his profession. The notary must be an attorney and is responsible for the legal form of the deed, as well as the tax declarations which are required when a foreigner is involved as buyer or seller.
An appraisal made by an appraiser appointed by the local municipal government is also a requirement of transfer in many parts of the country.
The real estate agent lists and markets property for sale including growing use of the internet as a marketing tool.
Property Marketing Systems
On line multiple listing systems are used in limited areas of Mexico and it is expected that usage and cooperation with other agents will continue to increase.
At present Mexico does not have a national referral system, nor an official referral policy. Some franchises such as Century 21, Realty World and ReMax encourage transnational referrals but success is limited at this point since many Mexican practitioners are not yet accustomed to representing different parties and sharing commissions.
Relationship of Buyer/Seller to Practitioner
The basics of the fiduciary relationship are outlined in Article 267 of the Mexican Commerce Code. Most agents represent both parties and buyer and seller separate agency is not common in Mexico. Foreign agents who wishes to represent his/her buyer should obtain a written agreement with the listing agent outlining the duties and responsibilities of each agent and then determine the method and amount of commission payment at the beginning of the negotiations.
Real estate agents in Mexico generally work on a commission basis, not a salary. Commission is generally paid by the seller at the time of buyer’s signing final documents at the Notary Public office. It is important for cooperating agents to obtain a written agreement with the Seller’s agent prior to closing of the transaction.
Escrow: (Handling of Trust Funds)
Traditionally, the buyer and seller have met at the Notary Public’s office to sign the deed and to exchange funds and deliver possession of the property. With increasing sophistication in the marketplace, some agents have established trust accounts and manage third party funds for release upon the performance of conditions. Certain companies in the country have established escrow services as third party neutral agents. Some of them maintain principal escrow accounts in FDIC insured accounts in the United States. Since there is no Mexican government regulation of these companies or accounts, it is important to request references and track record if one is going to use their services.
Certain title insurance companies are now offering the escrow services through their U.S. based escrow accounts when used in conjunction with the issuance of a policy of title insurance. Since agent management of third party funds is a new area in Mexico, it makes sense to check carefully on costs, operating procedures and reputation of those who will be handling the funds in a transnational operation.