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Special Considerations for Closing and Conveyance

Important notes:

  • Typically ALL closing costs are paid by the buyer, each operation differs in terms of the costs, but it can be a considerable amount and should always be investigated before closing
  • ALL paperwork (the deed, lien search, etc.) should be reviewed by a notary and a lawyer before laying down any money
  • The notary will need to see the following documents to witness a buy-sell (promissory) agreement and to process the title transfer:

Before a notary will record the Purchase Sales Agreement, the following documents are required:

  1. The title document.
  2. A certificate of no encumbrance or tax lien on the property.
  3. A Topographical study and appraisal of the property.
  4. The property tax receipts for the last 5 years.
  5. A notice of purchase.
  6. The water bill receipts for the last 5 years.
  • We highly recommend putting out the extra money and putting in a few extra steps of due diligence to make sure everything is in order (title insurance, escrow services, etc.)
  • NEVER consider buying or leasing or using ejido property (that is one of the reasons that it is important to make sure you get the papers checked by a lawyer and notary beforehand)

For the notary to process the trust agreement, the following documents must be presented:

  1. The title documents for the property.
  2. A certificate of no tax liability. This certificate is used to prove that there are no outstanding property taxes nor other assessments on the property at the time of the agreement.
  3. A certificate of no encumbrances. The certificate of no encumbrance shows that there are no conflicting claims to the property. It also contains the chain of title and a description of the property.
  4. A topographical study of the property.
  5. An appraisal of the property. The commercial value of the property is used to compute property and other taxes. The appraisal must either be done by a bank appraiser or a corredor público, an attorney licensed by the state to perform appraisals.
  • NEVER believe all that the realtor says in terms of the legal and fiscal situation and procedures. The law is VERY complex in Mexico and it is important that a lawyer take care of legal matters, accountants take care of the fiscal and taxation matters, etc. Some realtors are very informed but they do not keep up daily on the changing legal situation
  • Ensure that the SELLER is paying all of the commission
  • Have the buy-sell agreement notarized by a notary in Mexico, insist on this, and be sure that the notary has all the paperwork in front of him/her at the time of signing the buy-sell agreement
  • Offers to purchase are considered legally binding here but are rarely enforced, both sellers and buyers back out of deals, this is another reason to go to a notary at each step of the process
  • Make sure the real purchase price goes in the deed when doing up the paperwork. Some people like to use the “valor catastral”, or a lower, city-assessed value, on the deed, in order to save on taxes on the sale and also on the trust. The problem is that it comes back around at the time of selling the property and hurts you in capital gains. It also does not reflect the true value of the property itself which can also be an insurance issue.
  • Make sure that you have full insurance, from any of the main Mexican insurance companies is fine, but covering ALL natural disasters and acts of God, third party liability, etc. and also insure the contents of the home, vehicles, etc. with proper national insurance
  • If you are planning on having regular staff working in the home, it would be a good idea to form a corporation, rather than a trust. These employees should be put on a proper payroll and not just paid cash. This protects both the employer and the employee. Their payroll can be outsourced (we provide those services, in other states there will be companies that do this, including the accountants) and have their proper remittances paid to the government. This also provides the worker with security and long-term benefits (pension, the opportunity to use the Infonavit housing credit, medical insurance, an additional retirement fund, etc.).
  • If the home being purchased falls under the “regimen de condominios”, know the by-laws inside and out before making the purchase decision, know the strata and/or maintenance fees, and get a letter from the president or administrator stating that there are no outstanding fees owing on that property. When you go to sell your property, the other condominium owners in your building have the right to first refusal.
  • The SELLER is obligated to bring all outstanding payments up to date (water bills, annual property taxes, garbage removal, electricity, dues, fees, maintenance, strata or otherwise) and must provide proof of this (certificado de no adeudo) before the paperwork is processed and before any money is paid to the seller.
  • The certificate of no liens and encumbrances is called “certificado de libertad de gravamen”. If there are liens or suits against the property, this needs to be divulged and clarified before the operation closes and preferably before any money is laid down. Again, title insurance goes a long way to avoiding problems. Title insurance can also be issued after purchase, as another level of security when selling a property, a marketing tool. It can also be issued on a development before subdivision or before sale of the individual properties.
  • In a trust, it is essential to name beneficiaries
  • In a corporation, or even when holding property with a trust, it is very important to have a will, and living will, etc. in Mexico, even if you have one at home. We are seeing several unfortunate situations happen as a result of not having had a will or living will in place, again, in Mexico and are bringing many of our clients up to date now on this. We can prepare wills for anyone, in any state in Mexico, even if they have them notarized by their local notary in another state. The will and living will MUST be notarized. The living will assigns a proxy to act on your behalf and details such things as a do not resuscitate order, whether you will accept or give donated organs, etc. Though a trust names a beneficiary of the real property, it does not cover contents of the property, personal belongings, vehicles, etc.
  • In terms of pricing of the trust or corporation, it varies according to the value on the operation. Trusts operate as a percentage and, I believe, need to be renewed every year. A corporation would cost about 50,000 pesos, start to finish, to set up, and would take at least 6 months to conclude the process, plus around 5,000 to 10,000 pesos per year for accounting services.

by IdeaCOM

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