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About Real Estate

Very Important Information!

The porpuse of this article is to provide a perspective of the most relevant aspects of the acquisition of real estate by foreigners in Mexico. Timeshare, property rentals and Ejidal property(It is a portion of land of public use that is not tilled), are part of the real estate issues. However, fue to the restricted space of this article, those topics are excluede, focusing on the general aspects of the purchase of a real estate within the Meixcan Republic.

Public Deed of a property

In order for a property to be legally secured, the owner must make a deed, because it is the only way to certify, truthfully, the possession of such real estate since any other type of document (such as private contracts) is not recognized before the Mexican law as having value.
Then you are told how to get a Deed for a house or land, taking into account that a legal advice for these cases is advisable.

Titles or deeds of property?
Although sometimes the terms ' title ' and ' Deeds ' are often used indiscriminately, the truth is that each one indicates a different thing. A deed of property is a document made by a notary public to establish, legally, the obligations and rights of the individual who buys or inherits a home or land. Instead, the title of property is a requirement to complete the deed of a property. Thus, it is a document that must be in the name of the person or entity that sells or transmits it as an inheritance.

How to get a Deed of property or land?
When writing a house, you will be able to check the property of the building before third parties. The steps you must follow are the following:
1. Attend a notary: He will request a certificate and notify the registration about the purchase. This offers legal support from the beginning of the process as well as a record of land use and non-debit of predial (check Predial section) and water.
2. The notary retains and pays the taxes (federal and local) to the corresponding authorities; Prepare the documentation and writing of the Scriptures.
3. Subsequently, it processes the inscription in the public registry of the property and a certified copy of the writing is issued.

Requirements for the Deed of property
Remember that, in matters of legality, even the tiniest details are important. Thus, it considers that in the deeds of property there are no blank spaces, which do not contain erasures or amendments evident. Also keep in mind that you can't use abbreviations.
If in addition to asking you what do I need to write a house? you wonder how to write a plot, considers that the general requirements are the same. Within the Scriptures are requested:

  • • Notary Data (full name, notary number)
  • • Seller's data
  • • Property data (address, surface, measurements, boundaries, close) and
  • • Personal data (full name, among others).

The information with which it is complemented is about the sale (what is the value,) Verify that you are aware of payments, etcetera, the mortgage guarantees, and if you have requested the procedure with INFONAVIT, all with respect to the requested credit (amount, conditions, guarantees and insurance).

How much does it cost to have a Deed of property or land?
The costs of writing vary because the payment must include the rights, that is to say what is paid for processing certificates of non-debit, the registration to the registry and the permissions that must be requested. Expenses for the appraisal, the generation of the scriptures and the fees are extras to consider. It is also necessary to calculate registration that has a cost of between 5 and 8% of the value of the property; In addition to the acquisition tax representing 3 to 4% of the appraisal and the cadastral value of the property. Consider that every year notarial days are held, which offer discounts for notarial expenses such as paperwork and taxes.

Why are Deeds important to a house/property/land?
So that it sits in the public registry of the property. That is why within the requirements of a field there are identification documents of the buyer and the seller, as well as the property and its payments to the current. They also serve as a test to reduce the risk of fraudulent transactions in the purchase of real estate, or that they have problems.

Trust Fee

Article 381. Under the trust, the trustor transmits to a fiduciary institution the ownership or ownership of one or more goods or rights, as the case may be, to be destined for lawful and determined purposes, entrusting the execution of such purposes to the trustee institution itself.

Article 382. People who have the capacity to receive the benefit that the trust implies can be trustees.
The trustee may be appointed by the trustor in the Constitutive Act of the trust or in a subsequent act.
The trust will be valid even if it is constituted without mentioning trustee, provided that its purpose is lawful and determined, and the acceptance of the order by the trustee.
The trust which is constituted in favor of the trustee, except as provided in the following paragraph, and in the other applicable legal provisions, is null and void.
The Trusteeship institution may be trustee in the trusts that have finally served as instruments of payment of unfulfilled obligations, in the case of credits granted by the institution itself for the accomplishment of business activities. In this case, the Parties shall agree to the terms and conditions for settling possible conflicts of interest.

Article 383. The trustor may designate several trustees to receive simultaneous or successively the benefit of the trust, except for the case of article 394, fraction II.
When they are two or more trustees and their will should be consulted, as soon as it is not foreseen in the trust, decisions will be taken by majority of votes computed by representations and not by persons. In the event of a tie, the judge of the first instance of the place of residence of the trustee shall decide.

Article 384. Only the persons capable of transmitting ownership or ownership of the property or rights subject to the trust, as the case may be, as well as the judicial or administrative authorities competent to do so can be the trustees.

Article 385. Only fiduciary institutions can be expressly authorized to do so in accordance with the law. Several fiduciary institutions may be involved in the trust to jointly or successively serve as trustees, establishing the order and conditions in which they are to be replaced.
Except as provided for in the trust, when the Trust institution concludes the performance of its, position by resignation or removal, it shall be appointed to another trusteeship institution to replace it. If this substitution is not possible, the trust shall be extinguished.

Article 386. All kinds of goods and rights may be subject to the trust, except for those who, under the law, are strictly personal to their owner.
The assets to be given in trust shall be deemed to affect the purpose to which they are destined and, consequently, only the rights and actions referred to above shall be exercised in respect of them, except for those expressly reserved by the trustor, those who derive from the trust itself or those legally acquired in respect of such property, prior to the Constitution of the Trust, by the trustee or by third parties. The fiduciary institution shall record such assets or rights and keep them separately from their free-to-read assets.
The trust constituted in fraud of third parties, can at all times be attacked of nullity by the interested ones.

Article 387. The Constitution of the trust must always be in writing.

Article 388. The trust whose object is in real estate must be registered in the Public Registry Property section of the place where the property is located. The trust shall take effect against third parties, in the case of this article, from the date of registration in the register.

Article 389. The trust whose object falls on movable property shall have effects against third parties from the date on which the following requirements are met:

    • If it is a non-negotiable credit or a personal right, since the trust is notified to the debtor;
    • In the case of a nominative title, since it has been endorsed by the Trusteeship Institution and recorded in the registers of the issuer, where appropriate;
    • If it is a corporeal thing or a bearer's title, since they are in the possession of the trust institution.

    Article 390. The trustee shall have, in addition to the rights granted to him by virtue of the Constitutive Act of the trust, that of requiring its fulfilment to the trust institution; To attack the validity of the acts that this comet in its detriment, in bad faith or in excess of the faculties that by virtue of the Constitutive Act or of the law it corresponds to him, and when it is proceeding, to claim the assets that as a consequence of these acts have emerged from the patrimony object of the trust.

    Article 391. The Trusteeship institution shall have all the rights and actions required for the fulfilment of the trust, except for the rules or limitations established for the purpose, upon constituting the same; shall be obliged to comply with that trust in accordance with the Constitutive Act; You may not excuse yourself or give up your order but for serious causes in the judgment of a judge of first instance of the place of your domicile, and must always act as a good father of the family, being responsible for the losses or impairment that the goods suffer because of you.

  • Article 392. The trust is extinguished:
    • By the realization of the end for which it was constituted;
    • For making this impossible;
    • To make it impossible to comply with the clause condition that it depends or not have been verified within the term indicated when the trust is constituted or, failing that, within 20 years following its incorporation;
    • For having fulfilled the resolute condition to which it has been subject;
    • Written agreement between trustor, trust and trustee;
    • By revocation made by the trustor, when the latter has expressly reserved that right in the form of the trust;
    • In the case of the final paragraph of article 386, and
    • In the case of article 392 Bis.

    Article 392 Bis. In the event that the fiduciary institution has not been covered by the due consideration, in the terms established in the respective contract, for a period equal to or greater than three years, the trustee may terminate, without liability, the trusteeship. In the case referred to in the preceding paragraph, the Trust Institution shall notify the trustor and the trustee of his decision to terminate the trust for non-payment of the benefits due to his acting as a fiduciary and to establish a period of fifteen working days so that they can cover the debts, as appropriate. In the event that, after the aforementioned period, the benefits owed have not been covered, the Trustee shall transmit the goods or rights in its possession under the trust, the trustor or the trustee, as appropriate. In the event that, after reasonable efforts, the trustee cannot find or have no news of the trustor or trustee for the purposes of the foregoing and provided that the time limit has elapsed without having received the corresponding consideration, it shall be empowered to pay the referrals, when these are liquid resources between the available options that maximize the recovery , to the institution's global account referred to in article 61 of the Credit Institutions Act, in which case the aforementioned remedies shall be subject to the provisions applicable to the aforementioned global account. In the case of goods other than liquid resources, the trust institution, without any responsibility, shall be empowered to dispose of the same and convert them into liquid resources, for subsequent credit in the global account in the terms indicated. Against the liquid resources obtained, recovery-related costs may be deducted. For the purposes of this article, reasonable efforts will be made by the Trusteeship institution when the notification procedure provided for in article 1070 of the trade code is observed.

    Article 393. Extinguished the trust, if the opposite is not agreed, the assets or rights held by the Trustee shall be transmitted to the trustor or the trustee, as appropriate. In case of doubt or opposition to such transmission, the judge of first instance competent at the place of domicile of the trust institution, hearing the parties, shall resolve the conducive.
    In order for the aforementioned transmission to take effect in the case of real property or rights imposed on them, it is sufficient that the trustee so declares this statement and that this declaration is registered in the public registry of the property in which that person has been registered.
    Fiduciary institutions shall indemnify the trustor for acts of bad faith or in excess of the faculties which correspond to them for the execution of the trust, by virtue of the Constitutive Act or of the law, which they make to the detriment of them.

  • Article 394. Prohibited:
    • The secret trusts;
    • Those in which the benefit is granted to various persons successively who must be replaced by death of the previous one, except in the case that the substitution is carried out in favour of people who are alive or conceived already, with the death of the trustor; and
    • Those whose duration is greater than fifty years, when designated as a beneficiary to a moral person other than public law or charitable institution. However, they may be longer than fifty years old when the end of the trust is the maintenance of museums of a scientific or artistic nature that do not have a profit.




Property Taxes

A transaction where the transfer of ownership of a real property implies the incursion of a series of additional expenses outside the sale price, these expenses are taxes and tax obligations. This reality is inescapable in Mexico as in any part of the world, that is why, if you are a seller, you should have a detailed knowledge of these expenses, it is of paramount importance when you want to access a planned and successful sales operation. In this sense, in this article, the International “Real Estate Alliance” informs about the taxes imposed by federal laws on the sale, that is to say, the fiscal responsibilities of the seller-owner and the exemptions to which it could appeal in order to make considerable deductions in these expenses.

Goods whose sale is liable to be taxed by federal taxes:
First of all, it should be noted that any real estate subject to a certain form of transmission is either through sale, donation, transfer or any type of alienation, it causes taxes, that is to say, obligations that must be honored with national treasury or with local tax institutions, in the latter case the instances that proceed to the collection are the States through their agencies of finances or cadastral when it comes to municipalities.
In this sense, and for the specific case that concerns us, the seller or alienator is usually not imposed the payment of taxes to local authorities, this should only honor the federal tax. This is the income tax for the disposal of real estate; it must be clear that the word income refers to profit or performance and in no case to lease, a word that is often mistaken.

Also, it is necessary to know that this tax only proceeds in processes of disposal that contain some pecuniary compensation (sales or cessions of rights with a consideration, whenever it is precisely the utility that is taking the seller which is taxed with this tax.) This gain is obtained through the subtraction or difference or difference in the price you purchased and the price you are selling, all this to constant and non-nominal values, I mean, previously applied a deflator. Hence if the seller bought in 1 peso and sells in 2 pesos is getting a utility of 1 peso or what is the same, a profit of 50%. There would still be some calculations that will result in the exact amount payable. For more information, please refer to article 154 of the Income tax law.
As it was said, it is not enough to subtract the price in which a property is being sold minus the price paid by it to determine the tax, because inflation directly affects the purchasing power of the currency in a certain period compared to another, so the prices should be deflate. The best way to do this is through the national consumer Price index. But this adjustment only comes when the seller has acquired the ownership of the property through a sale, if the acquisition was made through a transfer in the form of inheritance or transfers will depart from the last antecedent where the property has been the subject of a sale. This calculation is disaggregated in detail in articles 147 to 154 of the aforementioned law, as well as in its regulations and miscellaneous tax.

Exemptions contemplated by the income tax law for the disposal of real estate:
This federal law on tax liens for profits in real estate sales includes some exemptions that the seller may enjoy whose operation applies for such guarantees. These benefits are related to remodeling or investments by means of expansion and construction of improvements that they have made on the property.
These investments can be considered as deductibles of the utility, that is, that decreases the profits on the transaction, and therefore the fixed tax will be lower. Hence the importance of making improvements to your home do not forget to ask for personalized bills and file them in an orderly way, these receipts will be the certificate with which you access the benefit.

On the other hand, they will not be subject to charges for profits those transfers where there is no monetary consideration, I mean, where there are no profits; these cases are referred to donations, as well as testamentary rights or inheritances. There are also other cases where the law exempts the seller from paying this type of tax; one of them is whether the landlord is selling his residence. If it is your case, to make the benefit effective, you will have to note the following 5 requirements:

1. That the property is destined to house of habitation: it must be shown that the real estate will be destined to use of residence, and in no way to ownership whose end is economic exploitation. In the case where only one part of the property is destined for commercial premises or offices, these will be taxed with the tax and will exempt from the payment only the sector of the real estate that is intended for room, which is accredited with the corresponding appraisal.

2. That the value of the property is not greater than 1,500,000 UDIS: If the value of the property exceeds this amount in UDIS, only the surplus part will be taxed, however, if the seller manages to certify that he resided for the last 5 years on the property, the sale will be exempt from the tax regardless of the value of the building. The value of the investment units (UDIS) set by the Bank of Mexico varies each month, the seller must be aware of this and go to inform in his bank.

3. That the seller has not alienated another residential property in the last 5 years: This statement must be made to the notary and under protest of telling the truth. The notary will impose on the Treasury to have made another transaction during this time and has been exempted from taxes; this information shall be crossed against the annual statement made by the seller. It is important to bear in mind that an infides in this type of declaration is considered a tax evasion and a prison sentence.

4. Inhabiting the property: for this requirement, the law exclusively provides for the following vouchers: paid energy bills, landline phone, bank accounts or financial statements commercial companies or non-bank credit cards, which must be in the name of the seller, their spouse, their parents or their children (the consignee shall certify that kinship with the records of the civil registry corresponding to each case). It should be taken into account that for the Hacienda a house is considered to be inhabited by a person, as long as it has resided there for a period not less than six months, from where the receipts of services and accounts should be recorded for a time not less than this.
The voting credential issued by the Federal Electoral Institute shall also be recorded, which will only be valid for the holder of the credential, obviously must reflect in it the home address of the property subject to sale.

5. That the land does not exceed an area equal to or greater than 3 times the surface covered by the Bienhechurías: It Bienhechurías is the wasteland to urban or rural land without building or cultivating that is part of the state's assets because it is within the territorial boundaries and lacks another owner.)
 This will be accredited through the corresponding appraisal, with the ballot or with the certification of cadastral valuation. If there is a surplus in the field, only this surplus surface will be taxed. International Real Estate Alliance the largest real estate company in America and Europe, asserts that it is of paramount importance that the parties involved in a real estate transaction in Mexico know fully the subject of taxes that tax the sale, in the case of this article, only the seller is concerned, however, tax liens on the purchase of property are also stipulated.

In this sense, the purchase of real estate is taxed with two federal taxes, regardless of any obligation that the regions tax the acquisition of property in their respective jurisdictions. These federal taxes are the income tax for the acquisition of real estate, which is caused when the valuation value is 10% greater than the value of sale; in this case hacienda will consider that the buyer is acquiring a good cheap enough to be taxed. In the event that the gap between the appraisal and the selling price is less than 10% the transaction does not cause this type of tax obligation.
 In case of the implementation of the tax, this will be fixed by subtracting the value of the appraisal minus the sale price and the result is multiplied by 20%, this will be the tax for the purchase of housing. The second federal property purchases tax is VAT, which will only be obtained on those transfers of properties that are not intended to be residential but commercial use or any other kind of exploitation for economic purposes. The VAT for the purchase of real estate is fixed on the basis of 16%, based on the value of these constructions. If the property is for residential use only, then it does not operate this tax on the purchase.

In this sense, the purchase of real estate is taxed with two federal taxes, regardless of any obligation that the regions tax the acquisition of property in their respective jurisdictions. These federal taxes are the income tax for the acquisition of real estate, which is caused when the valuation value is 10% greater than the value of sale; in this case hacienda will consider that the buyer is acquiring a good cheap enough to be taxed. In the event that the gap between the appraisal and the selling price is less than 10% the transaction does not cause this type of tax obligation.
 In case of the implementation of the tax, this will be fixed by subtracting the value of the appraisal minus the sale price and the result is multiplied by 20%, this will be the tax for the purchase of housing. The second federal property purchases tax is VAT, which will only be obtained on those transfers of properties that are not intended to be residential but commercial use or any other kind of exploitation for economic purposes. The VAT for the purchase of real estate is fixed on the basis of 16%, based on the value of these constructions. If the property is for residential use only, then it does not operate this tax on the purchase.

Sources consulted:

Predial Tax

The predial tax is a lien on a property or estate ownership. This contribution must be paid by all owners of a property, whether it be housing, office, building or commercial premises. It exists in many countries and is based on the idea that all those owners of a real estate must contribute an annual fee to the state in the form of tribute.

How and when do you pay?
In Mexico, the predial is paid and calculated annually, in the first two months of the year. There is also the possibility of paying it on a bimonthly basis, with the exception of the taxpayers who provide the minimum quota, that is to say: retirees, pensioners or over 60 years. There is usually a discount for those who make their payment during January. The percentage that is discounted varies according to the federal entity and changes each year. Reductions often range from 5 to 15% of the total to be paid.

How is the property tax calculated?
This assessment is determined by taking as a basis the cadastral value of the property, which is established by calculating the unitary values of the soil and the construction and multiplying these by the surface of the building. To calculate the value of the soil, the first criterion used is the location of the property. That way, there are three types of soil value:

Value area: This implies a calculation based on several blocks (a group of houses located in the same lot or area) that have similar characteristics in terms of infrastructure and urban equipment (services), type of properties (single-family houses, condominiums, commercial premises, factories, etcetera) and real estate dynamics.

Value Enclave: The enclave calculation is made when a portion of blocks or housing lots are notoriously different in value and characteristics compared to others in a specific area.

Value Broker: This is the calculation that is made when the property is on an important or busy avenue or highway. It is considered that large roads increase the commercial value of a property by increasing the economic activity of the area. The calculation applies even if the property does not have its main access on the road in question.

Calculating the value of the building
After calculating the value of the soil, the appraisal of the construction is determined. For this we take into account factors such as:
• Type of property: Residential or commercial
• Number of floors (both the general construction and the property itself.) For example: This can be a two-level apartment located within a 10-storey building.
• Terrain surface
• Construction Size
• Antique of the property

Finally, to perform the calculation, the value ranges are taken into account. This means that there are tables that mark the amount of the property tax in accordance with the range of cadastral value in which a home is located. The range is presented taking into account the lower limit and the upper price limit. This means that, if rank 1 were, for example, housing between $1 and $100.000 and you have housing with cadastral value of $50.000 and your neighbor has a value of $30.000 pesos, both will be creditors to the same single fee.

"Observations on the calculation"
The results of the calculation not only depend on the number of square meters of the property, but also of the area and type of construction, topographical conditions, equipment and urban services with which they count. This means that the amount to be paid for the property tax will be different for each person and should not be compared to contemplate one or two isolated factors. The Ministry of Finance of the Federal District, as well as those of some other states, offers users an instrument to carry out the calculation of the property tax, if they have not received the payment order, lost it, or disagree with the amount marked in that document.

Where can I pay?
The property tax, as well as most of the contributions of this type, can be paid in any bank branch (even if you do not have an account at that institution), in self-service stores and departmental authorized, or, via Internet, on the electronic portal of our bank. Finally it is important to note that it is advisable to pay the predial promptly in order to benefit from the discounts and avoid penalties for non-compliance.