How to buy a house in Mexico

 

For the last three or four years our son Chris has rented a house in San Vicente, Nayarit, in the Bahía de Banderas region of the Pacific coast of Mexico. Every month he called on his landlady to pay his rent in cash (cash is still alive and thriving in Mexico). A few months ago, his landlady, a member of a local landowning family, rather unusually invited him to sit down for a chat. She explained that she was thinking of selling the house to buy some cattle. Chris, who was about to obtain his permanent resident’s card after four years of residence, decided to buy.

 

This news set me thinking about one of the things I learned during my studies of Mexican history. Between the achievement of independence in 1821 and 1867 Mexico was invaded four times by foreign powers, and for nine of those years was under foreign occupation. The most consequential of these invasions was the American occupation of 1846-1848. President James Knox Polk, roughly the equivalent in Mexican history of Vladimir Putin in Ukraine, obliged Mexico to sign the Treaty of Guadalupe Hidalgo, which ceded about half the national territory to the invading power. US forces returned in 1914, this time to occupy only the port of Veracruz, rather than the entire country.

Statues on the terrace of Chapultepec palace commemorate the sacrifice of military cadets who died rather than surrender to the invading forces of General Zachary Taylor

 

 

The tragic end of the final, French, invasion and occupation of 1861-1867 was captured on canvas in a famous painting by Manet. Monarchist centralists had been struggling with liberal federalists since Independence and the brief rule of Emperor Agustín I of Mexico in 1821 to determine how the new nation should be governed. The royalists who had scoured Europe for an unemployed monarch, had persuaded an Austrian Archduke to become Emperor Maximiliano I. Napoleon III saw an opportunity to clip the wings of an expansionist United States by placing his own man as Mexican head of state. In 1864 Maximiliano and his wife Carlota took up residence in the palace on Chapultepec Hill (where six cadet soldiers had died rather than surrender to the invading forces of General Zachary Taylor in 1847). But the Liberal President Benito Juárez, like the boy soldiers, had refused to surrender and led a stubborn resistance to the combined monarchist and French army. By 1867 Napoleon III had had enough and abandoned Maximiliano and Carlota to their fates: the Emperor was executed on the Cerro de las Campanas at Querétaro and Carlota died in exile, driven mad by her husband’s death.

Edouard Manet's painting of the execution of Maximiliano I

 

 

The Americans’ 1914 occupation reminded the delegates of the contending revolutionary groups who assembled in Aguascalientes three years later to draft a new constitution that Mexico remained vulnerable to a foreign power which had a real, or concocted, grievance. They wrote into the 1917 constitution a clause that prohibited foreigners from owning property within a restricted zone 100km. from the borders and 50km. from the coast. The goal was to reduce the risk of foreign powers attacking Mexico to remedy a perceived or real wrong suffered by a foreign national.

 

Now, San Vicente is about 8-10km. from the Pacific coast, so Chris’ home is firmly located in a restricted zone. And the windows of local real estate agents advertise a large variety of properties for sale to expatriates (mostly Americans and Canadians). So, the question is how can so many foreigners openly flout the constitution? It used to be that a foreigner would discretely  arrange for a straw man to own the property on behalf of the foreigner, which worked as long as the straw man was honest. However, no such arrangements are now necessary. Instead, the property is not legally-speaking owned by the foreigner, but rather by a trust managed by a bank. The foreigner (or in the case of death, the heirs of the foreigner) is the beneficiary of the trust, not technical the owner of the property.

 

The process begins with a “contrato de promesa de compraventa de inmueble sujeto a condición suspensiva”. In the Bahía de Banderas area, real estate contracts are provided with a parallel English “translation”, which not very helpfully, informs the English speaker that he is about to sign a “real estate promise to purchase private agreement subject to condition precedent”. The agent’s legal person explained that “condition precedent” refers to the conditions that must be met for the contract to proceed.

 

Another puzzling passage of the agreement informs the buyer that he promises to buy the property “bajo la modalidad ad corpus”, rendered in the “translation” as “under the ad-corpus modality”. This, the agent’s lawyer explained, is the modality according to which the price is agreed in accordance with the individual value of the property as a whole, without any reference to any unit of measurement (i.e. the price is not determined on a square meter basis, but is negotiated and agreed on a per property basis).

 

Once Chris and I had understood this initial contract, a variety of (to us) rather obscure processes were set in motion. The sale had to be referred to the Mexican Ministry of Foreign Relations (fee 4,500 pesos/£20). This in turn led to a much larger charge of 23,000 pesos (c.£1,000) for a permit from the ministry. The other expensive charge was 24,000 pesos for something called “transmisiones patrimoniales” (“patrimonial transfer” or “property transfer”), which I think referred to some other process required by the government for a transaction involving a foreigner. The bank trust cost another £1,0000 or so and the property registry about £600. These charges plus the notary’s fees and expenses came to a total of 119,376 pesos (about £5,400), a hefty charge for a very modest terraced home.

 

Chris is now the beneficiary of a trust which owns a compact home at 38 Calle Playa de Golondrina, in the Fraccionamiento (housing development or estate) Palma Real. And as far as the constitution is concerned the prohibition of foreigners owning property near the coast has been upheld.  

Calle Playa de Golodrina, Chris' number 38 is the second house from the right