Why do I need an independent lawyer to do a title search?
You need a lawyer because real estate agents are not legal experts trained to assess litigation risks, land claims and communal land disputes. You need an independent lawyer because a lawyer referred by the real estate agent might be more interested in closing the deal than in preventing you from buying a problem.
As a foreigner, it is important to have the advice of a real estate agent and that of an independent lawyer to carry out a due diligence, because you need to obtain much greater security to carry out the purchase of property, particularly beach front property.
In Mexico, from the 1930s up until the 1970s, title to beach front land was given to “Ejidos” (communal land used for agriculture). When Quintana Roo was granted statehood in 1974 it was ruled that the Ejidos bordering the sea also owned the beach front land and access to the Caribbean Sea. This made the land owned by the Ejidos very valuable, though selling it back then was forbidden.
Cancun also began to develop in the 1970s from a small coconut plantation to what it is today. At that time Playa del Carmen, Cozumel, Isla Mujeres and Tulum were small towns with no more than 2000 inhabitants each.
Nowadays Quintana Roo has more than 200 Ejidos, stretching from Cancun to the state capital Chetumal, including Tulum, Cozumel, Playa del Carmen, Bacalar, etc. The communal land of the Ejidos is not registered in the Public Registry of Property (with offices in Chetumal, Cancun, Playa del Carmen and Cozumel), but in the National Registry of Agricultural Land (with an office in Chetumal and the central office in Mexico City).
The Ejidos were granted the ability to rent or sell their land in 1991. In order to do so, they need to follow a very specific process to convert the communal land into private property, subject to the approval of all the landowners of the Ejido. The land cannot be subsequently sold to foreigners.
Some developers jumped at the opportunity to acquire prime beach front real estate from the Ejidos before the land turned into private property and could no longer be sold to foreigners. Some developers rented the land, and some entered into private agreements with an Ejido. Some deals went well and some deals went really, really badly.
Within a few decades the rented land changed hands many times. Mexicans and foreigners alike built restaurants, houses and hotels, and some owners ended up losing their rights over the land. For example, in Tulum in 2014, four hotels were forced to close because they were found to be illegally located on land that was not properly transferred. In 2016, the same thing happened to sixteen hotels and two houses. These cases were widely reported in the media, but not isolated incidents.
Because of the complex legacy of Ejidos, we strongly recommend foreigners who are new to Quintana Roo to consult with an independent lawyer and conduct an exhaustive title search for any property they are interested in acquiring, both in the offices of the National Registry of Agricultural Land in Mexico City as well as the offices of the Public Registry of Property in Quintana Roo. Additional research should include interviews with communal landowners and elders before buying or leasing property, particularly beach front property closes to the main towns of Cancun, Playa del Carmen, and Tulum.
Real Estate Agents are not legal experts trained to assess litigation risks, land claims and communal land disputes. The hiring of a Real Estate Agent and a lawyer mainly differs as follows:
The information a good real estate agent collect is:
1) Information about the property title.
2) Information about the seller. And 3) Information on the price at which similar properties have been sold in the area.
The information a good lawyer collect is:
1) Information on the property history recorded in the Public Property Registry.
2) Legal information about the seller (including the lawsuits that exist against him in various places).
3) Information on the property history when the property is not in the center of the town or when it is close to an Ejido, or to an area that was once ejido.
4) Interviews with neighbors about property problems with the area where the property is located.
5) The conditions of the contract.
6) Analysis of the conditions for delivery of the property and determination of comprehensive legal risk.
In Mexico only some States require accreditation from the Real Estate Agent. And even when the Real Estate Agent is accredited, his responsibility is not to identify, mitigate and prevent legal problems, but to recognize evident frauds. Even though the Notaries Public in Mexico intervene in sales and the Notaries are always lawyers, most of the condominium sales contracts for foreigners are made through a private document without the participation of a Notary Public, since foreigners regularly cannot acquire property in Mexico except through a trust, and the trust is not formed until the price is paid and the property is legally built and ready for deed.
So, when foreigners buy property, they usually do so by signing two contracts:
1) A Private Purchase Agreement in which they agree to pay a price and
2) After the price is paid, a formal purchase (or title) through a Public Deed of Trust, if the property was built, delivered and if the payment was completed.
Foreigners who do not have the assistance of lawyers in the preparation of the Private Purchase Agreement are exposed to many risks, including:
A)Consent to the contract, clauses that may jeopardize your investment.
C) Collection of excessive commissions.
D) Accept clauses that due to legal ignorance, may put your investment at risk.
When a foreigner wishes to acquire real property in Mexico, through a real estate developer, their purchase will be regulated mainly based on the Contract they make, so it is extremely important that you as a potential buyer have legal advice prior signing a contract.
The way to protect the buyer, is with the negotiation and correct elaboration of the contract. This is even more important in Mexico than in the United States or Canada, since in Mexico it is more common to buy from real estate developers who have one or two projects, or that work through special-purpose companies per project, instead of real estate developers with dozens of projects in their portfolio with an accredited reputation. Discuss your case with us, Schedule a Free Call.