Legal Process

LEGAL PROCESS

JD'GAAIF will show you the correct Legal Process. We are a One-Stop-Shop to get you started with a Property Vacation Home combined with a Retirement Wealth Building Plan. We provide every service you need such as: 1. Providing the Property 2. Setting Up the Company 3. Accounts & Tax 4. Rental Program 5. Maintenance & Repairs 6. Immigration

Legal Structure - Understanding Your Options

Buying property in Mexico as a foreigner involves understanding specific legal frameworks, especially regarding properties near the coast or borders. While foreigners can own property, those within the "restricted zone" (50km from the coast or 100km from a border) require a bank trust (fideicomiso) or a Mexican corporation. It's crucial to work with a reputable real estate agent and potentially a lawyer, and to understand the associated costs and taxes.

JD'GAAIF will guide you through the whole legal process and recommend the correct stucture for you.

Key Considerations for Foreign Buyers:

Fideicomiso (Bank Trust):

Foreigners typically use this legal structure to hold property within the restricted zone, managed by a Mexican bank.

Mexican Corporation:

Another option for property ownership within the restricted zone is to establish a Mexican corporation.

SRE Permit:

Foreign buyers need a permit from the Ministry of Foreign Affairs (SRE) to register property deeds.

Real Estate Agent:

Engaging a qualified and experienced real estate agent is highly recommended.

Closing Costs:

Factor in closing costs, which include notary fees, registration, and taxes, typically ranging from 4% to 6% of the purchase price.

Property Taxes:

Mexico has property taxes (predial), which are generally lower than in the US, but vary by location.

Due Diligence:

Thoroughly research the property, verify the seller's credentials, and understand any potential title issues.

Financing:

Consider developer financing or securing financing from a Mexican bank.

Restricted Zone:

Properties within 50km of the coast or 100km of a border are subject to restrictions.

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The Duties of Your Notario

In Mexico, a Notario Publico plays a crucial role in real estate transactions, acting as a legal professional appointed by the state to oversee the process and ensure its legality. Their responsibilities include verifying property titles, drafting legal documents, collecting taxes, and registering the purchase with the Public Registry.

At JD'GAAIF we act on your behalf, ensuring all aspects of the transaction comply with Mexican law and bring in a third party neutral authorized Notario to check that everything is legally correct for you as the Buyer and for the Seller.

Key Duties of a Notario Publico in Mexican Property Transactions:

Verification of Legal Status:

The Notario Publico conducts thorough title searches to confirm the property is free from legal impediments, liens, or encumbrances.
Drafting Legal Documents:

They are responsible for preparing the escritura (deed) that transfers ownership of the property.
Ensuring Compliance:

The Notario ensures that all aspects of the transaction, including taxes and registration, adhere to Mexican law.
Facilitating the Transaction:

They guide buyers and sellers through the process, ensuring a smooth and lawful transfer of property.
Tax Collection and Reporting:

The Notario calculates and collects relevant taxes and fees associated with the transaction and reports them to the tax authorities.
Registering the Property:

They register the new deed with the Public Registry of Property, officially transferring ownership to the buyer.
Acting as a Neutral Advisor:

The Notario provides impartial legal advice to both the buyer and seller, ensuring transparency and fairness.
Maintaining Records:

They are legally obligated to maintain original records of all documents related to the transaction.

Choosing a Notario:

Independent Choice:

Buyers in Mexico have the right to choose their Notario Publico, independent of the seller's preference.
Experienced Professionals:

It's recommended to choose a Notario with experience in real estate transactions and preferably one who specializes in transactions involving foreigners, especially in coastal or border areas.

Notario Fees:

Fee Structure: Notario fees are typically based on a percentage of the property's value, as set by the Bar of Notaries, and are payable by the purchaser.

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Transfer of Funds - Correct Procedure

To correctly transfer funds for buying property in Mexico, particularly for foreigners, it's crucial to understand the regulations and best practices. Wire transfers are the most common and secure method, especially for larger amounts, though services like Wise.com can be cost-effective for smaller transfers. For properties within the restricted zone (near coastlines or borders), a bank trust (fideicomiso) is usually required, managed by a Mexican bank.

Key Steps and Considerations:

Bank Account:

You can transfer funds from any global bank account but if you don't already have one, we recommend to open a Mexican bank account to facilitate the transfer of funds for local payments to Lawyers & Notarios etc.
Wire Transfers:

Most banks offer wire transfer services, which are recommended for security and are often the only option for property purchases.
Exchange Rates and Fees:

Be aware of the exchange rate and associated fees from your bank when converting from your currency to Mexican pesos or US dollars (as many properties are listed in USD).
Money Laundering Regulations:

Be prepared for potential additional checks to verify the source of funds due to money laundering regulations. The funds MUST be transferred from a matching Bank Account to the name of the Buyer. The Buyer is the person who makes the initial Purchase Offer, is the name on the Purchase Agreement AND will be the future legal owner of the Property, irresepective if ultimately the Property is held in a Fideicomiso or Mexican LLC of a dififferent name.
Fideicomiso (Bank Trust):

If the property is within the restricted zone, you'll need to establish a fideicomiso with a Mexican bank, which holds the title for 50 years and can be renewed.
Public Notary:

The property transfer must be conducted before a public notary, who is legally responsible for ensuring all documents are in order and taxes are accounted for.
Legal Due Diligence:

Engage a lawyer to conduct due diligence on the property, including title searches and other necessary checks.
Closing Costs:

Factor in closing costs, which can include transfer taxes, notary fees, recording fees, trust formation costs, and potentially attorney fees.
Taxes:

Be aware of property taxes, including both one-off and ongoing costs, and seek professional tax advice from a local expert.
Restricted Zone:

Understand the restrictions on foreign ownership within the restricted zone, which generally requires a fideicomiso.
Alternative Payment Methods:

While wire transfers are the norm, discuss other options with the notary public or your legal representative.
Professional Advice:

Engage a Mexican lawyer and possibly a financial advisor to guide you through the process and ensure a smooth transaction.

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Closing Costs & Fees in Mexico

Closing costs for buying property in Mexico typically range from 4% to 8% of the purchase price. These costs are the responsibility of the buyer and include various fees like transfer taxes, notary fees, and the cost of establishing a bank trust (fideicomiso). It's recommended to budget for these costs early in the buying process, as they can significantly impact your overall expenses, according to Pacifico Property. Here's a more detailed breakdown:

Key Closing Costs:

Property Transfer Tax: This is a state-level tax, typically around 2% of the property value.
Notary Fees: Notaries play a crucial role in real estate transactions in Mexico. Their fees are based on the property value and the complexity of the transaction.
Trust Permit (Fideicomiso): If the property is located in a restricted zone (within 100km of the coast or 50km of the border), a bank trust is required. This involves fees for establishing the trust and an annual fee.
Land Registry Fees: These are for registering the property transfer and can vary by location.
Appraisal Fees: An appraisal may be required for tax assessment or financing purposes.
Other Potential Fees: Depending on the specific circumstances, you may also encounter costs for title insurance, inspections, or legal fees for your lawyer.

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The Duties of Your Lawyer

At JD'GAAIF we get involved at all levels of your purchase. Not only are we real estate professionals we are also licensed lawyers. This extra layer of protection gives you complete peace of mind that whatever you are purchasing will be done right and your investment will be safe and selcure for the long term.

Steps to Buying Property:

Find a Property: Work with a Licensed Real Estate Agent & Licensed Lawyer to find suitable properties and conduct initial research to establish Title Deeds etc.

Make a Written Offer: Once you've found a property, negotiate and make an offer with the help of your Lawyer, potentially subject to inspection.

Secure Financing: If financing is needed, explore options such as developer financing or a Mexican bank loan.

Sign the Purchase Agreement: Once terms are agreed upon, sign a purchase agreement with the seller.
Tip: Make sure the Purchase Agreement has a Fixed Price reference to BOTH Mexican Pesos AND USD. If buying Pre-Construction your final payment in 12 months time could be affected by future exchange rates. Listing both currencies on the Purchase Agreement effectivly locks in the rate at time of signing.

Obtain SRE Permit: Apply for and obtain the required permit from the Ministry of Foreign Affairs.

Establish Fideicomiso (if applicable): If the property is in the restricted zone, set up a bank trust with a Mexican bank.

Finalize the Purchase: Pay the agreed-upon price, closing costs, and taxes.

Obtain Homeowner's Insurance: Secure homeowner's insurance for your property.

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JD'GAAIF Litigation Services

Litigation in Mexico, while evolving, can be complex and lengthy, requiring a thorough understanding of the legal system and the specific procedures involved. It's crucial to be aware of potential costs, as litigation can be expensive, and the process can take several years. However, Mexico's legal system is characterized by strong civil and commercial procedural laws that allow parties to present their case, offer evidence, and file final pleadings.

At JD'GAAIF we specialize in all types of property and real estate disputes on your behalf. We can help you if you have a dispute with a Developer or Builder, a Land Title dispute, or even a simple neighbor dispute.

Key Aspects of Litigation in Mexico:

Jurisdiction:

Jurisdiction of a judge is typically determined by the defendant's domicile, the subject matter of the dispute, or the amount of the claim. Parties can agree to consensual jurisdiction, often waiving other jurisdictions in favor of Mexican courts.
Alternative Dispute Resolution (ADR):

Mexico's legal system encourages ADR mechanisms like arbitration, mediation, and other alternative dispute resolution methods.
Stages of Litigation:
1. Settlement Negotiations: Negotiations to reach a settlement are a common first step, and experienced litigators can help draft settlement documentation.
2. Filing a Lawsuit: If a settlement cannot be reached, a lawsuit is filed, and the case proceeds to court.
3. Trial: The trial process involves evidence presentation, arguments, and a final decision by the court.
4. Appeals: Parties can appeal decisions within specific timeframes, but new evidence is generally not admissible at the appellate level.
Costs and Time:

Litigation can be costly, and the time to resolution can vary, but it's not uncommon for cases to take up to two years from start to finish.
Enforcing Judgments:

Enforcing judgments in Mexico can also be a time-consuming process.
Specialized Litigation:

Mexico has specialized courts and procedures for various types of litigation, including employment, commercial, and environmental cases.
Impact of Recent Reforms:

Recent judicial reforms, including the implementation of the National Code of Civil and Family Procedures, are shaping the landscape of litigation and arbitration in Mexico.

Tips for Navigating Litigation in Mexico:

Seek Experienced Legal Counsel:

Engage a lawyer experienced in Mexican litigation who can guide you through the process and advise on the best strategy.
Assess Claims Thoroughly:

Evaluate the strength of your claim, potential remedies, and the risks involved before initiating litigation.
Explore ADR Options:

Consider ADR mechanisms as a faster and more cost-effective alternative to traditional litigation.
Understand the Legal Framework:

Familiarize yourself with the relevant laws, procedures, and timelines involved in Mexican litigation.

By understanding these aspects and seeking appropriate legal advice, you can navigate the litigation process in Mexico more effectively and potentially achieve a favorable outcome.

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