Buying Foreign Property

timeshare

Watch Out Buying In Mexico…

A few years ago my sweetie pie Donna and I spent a lot of time in a little Mexican town called Melaque. We stayed in a beachfront Mexican hotel called the Santa Maria, at the time inexpensive and very friendly. Lots of other Canadians and Americans came down and stayed there for the whole winter. The non-operating hotel restaurant was right on the beach. All the hotel residents used it for their own cooking and for regular fantastic nights of potluck and entertainment. It was paradise!

Frequently the talk turned to, “wouldn’t it be great if we had a place down here.” Some people actually bought property going through a completely unfamiliar buying process. There was property also called ‘ejido‘ land. There was a chunk of ‘ejido’ on the beach right in the middle of town. None of us quite knew what an ‘ejido’ was, but it seemed strange because this large, beautiful, and obviously valuable property was piled high with garbage and a few shacks. Some said the ‘ejido’ was like an Indian reserve available only to indigenous peoples.

 

It turned out an ‘ejido’ was a group of people who live communally and work on a particular piece of property. ‘Ejido’ lands were born of the Mexican Revolution, which, as much as anything, was a fight by the landless peasants against the tiny (but fabulously rich) aristocracy. After the revolution, vast tracts of land were set aside for ‘ejidos’.

Details were hard to come by and nobody bought ‘ejido’ land. We were all having way too much fun with Richie ‘Coyote’ Smith and his numerous friends from Chicago.

Years later, I heard a story that brought back some good memories along with a splash of cold hard reality. It was about Tenacatita, a beautiful little Mexican town right up the beach from Melaque where we spent all those wonderful months. Siegfried Schiffmacher from Surrey BC and approximately 40 other foreigners, including many Canadians, bought property in Tenacatita that they thought had been ‘ejido’ land. They hired notaries to investigate the property and did lots of diligence. It seemed that all proper, legal steps had been taken to convert the ‘ejido’ into property that could be purchased privately including by foreigners. The land had been surveyed and titled. Titles were signed by Mexican presidents Vicente Fox and Felipe Calderon. Purchase paperwork was signed, money changed hands, and homes were built.

On August 4, 2010, 150 state police showed up and evicted everyone from almost 40 hectares of land on behalf of a developer from Guadalajara. He had purchased the land in 1991 based on a 1977 Mexican Supreme Court decision that the land had never been ‘ejido’ land . The developer filed a complaint in 1993 to enforce his title. 17 years later Mexican courts confirmed the developer’s claim leading to the evictions. Unless an appeal is successful, the developer now officially owns all of the properties and all of the improvements with no obligation to compensate. All those investors have lost everything.

Questions from afar:

  1. Conversion of ‘ejido’ land to private property is not supposed to occur if there is pending litigation. Why didn’t the investors’ legal representatives know of the developer’s complaint filed in 1993?
  2. Would Title Insurance have helped? Quite possibly!
  3. Can you ever be sure of obtaining ‘good title’ to Mexican property?

Lessons Learned:

  1. Foreign ownership is tough—no matter where you buy.
  2. Ask your local lawyer/notary for a guarantee of title. When he most likely says he doesn’t guarantee titles, ask him to detail the possible issues that could deny you title.
  3. Poke hard at those issues, ask lots of questions, and get a solid understanding of your risk.
  4. Review your purchase with a Canadian or American lawyer experienced in Latin America.
  5. Consider purchasing title insurance. Show your title insurer this article and ask them if they would have covered this problem. Ask what they don’t cover.

 

Need a real estate lawyer in Alberta? Contact Barry McGuire now.

“timeshare ownership in Ibiza” image by Grace Garcia used under CC Attribution 2.0 Generic.