The process Holly and I went through in purchasing Ejido property here on the coast of Jalisco was not an easy one. Fortunately, our seller, an expat who had Carte de Poder (Power of Attorney) for the property was someone highly acclimated and 100% fluent, and thus able to navigate the brutal bureaucracy involved. Even with that, the process nearly killed him – literally.
“The fact that there are two types of title creates considerable confusion for most Foreign investors“
To start with the property needed to go through the process of “dominio pleno” a solicitation to have it removed from the community Ejido land holdings. Next, it had to receive state approvals on its way up the food chain to the final application for titling by RAN (Rural Agrario National) in Guadalajara. Once titled, it still had to be registered back at the state level, then returned for a final “derecho del tanto” (right of first refusal for Ejido members) and payment of taxes at the Ejido level.
Normally, once titled by RAN, a coastal property can be held in fideicomiso bank trust and even receive Title insurance with an expat named as the beneficiary. In our case, however, we had to form a Mexican corporation due to the size of the two parcels. This process added an extra six months. In total, the process, start to finish, took three years, with plenty of under-the-table “tips” paid along the way by the seller.
(For more of the back story, check out my memoir “The Mexico Diaries, A Sustainable Adventure” rated 4.7 stars at Amazon/Kindle: https://goo.gl/FHJ94q)
The following is offered as a quick-start trouble-shooting guide to any foreign nationals considering the purchase of ejido, or recently privatized ejido property, particularly in the federal restricted coastal zone.
1) Any deal to purchase property that is still part of an ejido (communal land holding) should be considered RISKY. Regardless of what you may be told, using a Mexican national as presta nombre (borrowed name) or any other means to purchase ejido property in the restricted zone can never be a fail-safe proposition regardless of having powers of attorney (carta de poder) or a will (testimento) in place. While many people have successfully “owned” property for years in the name of a presta nombre, there seems to be increasing financial/development pressure that is making that vehicle for holding property ever less stable over time.
2) The litmus for determining if a property is actually private, and not still part of the ejido, is possession of a Title from RAN (Registro Agrario National). A word of caution, however; many sellers will say that properties are titled, and will wave around what’s called an “escritura”, however, these are usually ejidal deeds and are not the same thing as a full RAN title, or acceptable as instruments that can be held in a bank trust. The fact that there are two types of title creates considerable confusion for most Foreign investors, however, any Notario can easily determine if the title is a proper RAN title, the kind necessary for a secure purchase. It should also be noted that converting a Ejidal escritura to a proper RAN title can take years. Beware of anyone claiming otherwise. There is a cluster of titles in our town that have been in process since 2006!
4) It is advisable that any deposit money paid should be accompanied by a formal compra y venta agreement, best reviewed by a Public Notario’s office. A formal compra y venta will be drawn up for privately titled property only, not ejido property. Any purchase agreement other than a formal approved compra y venta should be considered extremely risky. Consideration should also be given to the facts that realtors aren’t licensed, escrow accounts are rarely used, and that even deposit money accompanied by a formal compra y venta may be at some risk.
Note here also that even with a compra y venta agreement in place, all members of the ejido are constitutionally entitled to the first right of refusal before the first sale of a property out of the ejido.
5) Final purchase, payment, and transfer of title should be conducted under the supervision of a Public Notario’s office only.
6) Even with proper RAN title and/or municipal subdivision approvals for deeded lots, there are still risks! Unlike the U.S. (or Canada?) where municipal approvals cover the liability for adherence to federal environmental rules, approvals granted Mexican municipalities do not cover this liability. Any subdivided property being sold without a prior Estudio Impactal del Medio Ambiente (Environmental Impact Study) is still at full risk for future fines or even forfeiture for any existing or future development done without the study. In many cases, a Forestry study will also be required.
7) A final cautionary note. Even if you are confident that your papers are all in order, keep in mind that the Mexican legal process makes the legal system in the U.S. look like a bullet train. Legal battles can take many years to resolve, if ever, and a legal fight is usually a true battle of attrition, and largely stacked toward the Mexican nationals.
Good Luck Amigos. Buying property in the restricted coastal zone is definitely not impossible, but it should be considered a gamble, and like all gambling, it should not be done with more than you can truly afford to lose. Purchasing property in the interior, where fee simple deeds are easily acquired, is a straightforward process very similar to the U.S. or Canada. Striking a deal to lease or build on a Mexican’s land are other options that are often successful.