Policy wording for Mexican property insurance

Property insurance policies sold in Mexico differ from policies you are used to seeing in your home country. The policy wording is unique, and the types of coverage offered by insurance companies is different here, so some things that you would expect to be included as standard, might not be present if you purchase your insurance in Mexico directly from a Mexican insurer.

Familiar policies, fully underwritten in Mexico

To help foreign residents who own property in Mexico to purchase insurance products familiar to them, specialist companies based in the U.S. have developed property ownership insurance policies which reflect the wording, terms and covers included on US and Canadian policies.

The insurance policy is fully underwritten by a Mexican insurance company (by law, it has to be this way), but the U.S. companies work in partnership to create a product that is familiar to those purchasing insurance in the US and Canada, and which is legally sound under Mexican law.  The premiums are paid in US dollars and any pay-outs are also paid in US dollars.

Policies to suit your situation and needs

The home insurance policies available in the market offer a wide range of options, and you can choose what to include and what to exclude as part of your coverage plan.

Depending on where your home is situated in Mexico, the risks (and coverage) you need to insure against will vary. For example, homes near the coast should be insured against hurricane damage and earthquakes, whereas inland only cover for earthquakes (and perhaps flooding, if you home is situated near water) will be needed.

Home insurance policies cover a wide range of eventualities and the most common coverages include reimbursement of costs related to:

• Damage caused by hurricanes and earthquakes
• Damage caused by and wind storms and floods
• Injuries to housekeepers and other workers in your home
• Burglaries and vandalism
• Damages to third parties, e.g. falling trees
• Coverages for owner-specific liabilities, e.g. in condos

You can cover all risks or named perils

Policy options and choices include all risks versus named perils, whether to cover assets like outbuildings surrounding the main property, and the option to insure your personal goods.

• The better policies will include coverages for third party liability: this is  helpful in the event that someone who does not live at your home meets with an accident on your property, or where some damage is caused to a neighbor, e.g. by a falling tree.
• This article about third party liability in relation to your home shares more details.
• Other considerations to take into account when you’re assessing your insurance needs include purchasing cover for any watercraft you may own, as well as special arrangements for condos, where some liabilities are shared and some are owner-specific.

Regardless of the type of insurance you choose, the insurer underwriting the policy is far more important than the broker or agent selling you the product: in the event of a claim, the integrity of the underwriter will determine pay-outs, not the insurance broker.

Learn more about caring for and insuring your home in Mexico

Mexperience publishes extensive information to help you plan and care for your home life in Mexico through guides, articles and free eBooks:

• Free eBook: House maintenance and home security
• Latest articles about property insurance
• Articles about real estate in Mexico

Comprehensive guide to real estate in Mexico for buyers, owners, sellers and renters—continually revised and updated.

Extensive and detailed guide to real estate in Mexico

Our comprehensive guides to real estate in Mexico introduce you to essential information about property in Mexico whether you are:

• Renting property in Mexico;
• Buying a home in Mexico;
• An owner who needs to insure and maintain the property;
• An owner who plans to rent a property in Mexico;
• Selling your home in Mexico; and
• Working with Real Estate Agents in Mexico.

Property rental in Mexico

We publish detailed guides about all aspects of property in Mexico, including renting residential property here.

Property purchase in Mexico

Connect to detailed and exhaustive guides about buying and owning property in Mexico.

Owning and maintaining a property in Mexico

Browse detailed information that helps existing property owners manage, maintain, and insure their property in Mexico.

Insurance for your home in Mexico

Helpful guides and insights to help you consider how to get the right level of coverage for your home and property in Mexico, including coverage against third party liability damages.

Selling your home in Mexico

When you come to sell your residential property in Mexico, our guides and articles give you practical insights to help you prepare, market and sell your property.

Working with realty agents in Mexico

Insights and tips for finding and working with a local realty agent in Mexico, whether you are renting, buying or selling a property.

Learn more about real estate in Mexico

We continually update our guides and articles about matters related to property and real estate in Mexico.  Connect to further resources for insights and connections:

• Latest insights about real estate in Mexico
• Latest insights about renting property in Mexico
• Tips and insights about insurance for your Mexican home
• Latest insights about realty agents and agencies
• Connect to professionals who can help with property closings

Your home’s interior design has the potential to inspire and lift you every day, and when you’re creating your dwelling spaces in Mexico, it makes sense to take inspiration from the natural habitats that surround you, as well as the local environment, and regional culture.

Interior design for your house in Mexico

Daniela Bahena is a professional interior designer with degrees in architecture and interior design. She brings her knowledge and expertise in these disciplines to interior home decoration projects, combining beautiful aesthetics with in-depth awareness about construction, use of materials, and appropriate approaches and techniques for the surrounding environment.

She’s passionate about creating interior spaces that transform a house into a home, blending her clients’ priorities and lifestyles with the warmth and charm of authentic Mexican design.

Daniela helps you to define the intention and purpose of each space you want to transform. Her design approach focuses on harmony and balance to create functional spaces you’ll enjoy and feel well inside, every day.

By applying her background in architecture and interior design, Daniela offers solid advice that considers your house build, the local surroundings, and climates through the seasons; selecting appropriate materials and including design elements that are aesthetic and durable.

Daniela’s experience and support help you avoid making material mistakes and falling into common pitfalls by providing a structured approach to your home’s interior design.

Benefits of working with an interior designer

When you’re making plans for the transformation of the interior spaces in your Mexican home, working with a professional designer offers key benefits, including:

• Taking command of your interior design project, guided and facilitated by an experienced professional who composes a detailed schema with step-by-step support to help you through each stage of the design and implementation.
• Carefully structured consultations that help you to define your intentions, give your project a clear direction, and enable you to visualize the look & feel of your home spaces.
• Have a design schema created for your individual situation and that meets your lifestyle and functional requirements, and that matches your budget.
• You’ll also save time and obtain value for your budget with a reference list of suppliers in Mexico that sell the materials and elements needed to realize your design project—included in the final schema.
• Whether you intend to undertake the interior design work yourself (DIY), hire local professionals to help, or a combination of these, having a carefully thought out plan and defined schema will help you to make the most of your budget and avoid material mistakes that can cost considerable time and money to put right.

You don’t have to be legally resident to own a home in Mexico

You do not have to be resident in Mexico to own property here, so there is no need to qualify for residency status under the immigration rules to buy land or a house—whether you purchase directly, or through a property trust.

Note, however that when you sell the property, there are certain property capital gains tax allowances that you may access only if you have legal residency in Mexico.

Mexican law on property ownership

Mexican law on property ownership is comprehensive and provides protection for the seller and the buyer in all property transactions provided that the law is followed, and you (most usually through a Notary Public) ensure that all necessary documentation is present and that the procedures are adhered to.

Mexican law provides for private ownership of land by foreigners, and its law is specific about the way in which land rights should be transferred from seller to buyer.

A Notary Public will guide you through the details of these, but generally:

• Property may be purchased and owned outright for residential use by foreign nationals outside of the 100km (~62 mile) restricted land border zone, or outside of the 50km (~31 mile) restricted coastal zone.
• Inside of these restricted border and coastal zones, foreign nationals may own land through a fideicomiso (a property trust) which is set up through a local bank and provides for ownership of the land and/or property in all but name. See the section below for more details about this.

Permit required by foreign buyers

If you are not a Mexican national (natural or naturalized) and depending on which Mexican state the property or land is situated in, the transaction may require a special permit that grants a foreign national the right to hold title deed of a property logged in their name on the Federal Register.

Check with the Notary Public in the state where you are purchasing dealing with your transaction, who will advise you if this is necessary in your case and will usually offer to manage the filing on your behalf if it is.

Whether the land or property you intend to purchase is situated inside or outside of the restricted zone (see above), foreign buyers must apply for and obtain a permit to acquire property in Mexico.

By applying for the permit and accepting its terms, foreign buyers agree that they will not seek the intervention by their home country’s government in any matters related to the property, and that they submit to the exclusive jurisdiction of Mexican civil courts in all matters and disputes related to the property.

The permit application carries a fee and typically takes around six weeks to process and get issued—but timescales can vary.  Once the application is filed, the official file number may be used in reference for matters related to the property transaction while you wait approval and issuance of the permit.

The application for this permit is made to the Secretaría de Relaciones Exteriores, Mexico’s equivalent of the US State Department, who is responsible for processing and issuing the permits.

This Federal Law requirement was reintroduced in 2022, but we are told by associates that some states in Mexico are not enforcing it at present. Talk to your property agent and/or Notary Public for further details about this in the place where you intend to buy.

See also: Costs and taxes of buying property in Mexico

Fideicomiso: property land trusts in Mexico

The Mexican Constitution forbade foreign nationals from owning property that was within the restricted border zones. This law was intended to protect Mexican soil from foreign invasion, and a property trust provides a means for non-Mexicans to buy and hold land and property if it’s physically situated within about 30 miles of the coast, or within about 60 miles from a land border.

To enable non-Mexican persons to invest in land and property inside the restricted zones protected by the country’s constitution, the Mexican government introduced a system of land trusts—essentially a special type of investment ‘wrapper’ that enables you to legally and securely hold title of property in all but name.

In practice this means that any non-Mexican national who wants to buy a home with an ocean view, or near the beach or a land border with Mexico, they can do so by means of a special property trust, which is set up and managed through a local Mexican bank.

The trust holds the deeds to the property, and you and/or other persons named in the trust are sole beneficiaries to that trust—and by extension, to the property that is folded into it.

The trust gives full rights to do whatever you like with your property:

• It can be developed (in accordance with local planning regulations).
• It may be rented or leased.
• It may be sold, or given away.

The trust thus enables you to own the property in all but name.

The trust also enables you to name a beneficiary or beneficiaries to it, so you can bequeath it (and by extension, the property) to others.  Some people choose to buy Mexican property through a trust even if the property is not situated inside the restricted zone, as part of their estate planning preparations.

See also: Costs and taxes of buying property in Mexico

The role of the Notary Public in Mexico

The Notary Public is the most important legal person you will deal with when you make a property purchase investment in Mexico.

Under Mexican law, the title deed to the property must be prepared by a Notary Public, and the Notary is also responsible for calculating and reporting tax duties owed to the Mexican tax authority arising from any property transaction.

As a buyer, it is your right to choose the Notary Public you wish to work with, and it should be your first port of call after you have agreed in principle to purchase a property in Mexico.

Experienced buyers choose their Notary Public independent of the seller’s preference or advice.  The Notary Public will ensure that all documentation and permits are in order so that the transaction can proceed.

Read more about finding and working with a Notary Public in Mexico.

‘Ejido’ land and Title vs Possession in Mexico

You should be aware of ‘ejido’ land in Mexico, as there is a lot of it; and while many properties and developments now built offer a legal title deed, some properties continue to be transferred on ‘agrarian’ terms.

About Ejido land in Mexico

Ejido (agricultural) lands have a long history in how they came into being; these properties are akin to “commons land.”

The ejidos are usually owned by a community of local people and possession of the land is passed down through generations within the communities which own the parcels.

These land parcels do not have legal title (property title deeds – see next section) and any matters and disputes related to them are dealt with by local comuneros, at agrarian courts, usually termed Asambleas —assemblies— that meet about once a month and are led by the elders of the local community.

Legal Title vs Possession

There is a distinction between ‘commons’ land and land that is registered with a Title Deed recognized and enforced by Mexican civil law courts.

Some types of property in Mexico, especially rural or semi-rural properties —and some that are quite desirable— are only available for purchase under Agrarian terms, and while this type of property transfer gives you possession, it does not offer legal title.

Read more about buying, having, and selling property without title deed in Mexico

Title insurance for your Mexican property

Some buyers consider taking out title insurance on the property they buy in Mexico. Title insurance covers you should the property you buy subsequently turn out to have liens associated with it.

This is especially relevant if the property you are buying has been privatized, having previously been classified as being “ejido” (or “common”) lands (see previous section); but even if this is not the case, title insurance will protect you if any other previously unforeseen lien or charge is brought against the property before you took possession of the title deed.

Rates for title insurance are around the equivalent of USD $5-6 per USD $1,000 of the property’s sale value; payable once only at the point of purchase, before you close.

Consult a realty agent or other legal or consulting professional regarding matters relating to title insurance. There are several insurance companies that now offer title insurance for Mexican property and, as the number of providers increase, rates should become increasingly competitive.

Choosing the right location for your purchase

As with property purchase in any country, the location in Mexico where you choose to buy is all-important. It’s better to buy ‘less house’ in an optimum location than to purchase ‘more house’ in a sub-optimal location.

Choosing places to live in Mexico

To help you discover and explore potential places to live here, Mexperience publishes a curated list of locations to consider for living, working or retirement in Mexico—organized by popularity and notoriety and classified by the location type

Do the (back)groundwork

It’s unwise to buy on impulse in an area based on your first impressions, especially if you’re on a leisure visit there.

It’s prudent to be familiar with the area and the locale in that area where you intend to invest.

Also ask yourself how marketable the property is in its current condition and location, especially if you are planning to rent it, or should you want to sell it later.

You may want to rent something nearby to start with and get a feel for the place. Once you’re living locally you can assess things like the atmosphere, the local climates, the neighborhood in general, and get to know the locals so that you can get a genuine understanding for what it’s like to live there.

Match your needs with your location

Consider your current and changing lifestyle needs as you make your choices about the location for your property investment.

Real estate purchases require patient capital in Mexico as not all markets are as fluid as places in the US, Canada, or Europe can be—it might take more time to sell a property than you imagine.

Ongoing management of your property

Learn more about maintaining and securing your home in Mexico here on Mexperience.

Learn more about property in Mexico

Mexperience offers detailed insights about property in Mexico for buyers, owners, renters, and sellers.

• Latest articles and insights about real estate in Mexico
• Working with a realty agent in Mexico
• Insuring your Mexican home
• Enjoying your home and home life in Mexico

This article describes the “off-plan” property market in Mexico and some key considerations potential buyers ought to keep in mind before agreeing to buy a home in this way.

“Off-plan” properties offered by developers

Most “off-plan” property sales are offered by developers at the early stages of the project before construction begins, and/or during stages of the project’s physical construction.

Property developers like off-plan sales as it helps their cashflow and the project’s costs can be at least partly allayed before any ground is broken, or as construction begins.

Off-plan projects also help developers to gauge the level of interest for the project in the market and the price levels which buyers are prepared to pay for properties being offered as part of the prospectus.

Discounts and incentives versus off-plan risk

There is an additional element of risk with off-plan purchases that does not exist when buying a pre-built home, and in return for assuming the additional risks off-plan investors (buyers) are enticed with a number of incentives.

The most common incentives offered to buyers are:

• a discount on the advertised “market value” sales price,
• a custom choice of decorations and furnishings, and
• the opportunity to pick from the ‘best available lots’ within the development complex.

Off-plan investments have become more popular as property buyers have become more affable towards investment risks of various types in return for a higher potential reward.

The most sought-after element of off-plan purchases is a discount in relation to the advertised market price, offering the potential of a bigger capital gain from the outset. In some cases, buyers may try to quickly sell the property (called ‘flipping’) when construction is completed if the market is buoyant and buyers are willing to pay a premium when they see the completed project.

Securing a ‘good lot’ (that usually means a decent garden space and/or view) is also attractive to off-plan buyers as the location of the lot within a complex or the view offered by a particular unit on the development can add value and make it easier to rent out, and eventually sell.

Turning a profit in a rising market can be straightforward with off-plan investing; however, care must be taken to gauge market conditions and you must have an excellent understanding of true market values in the locality where you are buying in order to negotiate the right level of discount for the additional risk you are assuming as an integral part of the contract.

If you are buying off-plan you should negotiate a level of price discount that reflects the additional risk that you are assuming as part of the investment. The discount should be based on your own impartial assessment of the estimated value of the property when it is fully completed and delivered.

If you cannot see sufficient reward for the risk you are buying into, be prepared to walk away if you cannot negotiate an appropriate deal from the developer.

The process of buying “off-plan” in Mexico

The process of buying “off-plan” starts with the signing of a contract and with it, your agreement to buy a certain property based on an architect’s plan (a scale model might also be shown) using a defined set of staged payments.

In some cases, construction might have started already, and you will be able to visit the building site.  The final payment stage is usually held back until you are fully satisfied with the delivery of the property and facilities you expected under the terms of the contract.

Potential buyers should undertake due diligence before signing any contacts, and extend caution if a developer insists on being paid a substantial sum (as a percentage of the total sales price) in any of the staged payments.

Key considerations for buying “off-plan” in Mexico

There are several important considerations to reflect upon when you approach a property investment in Mexico and additional matters to consider when buying a property “off-plan.”

Check the developer

Check out the developer. What other projects have they worked on? What projects are they working on now, other than this one? When were their projects scheduled for completion and when did they complete? What is the local reputation of this firm? What are previous customers’ experiences dealing with the developer? Don’t be afraid to ask for references, and follow-up with those references.

Don’t take prominent or extensive advertisement placements in magazines and newspapers, or the presence of a modern website and social media following as proof of establishment or reliability.

Most “off plan” sales are offered before ground is broken, but some projects might already be under construction when you are offered a unit for sale. You should not assume that because construction has begun that the project will be completed.

Ask locally and do your research. Don’t be afraid to ask incisive questions that put the developer on the spot about their reputation, track record, and anticipated completion dates for the project they are inviting you to invest in.

Key points about buying “off-plan”

Here are some additional pointers to consider when contemplating a purchase of property “off-plan” in Mexico:

Understand the risk: remember that when you buy “off-plan” you are taking investment risks on the property development project and the developer, as well as the wider market demand for property.

Due diligence: check the developer’s credentials, permits, and licenses; a local Notary Public will be able to ascertain the current legal state of a property development (you will need to hire their services at your own expense).

Don’t sign a contract you don’t understand: get a competent professional to review the contract and explain to you what is being agreed. It will probably be written Spanish and you might need an interpreter.  Any contracts presented to you in English will only have legal force in their original Spanish versions—don’t rely on the seller’s translation if they offer one.

If the development is cancelled: the contract ought to be specific about what happens if the development is cancelled or left partially constructed and incomplete—and what happens to the staged payments you have already made.  What are the realistic prospects of getting a refund if things go awry? This is one of the key risks of buying “off-plan.”

If you need to withdraw: the contract ought to specify what happens in the event that you cannot complete the staged payments or if you need to withdraw from the contract due to unforeseen circumstances in your own personal situation.

Cross-check the development plans

It sounds obvious to say, ‘cross-check the plans,’ but some people really do buy “off-plan” on the face value of the marketing brochures, or pretty-looking model mock-ups on display at the sales office, or because they can see some construction taking place already and assume everything is in good order. It may work out fine, but not checking the plans significantly increases the risk of your investment.

When you are buying a pre-built property, a good Notary Public will check the plans and permits carefully and tell you about any legal problems that may be present with them before your complete the transfer.

Before you buy off-plan, you should consider paying for legal services to undertake the same due diligence as you would make buying a pre-built property.  In all cases, the developer’s permits and licenses should be verified and your legal counsel ought also to verify that the transaction can lead to proper transfer of legal title.

Some plans never get approval from local authorities, some plans and construction projects come up against a plethora of other complications —too numerous to mention here— but suffice to say that an off-plan contract is just that: a plan, a proposal that is not yet realized, and you ought to be fully aware of that when you sign the contract and begin to make your payments.

Purchase price and total cost of ownership

Buying any real estate entails more than just the price of the property; ‘closing costs’ (legal and professional fees) and any associated taxes also need to be considered, even when you buy off-plan.

If the property you are buying off-plan is part of a condominium building or a gated community of some type —and most off-plan offers tend to be one of these— there will be monthly management fees (homeowner fees) to pay in addition to any other costs of ongoing ownership.

Find out what the management charges are going to be and remember that these can (and usually always do) rise year-on-year. Check the contract and its covenants carefully and hire a qualified and experienced professional to check it and explain the conditions and the obligations that you are subscribing to when you sign the off-plan contract and eventually take delivery of the property.

Learn more about property in Mexico

Mexperience offers detailed insights about property in Mexico for buyers, owners, renters, and sellers.

• Latest articles and insights about real estate in Mexico
• Working with a realty agent in Mexico
• Insuring your Mexican home
• Enjoying your home and home life in Mexico

The information published in this article is provided for general information in good faith and is not intended as personal, legal, financial or investment advice.

However, some types of property in Mexico are only available for purchase under Agrarian terms, and while this type of property transfer gives you possession, it does not offer legal title.  This article describes the difference and explores the practicalities of purchasing land or property on Agrarian terms.

Not all land is titled land

After the 1910-1917 Revolution, most of Mexico’s lands were divided into Ejidos: large land parcels which were owned collectively by many different people —often groups of families— who had the right to work the land, usually for growing crops and raising livestock.  Large swathes of Ejido land continue to exist today, and while there is a legal process to ‘convert’ Ejidos to legally-titled property, the process is involved and expensive.  It’s usually undertaken by specialist companies on large parcels of land which are then sub-divided and sold to property developers for use in residential, commercial, and tourism developments.

If you’re seeking something off-the-beaten track in Mexico, you might find that certain properties you’re offered —some with very desirable/idyllically-located homes built on them— are not legally titled but instead classed as communal property.  These types of properties are most usually situated in rural or semi-rural areas and might only be available for purchase under an Agrarian arrangement.

Practicalities of land possession vs land title

Many people purchase, pass quiet enjoyment of, and sell their right of possession of untitled properties without any trouble. However, if a property you fall in love with is only available on Agrarian terms, it’s as well to be aware of the practicalities and risks.

No legal title

Property designated to you under an Agrarian arrangement does not constitute legal title: your possession of it holds no force in Mexican civil law and any matters related to it will only be heard by the Agrarian Court (or Assembly) which adheres to its own code.

No title deed

When you purchase right to possession instead of title, you will not receive a Title Deed enforceable in a civil court and the property will not be registered on the national property register. Instead you receive two important documents:

• Cesion de Derechos (Transfer of Rights) and
• Constancia de Posesion (Record of Possession)

The first document records the previous holder(s) yield of their possession of the land, and the second records your current possession of the property.  When you sell, you will yield possession in the same way that the previous holder yielded to you.  This process is managed entirely through the local Comuneros, not the civil courts.  The property might or might not be listed on the national agricultural land register.

No finance, collateral value, or title insurance

These properties can only be purchased with your own money: you cannot take out a mortgage on them; you cannot use them as collateral; and you cannot obtain title insurance for these properties.

Difficult or impossible to insure the property

Civil law requires you have to have legal title to something before you can insure it.  It’s difficult (and may be impossible) insure untitled properties, because when you claim on a policy, the insurer will demand to see proof of legal title, especially for larger claims; thus any structural damage caused by earthquakes, floods, storms, etc. may not be insurable and you’ll need to pay building repair or reconstruction costs out-of-pocket.

If you hold land on agrarian terms, cross-check this issue with the insurance agent or insurance company you’re dealing with, and if they say they’ll insure untitled property obtain unambiguous pledges in writing to ensure that claims are not rejected after the fact due to an absence of legal title.

Transfer and sale on Agrarian terms only

You can transfer these properties to others through a private contract or bequeath transfer of them in your Will, although the beneficiaries will inherit the land on the same Agrarian terms as you did when you purchased it.  When you sell the property, the buyer will need to agree to purchase on Agrarian terms; this significantly reduces the potential buyer pool as most people seek legal title, not a Record of Possession, when they buy property in Mexico.

Disputes cannot be settled in Mexican civil law courts

If a dispute arises regarding the property, you must abide by the code of the Agrarian Court (sometimes referred to as Asambleas, or Assemblies) to resolve it; you cannot seek any remedy through Mexican civil law courts.

Tips when purchasing Communal or Agrarian property in Mexico

Mexicans and foreign residents buy and sell property on agrarian terms every year and transactions can pass without hindrance provided that the terms are known and understood by the parties and that proper local protocols are adhered to.  Here are some tips if you are intending to purchase land on agrarian terms.

Get a clear understanding of what you are buying

It’s not unheard of that buyers (Mexicans and foreigners) have been sold property given the impression that the ‘title’ sold was a legal title when in fact it is a Record of Possession under Agrarian terms.  A good Notary Public will ensure the buyer is aware of the land’s legal situation before the buyer finalizes a purchase.

Understand the protocols and documentation

When you purchase agrarian land, you normally receive a Cesion de Derechos (Transfer of Rights) document and a Constancia de Posesion (Record of Possession) document.  Any other documentation (including ‘title deeds’) are unlikely to be recognized by agrarian courts/assemblies who adjudicate on all matters related to communal land transfers in their area.  The procedures and protocols for land transfer are distinct to those under civil law, and buyers and sellers (or their Gestor, see below) often have to attend a meeting with local Comuneros at one of the regular assemblies to discuss their plans and intentions in regard to any land transfer.

Hiring a local ‘Gestor’

If you need advice about a property, or you need to ‘regularize’ the status of a property purchased on agrarian terms, you will probably be advised to hire a local Gestor—a manager / representative who specializes in these matters.  That person will attend the local agrarian court (or assemblies) and petition issues on your behalf with the local community leaders.

Due diligence

A good realty agent will be open and transparent about the property’s legal status; however the ultimate responsibility lays with the buyer.  If you are buying property in (semi)rural areas, a unique property, or a brand-new property, it’s important to be mindful about the legal status of the land the property is on (or the land you intend to build on).  Choose a good Notary Public, and consider also hiring a lawyer specializing in land matters to conduct the appropriate due diligence if you harbor any doubts. Ask direct questions to the realty agent and/or buyer regarding to the property’s legal status, and have all assertions verified by a Notary Public.

Transfer costs and local property tax

The local Comuneros charge a fee for the transfer of possession between the parties.  Fees vary considerably depending on the location, and buyers should investigate this matter locally before signing a purchase contract.  In some places, non-Mexican buyers are being asked to pay a significantly higher fee than Mexican nationals for property transfer.

If you purchase a property on agrarian terms, pay the Predial — local property tax — every year at the local Municipal office.  If the previous owner has not been paying this, you may need to back-pay the tax to ‘regularize’ the property’s Predial records and bring payments up-to-date.

Some desirable properties don’t offer legal title

There are foreign residents in Mexico living in homes which are held on Agrarian terms, and aware of that fact: some properties which people really want to dwell in are simply not available through the civil property registry process and they take-on the property knowing the practicalities and risks of doing so.

For the majority of foreigners who buy land or property in Mexico, full legal title will be readily available to them.

However, if you’re a buyer who’s seeking something unusual —rural or remote, perhaps something unique situated in the Mexican countryside— you may have to weigh-up whether you value the experience of living on that property with a Record of Possession more highly than legal title, and take your decisions accordingly.

Further reading

You can learn more about buying, selling, owning, and renting property in Mexico on our extensive and continually-updated guide to Mexican Real Estate here on Mexperience.

If you need assistance with a property transaction, we recommend you talk with an experienced Real Estate agent, and/or consult with a Notary Public in the State where the property is situated.  If you need an independent advisor, browse our section with professional assistance services for someone who might be able to help you.

The information contained in this article is published in good faith and not intended to constitute personal, professional, legal, financial or investment advice, nor replace the services of professional advisors.

What is ‘Total Cost of Ownership’?

Total Cost of Ownership (TCO) is a moniker that describes a financial estimate used to express the total direct and indirect costs of owning something over time.  This article highlights the principal costs which make up the ‘TCO’ of residential property in Mexico, including some of the less apparent and sometimes overlooked costs associated with buying and owning property here.

Up-front property purchase costs

Before the exchange of a property can take place, buyers will have some up-front costs to budget for; for example:

Discovery visits

If you don’t live in Mexico yet, or if you live here and plan to move to a different region in Mexico, you will need to budget for transportation and accommodation costs to visit the place(s) you are exploring for property purchase.  We strongly recommend that you never purchase property in Mexico “sight-unseen;” it’s wise to always visit the location and locale, and the properties (or building site) that you are interested in buying, in-person.

Buyer surveys

While these are not common in Mexico, some buyers may choose to hire a professional building surveyor to inspect the property before they make an offer to ascertain the state of the current build and costs that might be required to ‘make-good’ any dilapidation, and to ensure that there are no severe structural faults (for example, that might have been caused by earthquakes or natural land subsidence) that could be expensive to deal with, or perhaps even impossible to rectify without reconstruction.  Surveys are more commonly undertaken on older properties, but any buyer can hire a surveyor to check any building if they wish to do so and if the seller objects to a surveyor’s visit, then that might be a warning sign to the buyer.

Property valuation reports

Some sellers will hire a professional property assessor to undertake a study of the property and its neighborhood and produce a property valuation report.  In Spanish, these are called an Avaluo and they cost between US$200-$300 to get commissioned by an experienced professional.  Buyers are advised to do their own research and not take these reports as Gospel. (They are commissioned by the seller, after all.)  Some buyers might commission their own valuation report; this is not a common practice, but not impossible if the seller is willing to allow an independent assessor to visit the property.

Property purchase closing costs

‘Closing costs’ is a term that describes the fees and charges that buyers need to pay when they complete a legal property transfer.  Once a buyer has made an offer and had that offer accepted, a contract will be drawn up to begin the property exchange procedure, and the assignment of closing costs will usually be documented in the contract to avoid misunderstanding between the parties.  These usually include how and who will pay costs such as Notary Public fees, sales taxes and any other charges that may be required to secure the property’s legal transfer.  Closing costs vary; as a rule of thumb they may range between 5% and 10% of the property’s sales value.  This should be priced in to your TCO as they’re part of the overall investment.

Ongoing property costs in Mexico

When you have taken possession of your Mexican property, there are a range of costs which may not be immediately apparent, but that ought to be taken into account when you calculate your budget.  These include:

Property taxes

In Mexico, the annual property tax is known as the Predial.  It’s pay-able by property owners once a year at your local Municipality.  Some regions send a bill, others don’t but all run local ad campaigns reminding property owners to pay.  Rates vary depending on the state, the area, and the size of your home. Typically, your property tax bill in Mexico will equate to a small few hundred dollars per year and could be less than US$100 a year if your home is small and in a rural area.  You can learn more about property taxes in our Mexico Cost of Living Guide

Property service fees

If you purchase a condominium, apartment, penthouse, or a property which is part of a gated community, you will need to contribute the ongoing maintenance and service fees which pay for the amenities and and services provided at the property.  These services may include a swimming pool, gym, club house, golf course, gardens and other common areas, sports facilities (e.g. tennis courts) as well as services like watering the lawns, lighting the common areas and paying for gate security/access if this exists on-site.

If you buy the property from new, the annual services may start out quite low, because everything is new and very little maintenance is required.   In due course, buildings will need maintenance and repairs done to them, and sometimes the owners may be asked for a lump sum to pay for a major project—for example, the swimming pool may need major repair or maintenance.

Co-operative ownership of spaces and services is a great way to enjoy facilities; for example, the cost of running a swimming pool between twenty owners is far less than maintaining your own, and it’s also more environmentally friendly as the resources are shared across a defined community.   However, when you buy into a shared community, be sure you understand what the maintenance and service fees are, and be realistic about their (highly) likely need to increase over time, especially if you buy into the project when the building is brand-new.

Land trust fees

If you are not a Mexican citizen and plan to buy property within 50km (~30 miles) of the Mexican coast or 100km (~60 miles) of one of Mexico’s land borders, the law requires that the land be held in a Trust, known as a Fideicomiso.  (This is due to Mexico’s constitution prohibiting foreigner’s direct ownership of land near borders and the sea.)

The Trust that is set up when you purchase property through it ensures that the asset becomes yours in all but name. Trusts are usually set up through a local bank, and all banks in Mexico have a department dedicated to servicing Trusts for foreign property owners.  Trusts carry an initial set-up fee, plus an ongoing yearly fee to maintain.

The exact fees vary depending on the value of the property transaction, but set-up costs are around US$1,000 and ongoing Trust fees can range from between US$500 and US$2,000 per year.  Even at the lower range of the fee scale, this is a recurring cost that you need to take into account when you purchase land or property near the sea or a land border in Mexico.

If you purchase land or property inland of these distance limits, there is no obligation to set-up a trust and you may own the property in your own name. (Some owners choose to place the property into a Trust anyway, for estate planning purposes.)

Electricity supply to your home

To the surprise of many foreigners, electricity costs can be high in Mexico relative to local earnings, although if you keep your consumption in check, electricity can conversely be quite inexpensive here.

To keep your electricity bill low in Mexico you must remain within a subsidized ‘allowance’ of energy consumption every sixty days (the billing cycle).  The allowances vary by state and region, and local climate is taken into consideration; for example, if your home is situated in a hot climate zone, there is a higher subsidy (allowance) during the hot months, to help you cool your home.

If you exceed your subsidized allowance, two things happen: first, your unit cost increases for the entire amount consumed, not just the amount above the excess; second, the generous government subsidy is withdrawn —shown as a specific credit subtracted from your bill— leaving you to settle the entire so-termed “true” cost of the electricity.

The use of a modern ceiling fan consumes a low amount of energy; however, air conditioning units consume a lot of electric and these will usually cause a property to exceed its ‘subsidized’ kilowatts usage limit if used liberally, and you’ll need to budget for this during the hotter months of the year. You can learn more about electricity prices in our Mexico Cost of Living Guide.

Drinking water supply

If you live somewhere like the US or Canada, you’ll be accustomed to having potable water piped directly to your home, ready for human consumption straight from the tap.

Good quality hotels and resorts in Mexico purify their water systems so that guests may enjoy the same arrangement.  When you take possession of your home in Mexico, the water supply might or might not be fit to drink straight from the tap.  It’s a moot point: some people say it’s perfectly drinkable, others say no.

The truth is that it probably depends upon where your home is situated.  Many factors affect this issue: the supply itself, but more often the pipes which transport it to your tap.  In any event, most foreigners (and many Mexicans) buy bottled water.

A vessel containing twenty liters of drinking water will cost you between $15 and $40 pesos (US$1.60-$2.60), depending upon where you are situated in Mexico, and whether you pick it up yourself or have it delivered.  This can add around US$300-$400 a year to a household budget for two people. You can learn more about water systems in Mexico here on Mexperience.

Property management fees

If you won’t be staying full-time at your home in Mexico, you’ll need to hire someone to manage the property for you while you’re away.   Vacant properties are a favorite target for burglars and, in any event, it makes good sense to have someone looking after the property in your absence not only to mitigate burglaries, but to ensure the property is kept clean and checked after heavy storms, hurricanes, or earthquakes.

The precise fees will depend upon how much work the property manager needs to do.  If the property will be left vacant, and simply needs the post, bills, a bit of cleaning undertaken and routine checks made after storms, etc., the cost could be limited, perhaps US$75-$100 a month.  If you plan to rent out your property then property management fees will increase to reflect the extra services the property manager undertakes such as reception of your guests and providing a local point of contact should they need anything or something goes awry during their stay.

You’ll also have to pay agency commissions if a renter is found on your behalf.  Sometimes the property manager and the realty agent are the same person and sometimes they are not.  In any event, there are two separate fees to account for: the management fees and the rental fee commission.

Home insurance coverage

Sometimes overlooked, but vitally important to protect what is likely your most valuable physical asset in Mexico, is home owner’s insurance.

If your home is on or near the coast, storms, winds and flooding are key risks; elsewhere, risks from earthquakes and volcanic activity as well as flooding from any nearby rivers and lakes need to be mitigated with an adequate home insurance policy to ensure that you are not left with huge bills (or substantial loss of your investment) should unforeseen events take a toll on your property.

Our detailed guide to insuring your home in Mexico explains what you need to know and key considerations you should take into account when choosing an insurance policy.

Property sales fees

One day, you or your heirs will probably want to sell your Mexican property.  We mentioned the cost of commissioning a sales valuation report earlier, and there are a range of other costs and fees that sellers need to take into account when they decide to sell their residential property, including the agency costs if a realty agent is retained to market the property.  Our article about the costs and taxes of selling property in Mexico explains these in detail.

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Protect your personal items and defend against litigation

Although home insurance is not obligatory by law in Mexico (if your property is mortgaged, the lender may insist the property is covered), it’s prudent to factor-in a property insurance policy to your annual budget to protect your assets and, importantly, to defend against third party liabilities.

Third party liability in relation to home ownership doesn’t seem as obvious a risk as it is with driving a car, but in the event of an accident or mishap involving your property, your liabilities as home owner to third parties will become apparent.

Storm damage can leave you liable

Consider the trees in your garden. Trees falling in a wind storm can come down with tremendous force, and will easily cause material damage to your own property—and possibly to your neighbor’s. In acute cases they can cause bodily harm or fatalities.  Mexico experiences stormy days, even in the highlands away from the coasts, and some of those storms will cause trees to fall down.  Garden walls can also be subject to sudden and unexpected collapse, especially during an earthquake, or if they are old or have weakened foundations.

Condo unit ‘bloc’ coverages are limited

A common situation where homeowners unwittingly become exposed to liabilities is when they own a condominium, or live inside a gated community. They think the insurance policy —paid for through their Home Owner Association fees— that covers the building or the estate also covers them personally.  It usually doesn’t.  For example, when a water leak from the kitchen or shower room in your condo causes damage to units below yours, the repair bill becomes your responsibility.

Domestic workers and accidents

Another situation where homeowners can become liable is in relation to the domestic help they employ.  A lot of foreign residents in Mexico hire maids and gardeners.  If your maid falls down the stairs when she’s cleaning, or your gardener hurts himself while working in your garden, you become responsible to them in those situations.  Read this article to learn more about insuring domestic workers in your home in Mexico and how an adequate insurance policy can cover you.

Home insurance as an integral part of  your budget

Home insurance policies are often overlooked and sometimes ignored as an unnecessary expense by foreign homeowners here in Mexico, especially those with homes situated away from hurricane-prone areas. While hurricanes are among the most apparent risks in relation to property, powerful wind storms inland can also cause serious property damage, and give rise to third party liability in relation to events and people related to your home: if for no other reason, you should consider your insurance arrangements to mitigate those liabilities.

Learn more about caring for and insuring your home in Mexico

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In the US for example, almost anyone can become a Notary Public. Not so in Mexico, where the role is given only to experienced lawyers who are assessed and appointed by the state’s Governor.

The role of the Notary Public in Mexico

The Notary Public in Mexico has the power to witness and certify important business and civil documents which require absolute authenticity.  The appointment also holds responsibility for the management and secure storage of original legal records.

A Notary Public must be a Mexican citizen of at least 35 years in age, he or she must hold a law degree, have at least three years’ work experience at a Notary Public office, and pass a stringent exam.  Those who qualify and pass, in time, are appointed as Notary Public by the office of the state Governor.

Hiring a Notary Public for property transactions

While some buyers hire lawyers to ‘oversee’ their property transactions in Mexico, only the Notary Public has the legal power to process the necessary papers and ensure that legal title is properly passed from seller to buyer. It’s feasible to avoid the fees of a lawyer altogether, unless the situation is complicated and you want to seek additional legal advice in relation to the transaction, or you feel more comfortable having a lawyer involved as well.

Whether you hire a lawyer or not, the Notary Public is the most important legal person you will deal with when you make a property investment in Mexico. Under Mexican Law, the deed to the property must be prepared and processed by a Notary Public.

As a buyer, it is your right to choose the Notary Public, and it should be your first port of call after you have agreed in principle the purchase of a property.  The Notary Public will ensure that all documentation and permits are in order so that the transaction can proceed in a matter that ensures title can be confidently transferred.  The Notary Public will also advise you of any legal problems or liabilities that might be associated with your intended purchase.

Important tip: If you are the buyer in a property transaction, it is your prerogative to choose the Notary Public and we strongly advise that you choose with care and completely independent of the seller’s influence or recommendation.

Other legal matters

You might also need to hire a Notary Public for other legal matters, including creating a Will to bequeath your estate, notarizing certain legal documents, as well as dealing with legal disputes, for example, matters related to contracts or title deeds.

How to find and hire a Notary Public in Mexico

Most buyers tend to find their Notary Public through the realty agent they used to find their property.  A good, well-established, real estate agent in Mexico will have strong working relationships with known legal professionals in their locality, and none more so than the area’s Notary Publics.

Collegiate directory of Notary Publics

In absence of recommendations from your agent, talking with local friends or family can be helpful, and you can also check the directory on the collegiate website for Notary Publics in Mexico.

Learn more about property in Mexico

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Known in Spanish as Ley Nacional de Extinción de Dominio, the law enables a judge to immediately order the seizure of a property that is suspected to be part of a corrupt or illegal transfer chain (for example, if previous owners used illicit means to acquire it or build it) and/or if it’s suspected the property is being actively used for criminal purposes.

Legal quagmire if your property becomes entangled

Under this law, a property may be immediately seized without trial if the authorities present a petition to a judge and that judge deems that there are grounds to suspect the authorities have a genuine case.  The state may subsequently dispose of the property even before a trial has taken place. The law is causing some controversy especially in relation to a present owner’s risk of loss due to an illicit transaction history that the owner could not have known about.

If you buy a property in Mexico and, even years later, it’s discovered that the property was transacted illegally you could forfeit the asset and have no recourse to insurance coverages which would become null-and-void in this circumstance.

As the law is relatively new and untested there are no substantive case studies to reference regarding the appeal process.  In any event, legal costs to defend the asset would be substantial even if a subsequent trial ruled in the owner’s favor.

The law covers titled land, titled physical property (residential and commercial) and ejidos (communal land); as well as any assets situated on or linked to the property including valuables, goods, bank accounts, etc.

Definitions of ‘illicit uses’ of the property include —but are not limited to— organized crime, kidnapping or human trafficking, concealment, storage of stolen or illegal goods (e.g. cars, fuel, drugs), extortion, and money-laundering.

The wrong tenants could cause you to lose your Mexican home

This law also places the burden of responsibility of current use of the property directly on the owner.  If you rent your house out and the tenants use it for illegal purposes, then the state can seize the property from you with a writ from a judge.  In circumstances where your rented property is used by the tenants for illegal purposes it may prove impossible to get your home back or get compensated after the fact.

When you rent out your Mexican home you should be absolutely sure that detailed referencing and due diligence has been undertaken on potential tenants and that the people who apply and sign the rental contract are the same people who move in.  The contract should also contain carefully-worded legal clauses which specifically prohibit illicit use of the home.

Speak to your real estate agent or a lawyer or Notary Public to ensure your contract is current in respect of this new legal code.

The information contained in this article is published in good faith and not intended to constitute personal, professional, legal, financial or investment advice, nor replace the services of professional advisors.

Learn more about caring for and insuring your home in Mexico

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Get your property transaction independently examined

An independent examination of your sales contract and transactional procedures provides cross-checks as you navigate your way through a property purchase or sale in Mexico.

Linda Neil and her team at The Settlement Company® are experienced real estate professionals who can:

• Explain the procedures, legal matters, and tax rules to you in detail, independently of parties who have a vested interest in the transaction.
• Examine the details of your property purchase/sale contract to ensure that it does not contain clauses that may cause adverse effects and/or create undue risks.
• Ensure that the fees you are being asked to pay for professional services are reasonable, and that the tax calculations are aligned with current tax rules.
• Offer you a direct line for independent verification of matters which arise that you are unsure about as you make your way through the property transaction.
• Act as liaison between you, your real estate agent (if you are using one) and other professionals—for example, the Notary Public or local attorney situated in the State where the transaction is taking place.

Benefits of hiring an independent professional

Personalized service: This independent consulting service is formed around your individual needs. Furthermore, you can order practical support through the procedures to ensure professionalism and integrity in your transaction.

Overcome language issues: Property purchase/sale contracts are often written in Spanish and the seller’s deed is written in Spanish—by law. The legal terminology and clauses can be obscure or confusing. This service will help you to understand what you are committing to within the context of the sales/purchase contract. Linda and her team will explain what you are committing to in terms of Mexican law.

Oversee your investment: Hiring an independent assessor can protect your investment through an examination of the proposed transaction. This can help to ensure that agreements are realistic and are able to be fulfilled, legally.

Avoid pitfalls and hidden costs.  The costs of dealing with improper procedures or adverse contract terms after a property deal is closed can be substantial. An independent review and examination of your property deal prior to signing or payments being made can help you avoid to the costs and inconvenience of dealing with problems afterwards.

How the support service works

Linda and her team at The Settlement Company® provide an initial consultation, and can offer you a package of support services as you make your way through a property transaction in Mexico.  These services include:

• An initial consultation to talk about your situation and the proposed transaction.
• A review and examination of your sale/purchase contract and the Seller’s deed.
• Explain what you are committing to contractually, with highlights of any clauses that may be unusual or risky, as well as remarks about matters which you might want to consider renegotiating before you sign.
• An independent assessment of the professional fees, transaction fees, and property taxes you should be paying—whether you are the buyer or the seller.
• Advice and information about what structures need to be in place to ensure the property closes efficiently for tax purposes: when you are buying, ensuring that the contract and title are properly documented; when you are selling, how to claim current tax allowances on capital gains.

Service Fee: For the initial consultation and review with a written report, the fee is US$560.

The fee includes the support service as described above and will also include an estimate to supervise the entire transaction including Foreign Relations permits, appraisals, escrow fees, bank trustee fees, (if applicable) no liens and property tax certificates and full registration in the state where the property is registered—which are optional additional services you can purchase if you want or need these.  Fees are billed directly by The Settlement Company® who accept payments in the US, or in Mexico.

Estate planning for legal residents in Mexico

The estates of tourists and temporary visitors who come to Mexico for a short period are not affected by this issue as they are most likely to be legally domiciled in their home country, where their will would be read and interpreted, regardless of where in the world they die.

However, for residents living in Mexico (and those planning to make Mexico their primary residence, or legal domicile), it’s important to ask the question: How will my estate and loved ones be affected when I die in Mexico?

It’s a simple question with complex answers, and taking the time to consider your present circumstances and plan for your passing in Mexico will ensure that your loved ones will not be left dealing with complex legal matters, and that your assets and other interests are dealt with according to your wishes when you die.

If you already have a living will set-up in your home country, you also need to consider how that might be affected by your legal residence in Mexico; you might have to take steps to ensure that your wishes are legally enforceable under Mexican law.  Mexico’s legal system is markedly different from places such as the US, Canada, and other European countries, hence the importance for foreigners living in Mexico to acquaint themselves with local laws and customs—and prepare their estate accordingly.

Who needs to make estate planning arrangements?

Planning for your estate to be properly administered after your death is especially important if you:

• have legal residency in Mexico;
• own a home in Mexico;
• hold a bank account(s) in Mexico;
• have savings and investment plans in Mexico;
• own a company in Mexico;
• hold any trusts in Mexico;
• have assets split between Mexico and other countries.

Professionals who can help

You will need to hire some professional help to get this done properly.

Professional advisors

Professional law firms and property consultants can provide advice and either help you directly by writing a will, or referring you to a trusted source who can undertake the legal paperwork work for you.  See Professional Assistance services.

Notary Public

We have explained in these pages before now the importance of the role of the Notary Public in Mexico, and this person should be your first port of call as you begin to plan your estate.  Even if you use other services to structure your estate (e.g. financial planner), you will need to hire a Notary Public in order to get the necessary legal instruments in place.

Accountant

If you have business interests in Mexico, you should also consult with your accountant about matters related to any business accounts or assets, especially where these are held in company names, trusts, or jointly owned with others.

Financial planner

If you have a financial planner or investment manager, you should also involve that person in discussions about planning your estate.

Your country’s consulate offers limited support

As we mentioned in our article about consulate support, your home country’s consulate can only provide limited support in relation to personal matters, and in the event of a natural death, they will usually help to identify and contact the person’s next-of-kin in their home country.  They cannot and won’t become involved in any matters related to estate disputes, probate or any issues in relation to your personal assets in Mexico.

Don’t delay your estate planning work

If you’re living in Mexico and have any significant assets here or abroad, and have been procrastinating on matters related to your estate, or if you plan to move and create a new lifestyle in Mexico and want to ensure that your assets and personal interests are protected if you die when you’re here, you need to stop thinking about it and start taking some action.  By making adequate plans for the inevitable, your loved ones will be grateful and your assets will be properly administered.

Resources for Living & Lifestyle in Mexico

Mexperience offers you a comprehensive online resource of information and local knowledge to help you discover Mexico, explore choices, find opportunities and plan a new life in Mexico.  Our resources include:

• Insightful articles about living and lifestyle in Mexico
• Complete guides to aspects of living in Mexico
• A library of free Mexico guides you can download
• A regular Mexico Newsletter you can subscribe to for free