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Ask an Expert: Mitch Creekmore,
Senior V.P., Stewart Title
I’ve been told to run from any deal in Mexico involving land controlled by an ejido. Is that true? Is it possible to buy ejido property?L.B., Houston, Texas.
Article 27 of Mexico’s Constitution allows the federal government of the United Mexican States to create agrarian lands for the benefit of their citizens. With its constitutional inception in 1917, Mexico b13,000-square-foot, five-story townhouse for $24.9 million afteregan the process to provide “campesinos” (Mexican farmers) a beneficiary interest to land owned by the government. Entitled under “La Ley Agraria” (the Agrarian Law), these government parcels, known as “ejidos,” are recorded with the Registro Agrario Nacional (National Agrarian Registry or “RAN”) in Mexico City.
The ejidatarios can live, farm, homestead and construct dwellings on the property, but they do not own it. Under Mexican Agrarian Law, the ejidatarios can not sell, lease, subdivide, joint venture, contribute, mortgage or encumber the property. In essence, they have the use and benefit of the land, but they do not have title to it. What does this mean? You can pay an ejido member for the land they claim to own, but you will not acquire title to the land.
Ejido land is property owned by the Mexican nation. In 1992, recognizing the inherent value “terrenos ejidales” presented due to their geographic border or coastal location, and coupled with the inherent development potential, the Mexican government enacted a Constitutional Amendment to “regularize” or privatize agrarian lands.
Under the auspices of the Office of Agrarian Reform, the Mexican government could now provide a process of legal entitlement transforming the ejidal regimen to one of “regimen de domino pleno o privado” (regimen of full dominion or private land).
In other words, ejidatarios had the right to take the land that they didn’t own and convert it to private property, thereby allowing them to benefit monetarily from the ensuing regularization process.
When ejido property is fully privatized, the federal government issues “titulos de propiedad” (titles of property) to the ejido members. The land becomes private property via a recorded deed in the public registry of property and commerce. There is a requirement to provide a right of first refusal to the ejido members, known as “derecho al tanto”, when the first sale of a now private parcel is made to a non ejidatario.
There have been numerous cases, examples and horror stories of Americans, Canadians and other non-Mexicans buying ejido land. You may have paid money for a lot on the beach with the promise that you would receive a bank trust only to find out months or years later that the land was never privatized, and there is no conveyance of title forthcoming.
The end result is that you can not establish a recorded beneficiary interest to property placed in a Mexican bank trust, i.e., title vested in a “fideicomiso” for residential properties in Mexico’s “restricted” zone, nor can you have title in a foreign-owned Mexican corporation intended for commercial development purposes if the land is ejido. Remember, you can give someone money for land in an ejido but you won’t receive title to the land until the land is no longer entitled ejido. Caveat emptor buyers at its highest!
Mitch Creekmore is the senior vice president of Stewart Title Guaranty Company’s multinational Title Services Group. A licensed Texas real estate broker with more than 24 years of commercial and residential experience, he began his career with Stewart in 1994 and has been responsible for the development of the company’s marketing strategy and implementation of the business plan for Stewart Mexico. In 2005, he co-authored a book entitled Cashing in on a Second Home in Mexico with Tom Kelly, a Seattle-based syndicated real estate columnist and author. The pair released their second book, Cashing in on a Second Home in Central America, in 2007.
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( 5 Votes )
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Comments
He literally saved out bacon a couple of years ago. We were about to buy a seriously priced building lot neat the cathedral in San Miguel, but fortunately has stipulated in the contract that we be able to get satisfactory title insurance ( only added at the last minute, I am embarrassed to admit )
The Stewart Title chap was appalled when we went in to see him, and explained that we would never get building permission to do what we needed to do on that plot.
His through report got us out of the deal, and our deposit back.
We were being advised by a well meaning American agent who worked at a major franchise brand there, and we thought we were pretty experienced international buyers. How wrong we were.
We will never even try to buy abroad without checking in with you guys!!
Lesson learned, and fortunately not at great expense.
As far as I understand, ejidos are a a different kind of property (social property), but ejidatarios do own the property as a collective entity. The land is not owned by the Mexican Nation, and that becomes very clear when you check the Mexican Expropiation Law.
Regarding the land acquisition from third parties, there are three ways to do it according to the law (Ley Agraria):
1.- The (parcelamiento) or subdivision of the ejido to transform it into private property. This is the most common way to do it, but it has a major risk, which is the law's prohibition to parcel in forests and tropical jungles, which according to the Forestry Law's definitions, basically any property with trees on it, will be consider as forest or jungle, and therefore, not susceptible to subdivision.
2.- The creation of a real estate company (inmobiliaria ejidal), which doesn´t have the limitation of the forest and tropical jungle's acquisition; and
3.- Increasing the size of the Human Settlement Parcel of the ejido. (Tierras del Asentamiento Humano)
Regards,
Patricio Martin
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