Insuring Your Property's Title in Mexico
Title insurance in the United States is a contract that assures that the buyer will enjoy the property free of liens, encumbrances, limitations of domain or any other real estate rights. It is the obligation of the Title Company to review the title and authorize a clean transfer and enjoyment of the real estate. In México we have an office called "Registro Público de la Propiedad" which records transfers of title, limitations of domain, encumbrances, liens, etc.
According to the Notary Act, (Ley del Notariado) a Notary has the obligation, when witnessing a transfer of title, a mortgage contract, etc., to obtain a "lien (or no lien) certificate" - similar to an abstract of title - from the recording office. If the notary fails to do this, then he/she can be civilly and criminally liable.
The Notary has the obligation, as soon as the title is signed by the seller (and buyer if necessary), to send a notice to the recording office notifying them of the new transfer of title. The recording office is of a civil nature. On February 28th 1971, the Civil Code for Mexico City established the recording process. Since then, the public registry is organized by each state. The purpose of the Recording office is to provide the following:
- Publicity: the information is public;
- Legitimacy: whoever is registered as the owner is the only owner of the real estate;
- Protection: only the title holder or legally authorized party (judge) can make changes to the records;
- Priority: the recording is done in the order the documents are received; and
- Legality: only documents that fulfill the necessary requirements established by law can be recorded.
The Office will record, among other things: sales, donations, exchange, trusts, assignment of trust rights, contract of property use, pre-nuptial agreements (regarding real estate) family patrimony protection, eminent domain expropriations, condominium regimes, etc.
Differences and similarities between Title Insurance and the Registro Público.
In the United States, in general, every transaction starts with a private sales contract, which usually provides for the seller to transfer the title to the buyer at the closing. The contract also provides an obligation for the seller to prove that the title is legally valid, free of liens and able to be transferred to a different party, it is called a Marketable Title.
In México, the seller must have title, which must be properly registered at the Registro Público de la Propiedad. The notary will request from the recording office a certified report regarding any encumbrances or liens or any other limitations.
In the United States it is necessary to obtain the services of a title insurance company, an attorney or title researcher who will determine if the title is valid or not, if it has any reported liens or limitations, etc.
In Mexico, the report from the Recording office will corroborate the name of the legal owner of the property, if there are any liens or encumbrances, the date it was purchased, etc. The title will include the following information: names of sellers, buyers, price paid, paid taxes, floor plan, exact location, etc.
The Recording of real estate system has worked for many years here in México, but there are many problems that need to be corrected and services to be improved. Government workers and even Notaries make mistakes. The most common are: errors establishing size of lots, wrong property description or property numbers or updates, misspelled names, non-reported (recorded) liens or other limitations, etc. Also technology has made it easier to counterfeit "no lien certificates."
In some cities like Guadalajara, Leon Guanajuato and Monterrey, the recording offices are almost 100% computerized while here in Vallarta the search is still done manually. Old decomposing books, slow service, expensive registration fees make our local office one of the most difficult to work with. We are working to change that.
Although Notaries have certain obligations, they cannot carefully and personally review and explain to foreigners who purchase real estate in México of the buyer obligations. For example, most non-Spanish speaking owners do not know what their title says. Another large percentage of foreigners do not know how to contact the bank to pay their yearly trust fees, etc.
Of course a real estate agent can help you but then there are so-called agents and developers who have, many times, misguided or defrauded many foreigners. There are people who have purchased property though a private contract and still have not received title. A licensed Realtor from the U.S. or Canada working in México cannot guarantee reliable information simply because it is different here. How to record a transfer of title is one of the many differences between the two countries.
I do not believe that you require title insurance for finished real estate, but I think insurance is definitely necessary for pre-construction and unfinished real estate sales. A professional and complete title search at the Registro Público de la Propiedad should be enough -in most cases- to provide secure ownership. I understand and agree that people who wish to have the accessibility to title insurance should be able to purchase it. As of this moment, only American firms such as "Stewart Title" are operating in México, perhaps, as many more foreigners buy real estate all over México, Mexican insurance companies can offer these services. Until then, please always obtain the help of a professional.
Alejandro Niño Merino, Attorney at Law |
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