Authorities define title insurance as an indemnity insurance. It protects the owner (mortgage lien holder) from any financial loss caused by defects in a property’s title and/or claims against the new owner(s). Buyers purchase Mexican title insurance to protect not only themselves but the lender or trustee’s interest in the property, as well. With this in mind, the insurance protects the title holder(s) from any past, present or future claims (substantiated or not) against the holder after the purchase. It also notifies the potential owner if there are any past due taxes or government liens on the property.
The Myth on Title Insurance: Do You Need It?
Some attorneys don’t believe you need title insurance in Mexico. However, its popularity as a safety net for foreign owners has slowly increased over the years. If there is a fiduciary (trust or trustee involved), they will sometimes recommend against it or, in some cases, not even mention title insurance to their client. This depends on the institution’s policies, though. Title insurance can also slow down the purchasing process.
In the USA, title companies complete the transfer of property from one person/entity to another. In Mexico, officials assign that responsability to certified Public Notaries. Mexico relies on the Notaries to abide by the civil codes established through the government’s stringent policies. Moreover, certified Public Notaries have the right, obligation and authority to consummate real estate transactions in their territorial jurisdiction. Agents usually include the fee for this service in the closing costs.
Legally Registering for Exchange of Ownership
You should expect your Public Notary to research property titles using information provided by state and local government registries. However, not all land in Mexico has been recorded or registered. A perfect example is a family-owned property that has been handed down from generation to generation or privately sold off record for many decades. This could create a problem if the exchange of ownership has never been titled or legally registered with the government. Properties with these types of sales are mostly off the beaten path or lie outside the municipality’s jurisdiction.
If you find a property that is under Agrarian terms, you answer and abide to a different set of codes. Mexico’s civil laws hold little to no jurisdiction regarding Agrarian contracts. This also applies to Mexico title insurance which offers little to no protection on property purchased from private owners or from such contracts that have never been recorded or officially titled. Private parties can draw up a contract with no guarantees that a lien holder, family member or unmentioned part-owner won’t claim rights to the property.
Get Legal Counsel
Private owners can sell their property using a realtor attached to an agency or under Agrarian terms. You should always seek legal counsel in these cases. Attorneys will counsel the buyer in many ways. They will notify you if the property needs title insurance and if it’s an advantage to this particular acquisition. Most real estate attorneys will offer their own services that will perform an extensive title search for their clients. Again, remember that laws change from country to country. Having local representation is the smartest way to ensure a successful transaction.
And remember, at Top Mexico Real Estate…we make it happen!
