By: Bruce Parkman | Developer, Playa de Oro, San Felipe, Mexico
There have been many articles written about Title Insurance in Mexico, however there have been very few if any that explain how the Title Insurance is obtained on the property and what benefit the buyer will receive and who pays for the policy.
With this article perhaps these points will be clarified for buyer’s knowledge. For credibility purposes this writer has 18 years of Real Estate and project development experience in the Baja of Mexico, primarily in San Felipe. My development of 300 sea side lots has issued over 100 individual title insurance policies to its buyer/owners, more than any other development in Mexico.
How is title insurance obtained on the property?
An application is made on behalf of a buyer to a Mexico Authorized title insurance company. (First American Title, Stewart Title, Fidelity Title, GNP Insurance and others) The title company then assigns the file to a duly qualified Mexican Attorney to examine the history of the title to that specific property. This process is similar to the Title Abstract system that was used in the US. The examination should (not all title companies do this) go into the history of the land as far back as possible, sometimes 200 or 300 years!!!! When the exam is complete the Attorney presents a written detail of the land history to the underwriter at the Title Company. The underwriter will review the exam. Upon the review a decision will be made to have a Title Insurance Company representative actually visit the property for a visual inspection. The inspection will include the survey marks identifying the property, looking for or at encroachments (if any), reviewing the legal ownership documents at the Registro Publico and Notario. When the exam is finalized a decision will be made to issue a title policy of insurance or not issue a policy until certain conditions are corrected. This is very similar to the procedure in the US.
What benefit will the buyer receive from Title Insurance?
As a former insurance agent in the US I always read the exclusions from the policy to determine what my coverage was, this is still very valid information today. Ask your seller or Realtor for a sample policy of the title insurance. They should be able to provide one for you. If they cannot provide a sample policy, you can obtain one online at the Title Companies website. Title Insurance companies have a US division and a foreign division you want to deal with the foreign division. When reading the exclusions you do not want to read these words: Ejido (this excludes any Ejido claim), errors, documents, Notario, (this excludes any errors in documents, or errors in the Notario office), there are other issues that may occur locally to the land involved that need to be addressed. You want to include in your purchase agreement “subject to satisfactory review of title insurance examination”
You as a buyer receiving title insurance on the property should expect to be covered for; a) Ejido lands, b) errors in documents (this may be worded differently by various companies), c) local issues, d) fraud (this is a major issue and will be discussed in detail later), in addition to the normal liens against the property, taxes, water payments, mortgages, government registrations, etc.
As an example I was attempting to buy a property and the title insurance found a 15 year old unrecorded buy and sell on the property that affected the title. I did purchase this property with a signed release from the unrecorded buy and sell person. On another attempted purchase the title insurance found an overlapping owner. That property is still in litigation 7 years later!!!!
Remember title insurance will examine the title in detail for you; make sure you have it done.
Here is where you want to pay attention!!!!
Who pays for the policy and examination of the title?
The cost for the title exam is anywhere between $2,000.00 US and $12,000.00 US depending on the complexity of the title itself.
If you are buying a single lot or parcel of land in Mexico you want to ask the seller or Realtor has there been title insurance on this lot or parcel in the past. If the answer is no, you as a buyer will likely have to pay for the title examination or negotiate the payment in the purchase agreement to be paid by the seller.
The cost to examine a 500 Sq Meter lot is about the same as examining a 25 hectare parcel. What I did was have the entire parcel examined prior to subdividing into lots; therefore each lot was insured when the subdivision was approved. Doing this saved the buyer the expense of the title exam.
If the seller does not want to pay for the title exam you may want to reconsider your purchase for obvious reasons.
Mexicali is the capital of Northern Baja and it has the most advanced Real Estate recording system in all of Mexico in their Registro Publico. (It is comparable to the US systems) The Registro Publico can be accessed online by those Realtors, Attorneys and others who are willing to pay the access fee. A title can be verified very quickly with this system.
For summary, you as a potential buyer, with a little due diligence, can verify the title of your target purchase with a title company and add the benefit of the Public Registro in Mexicali as a backup source.
Mexico has very clear Real Estate laws, when these laws are followed the title chain of ownership is clearly identified and you as a buyer will receive the benefits.
Some Title Insurance companies do not research the land title, they insure the documents prepared by the Notario, and thus their cost to issue a policy is less. You as a buyer will need to determine what is best for you. If you are buying in an established development you should be ok, however if it is a new development or raw land you may want to consider the full research.
I mentioned the word fraud earlier and will now address this issue. Fraud is a word being used by those buyers who purchased without doing their due diligence properly and now are faced with problems with title and utility services.
Fraud in Mexico is a serious matter and proving fraud is not easy to do as the laws are confusing. Basically blatant fraud is easy to prove, however marginal or questionable fraud is not easy to prove. So how do you protect yourself? This is where the Title Insurance can be very helpful. When the title company does their exam of the title to the property they will determine if the title is clean so their will not be fraud committed with the title. Now you ask how am I protected in a subdivision? All of the required Government legal permitting and approvals are reviewed by most Title Insurance Companies before they will issue the policy.
Bruce Parkman is the developer/owner of Playa De Oro, north of San Felipe, started Baja Lifestyles Realty in 1994, bought the land for Playa De Oro in 1996 www.playadeoro.com email firstname.lastname@example.org.