One of the best real estate opportunities may also be a disastrous move. The gambler gets the pot but of course at a risk. Like any gamble there are odds – odds are if you play your cards right you can go away a winner.

I captured this shot of our future (now current) La Villa Barra property from the neighboring roof top – La Barra De Colotepec, Oaxaca, Mexico

The Calypso Couple now owns two such gambling properties, or should I say think they own…?

In a recent article in the local magazine here in Puerto, “Viva Puerto!” A more negative slant on this ‘opportunity’ is depicted.

The entire story from which I quote is here:

Comments within Square Brackets [ ] are mine.

All land in the Punta [and La Barra], is communal (i.e. not private) and belongs to the Bienes Comunales of Santa Maria Colotepec. This means that all land transfers (there are no “sales” per se) are registered with the Bienes Comunales which issues the acta de posesión establishing a person’s right to use and transfer a property. The acta is similar to a deed or title (escritura pública) except that the property is not registered at the federal land office…as private property would be.

Article 27 of the Mexican Constitution prohibits foreigners from owning property within 50 kms. of the coast, but foreigners may possess property in the restricted zone through a bank trust (fideicomiso), as long as it is titled property. In other words, a foreigner cannot get a fideicomiso on communal land, and an acta de posesión cannot be in a foreigner’s name.

It is also totally illegal to attempt to circumvent the constitution by buying property in the restricted zone by putting it in the name of a Mexican national [Here we differ in opinion a bit]. A prestanombre(name lender) is someone who, usually for a fee, will help a person circumvent the law…For that reason a private (not registered) escritura is also not an option since it is unenforceable. (You can’t present a contract for an illegal transaction to a judge.)

However, there is no law that says a Mexican can’t get an acta de posesión and then rent the property to a foreigner. Let’s say that you, as a foreigner, have a dear Mexican friend or relative who is willing to let you buy a property in his name. You build a house and everything is fine, until your friend unexpectedly dies and his heirs now own your house. Yes, it may happen that the widow or the children claim your property and there is nothing you can do about it. Same goes with a divorce if the couple was married under the joint property law. Conversely, there is no way for you to pass the property onto your non-Mexican heirs.

Furthermore, there was a time when unscrupulous people connected to the Bienes Comunales of Colotepec were free and easy with the issuing of actas [TRUE however no longer the case]. Record keeping was also sloppy. People now are still living with the consequences of there being two or more actas for a single property. The Agrarian court in Oaxaca is the final arbiter of these disputes.

Still, most foreigners on the Oaxaca coast, outside of Huatulco and the area of Puerto that was privatized by a presidential act in 1970 (Bacocho, Carrizalillo, the Lighthouse District, etc.), have a prestanombre.

So what are the alternatives? Legally, there is only one and that is to form a Mexican corporation [Keeping in mind you must really be renting the property to be legal]. It only takes two people to form a corporation and they can both be non-resident foreigners. A Mexican corporation has all the rights of a Mexican national. The catch is that the corporation must be lucrative[PROFITABLE would be a better word], and it must be administered by a Mexican, who is responsible for seeing that the taxes are paid. Now your house is a bed and breakfast, and you and your guests pay rent to the corporation. The yearly fees can be costly, but do you really want to build a $200,000 house on someone else’s property?

A third and increasingly popular option is to get an escritura pública issued for your property from the land registry for the district of Pochutla, then get a fideicomiso for this escritura, and finally an acta in your name and the name of the bank. Is it legal? Who knows. [I do not believe this is any better than an ACTA issued by the Colotepec Bienes Comunales]. It seems to work and is the practice in the condo communities down the Coast. Although this title is useless for purposes of establishing your ownership of the property (only the acta counts), it makes your property easier to sell or inherit (your heir is named on the fideicomiso). The downside is that the paperwork will cost you thousands of dollars, and you will have to pay property taxes to the municipio of Colotepec …. When you sell titled property you also have to pay a transfer tax plus capital gains. But remember, buying a property without getting the acta is like buying a car without getting the ownership papers.  END

Those are the very gory details from an obvious pessimist of which I am not. Digest this and next time I will explain in detail MHO (My Humble Opinion).

The ‘protections‘ provided in real estate transaction north of the Rio Bravo are steeped in law which fattens the wallet of many a lawyer, accountant, real estate broker/agent, and oh so many more with their hands in your pockets. U.S. real estate is necessarily colored throughout by forces of profiteering and does little to secure your safety in these transactions, home purchases.

Stay Tuned for the rest of the story.