What Contracts are used in Real Estate?

What is the source of the Contracts?

Mexican legislation and any rule that is applicable to the nature of the contract, there are different types of real estate contracts and which are related to the transaction of real estate within Mexico.

The most common contracts are aimed at the purchase, sale, lease and encumbrance of properties, whether they are construction projects preconstruction or completed residences.

What Real Estate Contracts are most used?

The first legal figure is the Contract of Escrow and it is intended for those foreigners who wish to acquire properties in Mexico within the restricted zone (50 km from the coastline and 100 km from the border line); since this restriction emanates from article 27 of our Mexican Constitution.

This legal figure uses three parts:

1. The Trustor, who is interested in transferring the property to a third party;
2. The Trustee, which is the party that will legally own the property, and whose main purpose is to manage the property for the benefit of the Beneficiary of the Trust. (This entity is commonly a derivative of a Banking Institution and charges an annual fee that ranges between $ 450 usd and $ 600 usd);
3. The Beneficiary of the Trust is the party that will enjoy and use the property owned by the Trustee, being able to encumber and transfer the property in favor of a third party with the authorization of the Trustee.

The second legal instrument is the Promise of Sale Contract, which is a common civil agreement, through which the Seller promises to transfer a property to the Buyer on a specific date and the latter pays an amount of money for said transaction;

If the object of this contract is a property located within the restricted zone, said legal act can only be configured by Mexican natural persons and/or Mexican Corporations (which may or may not have foreign shareholders).

“It should be noted that Corporations with foreign investment can only acquire Real Estate in Mexico that are not intended for residential purposes; otherwise, the parties must enter into a trust agreement”

The last one is the lease, a common contract through which the lessor allows the tenant to use and enjoy a property for a period of time, in exchange for a quantified amount.

“Eviction processes in Mexico are time consuming and expensive, so it is highly recommended to have sufficient guarantees and/or guarantees to protect the landlord from a non-compliant tenant”

How to guarantee my heritage?

In addition to the agreements mentioned above, which are the most commonly used in the laws of Mexico for real estate transactions, there are ancillary contracts that aim to grant a guarantee to an unprotected party.

Some of the legal tools that are used as collateral and/or collateral are:

1. Mortgage Contract
2. Guarantee Trusts
3. Promissory notes.