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  • Writer's pictureLuis Alfonso Licona Ortíz | L.D

Real Estate Operations in Mexico; Importance of International Formalities

Updated: Oct 8, 2022


Around the world, the closing of real estate transactions has a certain degree of complexity due to the diversity of legislations that are regulated by International Law. Therefore, in Mexico the risk factors could be multiple and derive in unfortunate losses of time, as well as, put at risk considerable sums of capital by not hiring specialized personnel in the matter to execute a complete documentary investigation to carry out this type of operations.


In the first place, dealing with so many legislations can be confusing if one takes into consideration that each one has a special nuance, but thanks to International Law these conflicts manage to solve certain problems such as:


a. Confirm the identity, personal or corporate, of the buyer or seller.


b. Corroborate the powers of the person or corporate entity for the execution of the legal act.


c.To avoid real estate frauds.



There is no refuting that Mexico is an extremely attractive country for foreign investors in the real estate sector, as much for the cost of land as for the location of real estate in spectacular areas.

In that respect, foreign investors choose to enter into transactions in Mexico for the acquisition of real estate for the following reasons.


1. Personal: With the purpose of enjoying directly, as much of the object of the operation as of the fruits that it generates by the execution of secondary acts, such as leasing or lodging.

2. Commercial: With the purpose of transforming the land into a viable and interesting project for the real estate demand in a certain market.


This means that while the personal investment is an end, the commercial investment translates into a necessary vehicle for the realization of a business that involves capital, land and the work of many specialists in design, projection, budgets, regulations, permits, taxes, among others.


Therefore, the goal is for investors to identify all the possible scenarios they may face. Even though the intention of entering into a real estate transaction is the first step, it is the successful completion of the transaction with adequate professional advice that determines an optimal result. From that moment on, all those involved work on organizing, coordinating and complying with the formal and substantive requirements established by law.


In this sense, the form can be understood as the set of legislations and mechanisms that govern the actions of the subjects -notaries, legal professionals, trustees, intermediaries and banking institutions- and parties to a real estate transaction, while the substance should be understood as the set of communications and interactions between the parties, with the purpose of negotiating the terms of a transaction.


Although the substance is an extremely important element, the form is what really concerns us today, in case one of the parties tries to enforce in our country a document issued abroad; such as a power of attorney or the legal documents of a corporate entity.


An example of this could be that a natural person, in his own right issues a broad power of attorney to a third party from his country of origin and with sufficient powers to sign the deed for the acquisition of a real estate property, which must be apostilled at the Secretary of State of the place where he resides and sent to Mexico for its official translation and notarization.


Another example could be that of a third party accepting the powers to represent a foreign legal entity in our country, for which he must take care of both the formalities of the power of attorney and the legal documents of the corporate entity, which range from the operating agreements and the certificates of good practices, to the registration of the entity in the commercial registries.

This second example presents an interesting variable, because, although the legal representative or attorney-in-fact of the entity is in our country and does not require a power of attorney to sign the deed of acquisition of the real estate, the law requires that the corporate documents of the entity comply with the aforementioned formalities.


With the experience acquired by participating in numerous and millionaire real estate closings, it is concluded that having the legal documents that obey the requirements established by the law in due time and form, is vital to carry out the real estate operations to a good end and without unnecessary risks, which depends to a great extent on the knowledge and professionalism employed by our real estate lawyers.


If you are about to execute real estate transactions in Mexico, contact us to receive professional advice according to your needs, those of your company or those of your group of investors.

 


Published on August 24th, 2022


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