All you need to know about Title Insurance

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Title Insurance is the essential protection for Mexican Real Estate. Canadian newspapers carried stories recently about the eviction of land owners in an area known as La Manzanilla, located on beautiful Tenacatita Bay, between Puerto Vallarta and Manzanillo on the west coast of Mexico.

Many owners purchased property from farmers that had previously been ejido land a tenancy not unlike Indian lands in the United States and Canada. Ostensibly the proper legal procedure had been followed and apparently many of the properties were held in fideicomisos, the Mexican bank trust that is required for foreign owners in compliance with Article 27 of the Mexican constitution. According to information published, the prior titles to the land had been signed by Vicente Fox, president of Mexico during 2000-2006.

Unfortunately, however, a Jalisco state circuit judge ruled recently in favor of a real estate developer who had allegedly acquired the land, as private property, in 1991. Attorneys for the developer declared that it had filed the complaint in the courts in 1993. 

Jalisco state police officers in compliance with an eviction order, dis-occupied the property and are denying access to those in possession.

This is a nightmare that could have been avoided. Title insurance is available in Mexico. A title policy, issued in conformance with Mexican law, will protect the amount of the buyer’s investment. In order to obtain a policy of title insurance, a title investigation must be carried out. This investigation will report potential issues and problems. If none are found, or if the issues are solvable, a commitment will be issued and the policy will be written at the time title transfers to the buyer who ordered the investigation.

If the title company reports problems that cannot be resolved, the potential buyer will at least be fully aware of the risk and can decide whether or not to proceed with the purchase. Some problems are not immediately known, however. When this happens and, if a problem arises at any time during the ownership of the party registered on the policy, it is necessary only to contact the title insurance company who is then legally bound to fight the issue and, in the event it does not win, owner is compensated up to the amount declared in the policy.

Title insurance is NOT an expensive proposition. The title investigation cost will depend upon the area where the property is located and can range from 450 USD. to 3,000.USD. Actual cost will depend upon whether or not a title data base has been created. When a new data base must be created obviously more time, and hence, greater cost, will be involved. The premium, a one time payment, will run from 6.00 USD to 7.50 USD per 1,000. USD valuation, plus tax. Thus an insurance policy on a 200,000. USD property can cost $1,200 to 1,600. USD. which seems to be a small amount to pay for the security afforded. The prudent buyer will always include the cost of title insurance investigation and policy in his closing budget.

Two US companies have title policies approved in Mexico for use on properties located in Mexico. It is important that this option be made available to any and all considering a purchase of property in Mexico.

Author Linda Neil is a partner in Linda Neil Properties and founder of The Settlement Company, the first escrow company in Mexico, which is dedicated to processing the trusts and title transfers of Mexican real estate for foreign buyers and sellers for properties located ANYWHERE in Mexico. Ms. Neil is also licensed as a Real Estate Broker in California, is an Accredited Buyer Representative through NAR, and has over thirty five years of hands on experience in all aspects of Mexican real estate. She holds membership in AMPI, NAR and FIABCI and PROFECO Certificate 00063/96

Source: Baja Insider