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jerezano

Oct 25, 2008, 8:42 PM

Post #26 of 35 (1415 views)

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Re: [jerezano] Acta de Constitutiva - Ejido Land

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Hello,

Help me on this. Someone has said that the use of a prestanombre is illegal. I can't believe this.

It seems that a prestanombre is a dangerous idea to even consider. The prestanombre becomes owner of the property you are paying for. You have to have a good deal of trust, more than I would have, to consider that on a multidollar purchase. Particularly since I have Mexican friends who for one reason or other have bought property in the name of brothers or sisters and have regretted it later because that brother/sister refused to give up ownership.

As to the illegality of a prestanombre the law doesn't care who pays the bills, but it does care about who gets the title. So far as I know any Mexican citizen of legal age can be titled with a piece of property. Perhaps there are felons who have lost citizenship or have a restricted citizenship but I'm not aware of that. The prestanombre gets the title and you pay the bill. Not a good idea at all.

Now having said that I used a prestanombre when I purchased my lot for the small sum of $2,000 us dollars + -. This was before I was able to apply for and receive Government permission to buy the property. When that permission finally came through I then had to repurchase the property from my prestanombre for $100 pesos and friendship, pay all taxes and transfer costs and honorarios just as I had done previously when I "loaned" the original $2,000 plus purchase costs to my prestanombre friend so that he could purchase the property. I was then able to take all papers down to Catastro and have the deed recorded and have been paying taxes on the property now for 11 years. 8 in my own name and 3 in the name of my friend and his wife (To complicate the process he married during the 3 year interval in which he owned the property and I was building on his property with my own money. And of course my final transfer tax bill was based on the valuation of my completed construction which of course skyrocketed costs.) Trust necessary? Yes, a lot of it even for small sums.

Such a process is complicated involves paying purchase costs twice and requires a great deal of trust in the prestanombre. But illegal? I can't believe it.

jerezano.

DanGair

Oct 26, 2008, 6:48 AM

Post #27 of 35 (1405 views)

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Re: [jerezano] Acta de Constitutiva - Ejido Land

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Thank you for your great post on the Procede process.

As for the legality of presta nombre - this was addressed earlier in the thread. You're right that while not illegal, neither is it legal, and someone using presta nombre has absolutely no legal protection should the relationship with the presta nombre go south for any reason, death included. While this is certainly a reasonable degree of risk for a $2000 investment, it seems insane to me that there are many, many people using it as the vehicle for investing $200,000 or more or their presumably hard earned money. It's all just a matter of one's risk tolerance though I guess.

What's definitely not right is realtors or developers promoting presta nombre as a safe way to own a property. In a way it's not totally unlike realtors and mortgage brokers in the US encouraging underfunded borrowers here to take on more risk than they could afford, and look where that's gotten us! Presta nombre is sort of like the "mexican roulette" version of that.
MexDog

DanGair

Oct 26, 2008, 7:34 AM

Post #28 of 35 (1398 views)

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Re: [jerezano] Acta de Constitutiva - Ejido Land

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Another aspect of using a presta nombre is the notion that one can be protected with a Power of Attorney or even a Will, with the foreign national buyer having authority or as the beneficiary in the case of death. The problem with either of these is that while one might have some protection, depending on how well the POA or Will is written, the ensuing legal battle if there's a problem (should a decedent presta nombre's family claim ownership for instance) could take years to resolves, and the outcome in no way guaranteed.
MexDog

jl1

Oct 27, 2008, 11:33 AM

Post #29 of 35 (1360 views)

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Re: [jerezano] Acta de Constitutiva - Ejido Land

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Thanks for the excellent clarification. Although the "procede" route was suggested to us as an alternative, we never pursued it. It is rumored here in Sayulita that one of the larger developers is trying this route, but as far as I know it has not happened yet. The latest news here is that a combined group of realtors and lawyers is petitioning for a reduction in the new fees. This could be a long process and many property owners are feeling uneasy about it. There could be a severe slowdown in property sales while this is being sorted out. As I have mentioned before, this issue, along with the credit crisis NOB, could result in welcomed cool-down of larger developments.

jl1

Oct 27, 2008, 11:45 AM

Post #30 of 35 (1358 views)

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Re: [DanGair] Acta de Constitutiva - Ejido Land

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On the POA...our attorney explained that the POA we held had no validity because it referred to a transaction--the use of a presta nombre--which could not be defended in court. The earlier reference to the purchase of a $2000.00 property, as opposed to a $200,000.00 property, is exactly what is putting the whole system under legal scrutiny. I felt for years that people who are considering a half-million dollar property are not likely to fall for the realtor's pitch of "that's how everybody does it here." word

jerezano

Oct 27, 2008, 1:04 PM

Post #31 of 35 (1348 views)

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Re: [jl1] Acta de Constitutiva - Ejido Land

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Hello,

Somehow I didn't get my point across. Use of a prestanombre is purchasing a property for somebody else, and Powers of Attorney and Wills do not change that responsibility. As one of you has pointed out, if that prestanombre dies, then all hell breaks loose. If that prestanombre changes his mind and will not release the property, then all hell breaks loose.

Wills can always be contested, and Powers of Attorney must be accepted by courts to be of any value.

Do you really think that a family member of a prestanombre who has just inherited a $350,000 property is going to be guided by a will or a Power of Attorney? Not here in Mexico.

That inheritor will fight like mad and attornies will be more than willing to help on a contingency fee basis.

The value of the property purchased, does of course have a bearing. That same inheritor will not go through the expense of an attorney and a court fight for a small amount of money---maybe.

Buying with a prestanombre is an exercise in trust, a belief in God, and a packload of hope.

jerezano

DanGair

Oct 28, 2008, 7:31 AM

Post #32 of 35 (1315 views)

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Re: [jerezano] Acta de Constitutiva - Ejido Land

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THREAD SYNOPSIS (offered as a quick start trouble shooting guide to any foreign nationals considering the purchase of ejido, or recently privatized ejido property in the restricted zone):

1) Any deal to purchase property that is still part of an ejido should be considered RISKY. Regardless of what you may be told, using a mexican national as presta nombre (borrowed name) or any other means to purchase ejido property in the restricted zone can never be a fail safe proposition regardless of having Powers of Attorney or a Will in place. While many people have successfully "owned" property for years in the name of a prestanombre, there seems to be increasing financial/development pressure that is making that vehicle for holding property ever less stable over time.

2) The litmus for determining if property is actually private, and not still part of the ejido, is possession of an escritura (title) for the parcela or lot from RAN in name of the ejiditario property owner.

(Note that property can be titled and owned privately by an ejido member (ejiditario) without still being part of the ejido land holdings). Privataization can be accomplished through either the Procede "regularization" or dominio pleno process only). Any deals involving property said to be "about to be privatized" should be approached with extreme caution - if at all.)

4) It is advisable that any deposit money paid should be accompanied by a formal compra y venta agreement, best reviewed by a Public Notario's office. A formal compra y venta will be drawn up for privately titled property only, not ejido property. Any purchase agreement other than a formal, approved compra y venta shoud be consider extremely risky. Consideration should also be given to the facts that realtors aren't licensed, escrow accounts are rarely used, and that even deposit money accompanied by a formal compra y venta may be at some risk.

Note here also that even with a compra y venta agreement in place, all members of the ejido are constitutionally entitled to a first right of refusal before the first sale of a property out of the ejido.

5) Final purchase, payment, and transfer of title should be conducted under the supervision of a Public Notario's office only.

6) Final deeds and ownership will be in the name of either a bank trust (fideicomiso) or mexican corporation, not in the name of the foreign national directly, and title insurance is available once the final deed is issued, approximately 2 to 6 months after closing.

How does this sound to the rest of you participating in this thread?
MexDog

bournemouth

Oct 28, 2008, 9:31 AM

Post #33 of 35 (1297 views)

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Re: [DanGair] Acta de Constitutiva - Ejido Land

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Thanks to all of you for a very informative thread.

jerezano

Oct 29, 2008, 8:37 AM

Post #34 of 35 (1262 views)

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Re: [DanGair] Acta de Constitutiva - Ejido Land

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Hello DanGair,

Excellent summary. One quibble. Point 6, the statement Final deeds and ownership will be in the name of either a bank trust (fideicomiso) or mexican corporation, not in the name of the foreign national directly, applies only in restricted zones, ie the coasts and the frontiers. In other regions the deeds of ownership (escrituras) will be in the name of the purchaser.

jerezano

DanGair

Oct 29, 2008, 10:18 AM

Post #35 of 35 (1245 views)

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Re: [jerezano] Acta de Constitutiva - Ejido Land

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Yes, that is correct. I specified restricted zone in my post because there are no such requirements in other areas.
MexDog

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