BuyingOnLeasedLandInMexico

What is MEXICAN “LEASED LAND” Property? Myth vs. Truth

There is no such thing as a 99 year lease, and never has been, as falsely reported by some of the American media.

To Lease or not to Lease?

Historically, dating back to the early days of the automobile and before, Baja beach front property
has long been offered as campground for vacationers. Surfers and weekenders came down with
tents, but wanted more than just the beach, maybe showers and BBQ facilities, “Let’s stay at a
Campo (campground)!!” In time, tents became trailers, some even got tired of dragging those
trailers back and forth, so why not just leave them here? Next the skirting, porches and rooftop
decks. Some even built freestanding structures from scratch, after all, why does the place need
wheels if we’re just gonna leave it here anyway? Over the years dirt roads have transformed into
paved streets and mobile homes have morphed into permanent homes. Landowners found that
collecting rent money was profitable. Lessees, or those who rented space, enjoyed the ocean,
weather, and the feeling of freedom being in Mexico offers. It was a win-win relationship, and still
is for a many. In fact, there are now folks building half million dollar and up homes….on leased
land!..so there must be a reason? Maybe it’s location? Price?

By law, leases for terms of in excess of ten years are neither legal, nor valid in any Mexican court.
Nor have they ever been, There is no such thing as a 99 year lease, and never has been as
reported by some of the American media. Neither is a 10-10-10 renewable for 30 years. By
Mexican law, no residential lease in excess of 10 years less a day is legal. Case closed!
(Commercial Leases can be for up to 15 years, and industrial leases for up to 20 years.)

If buying on Lease Land, be prepared to walk away with nothing at the end of the lease term and
do not invest more than you can afford to risk. It likely won't happen, but it could.

Some leases are month-to-month; others are ten years or less. If someone tries to lease a parcel
of land for more than 10-years, keep in mind that the owner will have the right to end it when the
10-years is expired. The right to renew is his, and he could choose either to not renew, or change
the terms considerably

Does this mean that you should avoid purchasing a home on leased land? No, it just means you
must do your homework. You need to be an informed buyer who is aware of the pitfalls and risks
(legal realities?). Leased land has its place as a viable option to ownership in Mexico. It allows
those who can’t afford bank trust property or those who don’t wish to make the often sizeable
land investment in Mexico an opportunity to enjoy a vacation or retirement home on beachfront
property. Those who have the rights to a structure on leased land should not price their homes
too high*. For some buyers, the risk factor is worth the exchange for a reasonable price.

*According to one acquaintance, “What a seller should understand when pricing their home on
lease land is that they are really only transferring the replacement value of the structure and its
accompanying improvements, as well as possibly the current, and otherwise not available,
location itself. In most cases, they are not transferring the lease, nor any of its terms, as those
are usually left to be negotiated between the landowner and the new tenant. Put simply, there is
always lease land available without any structure, or a much lesser structure, perhaps a tear
down, and any prospective purchaser could easily just lease elsewhere and provide their own
structure, perhaps at considerably lower cost. In much the same sense, purchasers of trust
property consider the same principles. What is the replacement value of this piece of land, and
also what is the replacement cost of all built upon it?” Many prospective buyers will also weigh
the difference of the real cost of the liabilities of escalating rents for lease land in ensuing years,
as opposed to the likely increased value of their investment should they acquire trust property
instead. The difference can be significant over the years the property is held, and the seller of a
holding on lease land is well-advised to consider this as well, as most purchasers can be
expected to do before parting with their money.

There are many who purchase an oceanfront home on leased land. They choose to rent land
because they can’t afford bank trust or escritura property, but the life-style is worth it to them
either as full time residents or part time vacationers who regularly visit Baja.

Many renters count on the owner registering their "Campo" or mobile home park as a business
and that it will stay that way. Is their security in jeopardy? Perhaps, but many know the owner is
making money each and every month. With a hundred lots in a campo, paying $300 per month,
amounts to a healthy $30,000/month income, and the land is likely going to keep increasing in
value, as most campos are oceanfront. Would the landowner sell his low maintenance cash cow?
Not many have, and not possible in some instances either.

For example, if a Mexican family, through a will, bestows a parcel of leased land to their children
with the stipulation that it is never to be sold, then that parcel of land is a better bet as leased
land than one that offers no such promise.
(There is little chance that a major developer would entertain thoughts of building a hotel or
resort, when his rights by law are limited to the maximum lease term allowed)

When considering a lease, it may be prudent to envision a worst-case scenario. The owner could
choose to sell, or even lose the land to a law suit. Your initial investment could disappear. Could
you live with that fact? Many have said, “yes” to that question. They can live with the worst-case
scenario or they’re willing to take the chance it will never happen. These people are enjoying
their Campo beach community life. They’re happy with their decision to live on leased land, just as
many are happy in their Mobile home park in Arizona. We know of many more successful leases
than those which have worked out less than favorably for the tenants.

When considering a purchase on leased land, there are some items you may want to research:
•        Talk to the neighbors, especially the Home Owner Association president if one exists.
You can learn a lot about what’s going on in the community.
•        Ask to read the current minutes of the Home Owner Association.
•        How many years has the community been in existence?
•        How long has the current owner been in place?
•        What length lease term is available, and what are the terms for transferring it?*
•        * Note some campos are only offering shorter than ten year leases, but this is not
necessarily a red flag, as would be the case for a campo only offering 5 year leases. In this case,
instead of waiting until yours has expired, and being concerned, it may be wise to be aware of
your neighbors’ leases as they are renewed. For example, if yours has less than 2 years to go,
but the campo just renewed your neighbor for 5 more, its quite likely nothing adverse is about to
happen for the next 5 years? Be a good neighbor!
•        How often and how much has the rent increased?
•        Does the landowner have a good track record? Does he maintain the common areas?
Does he pay his taxes each year?
•        What are the rules of the community? Are telephones available? Pets? Water Source?
For Sale Signs? Parking rules, sub-letting your home?
•        What happens to a person who doesn’t obey the rules?
•        Read a sample of a current lease agreement in the campo you are considering. You may
want a clause in it that allows you to sublease in case you want to cover expenses while on a trip
or in case of illness. Insist that you sign a Spanish version of the rental agreement with a certified
English translation. Ask for the original signed document for your file. Two originals, one for the
landlord, and one for you should be signed at the time of agreement. File it in a safe place. It will
protect you in court.
•        Make certain you have a receipt for proof of payment each month. It’s a protection of
your rights.
•        Before signing any lease, have your own Mexican attorney review the terms and
clauses and explain them to you.
•        Understand your rights, Mexico has laws that protect renters and foreigners are given
the same rights and obligations under Mexican law as Nationals.

There’s much to consider when purchasing on leased land. It has earned a strong and reputable
history and its own rightful place in Mexico. It may or may not be for you. Exercise due diligence
to make an informed decision in accordance with your personal needs and expectations, and
should you have any questions.....

.......ask your own attorney for a word about your rights, and not just the seller! We have heard
some pretty wild representations and stories, especially from the "For Sale by Owner" crowd
selling privately on the internet and in newspaper classifieds!

For information on buying legally titled land as a foreigner, please click here

Almost daily we are asked similar questions regarding the purchase of homes on lease land. This is basically similar to
buying a mobile home in the USA situated in a Mobile Home Park, the Lease Contracts involved are private contracts and
vary widely, just as in the USA. All terms should be read very carefully, and likely reviewed by an attorney if you have any
questions, well in advance of making any buying decision. Many brokers, offer these properties for sale. We do not, as
they are not Real Estate.   Not all give full disclosure in their advertising of these low priced, often ocean front, homes.
Additionally there are a lot of private "For Sale By Owner" ads placed in both print and internet media, extolling the virtues
of "cheap" beachfront property. Tons of them on e-bay and other FSBO sites as well..... Often without disclosure of
"ownership" issues.

The most common Questions and the answers are:

1. Can I get a Bank Trust on these properties?    NO, you are NOT buying the land.

2. Can I get financing?                                                 NO bank we know of would do this using the property as security,
                                                                                           although there are cases where a seller may finance your purchase

3. A 99 year lease sounds safe enough to me?    Yes it could, but it is Illegal.

4. What are my ongoing costs in a lease?              These differ widely according to each Campo and Lease contract. Most
                                                                                      include and annual 10% Cost of Living increase, compounded annually.

5. Can I sell my lease property?                                  Yes, but the lease in most cases is NOT transferable, and the buyer will
                                                                                            have to negotiate a new lease contract with the land owner, often with a
                                                                                            sizeable "transfer fee", sometimes a mandatory "commission" to the
                                                                                       to the Campo, and often with immediate 10% increase in Lease Fees

6. Can I sublet to a tenant?                                          Generally, NO. Read your individual contract closely

7. Why do people buy on Lease land?                       It can make sense to many happy buyers...please read above

8. Can I get title Insurance on Lease Land?            Nope!! You do not have title to the land, your landlord does.

9. Can I insure my home?                                            Of Course, You are a tenant and can insure your assets.