| "Buying" Homes on Lease Land in Mexico |
| "A Baja Land Lease for Over 10 years is not Legal and never has been".......Kermit & Miss Piggy Baja Real Estate Group members, including MLSbaja.com, do not advocate nor sell on lease land. |
| What is MEXICAN “LEASED LAND” Property? Myth vs. Truth, the Pros and Cons(no pun intended) 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? Understanding the Risks 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 can be for a many. Almost unbelievably, today there are even some building half million dollar and up homes….on leased land!..so there must be a reason? Maybe it’s history or location? Price? Or just a complete misunderstanding of Mexican Lease Laws??? 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 does not always happen, but it easily 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 solely 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? For most, yes, for others it 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 history as a viable alternative to real ownership in Mexico. It allows those who can’t afford real title with 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, until the day the landlord decides to terminate the lease, which has happened to many as well, with no recourse to a total loss. What both buyer and seller should understand when pricing their home on lease land is that they are really only, at best, transferring the replacement value of the structure and its accompanying improvements, as well as the location itself, and at worst, transferring nothing at all, as is the case in some leases. 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. Buyers should 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. 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 would likely 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 not happen soon. 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. While there are successful leases, there are also those which have worked out less than favorably for the tenants, when they come home one day to find their "home" has been bulldozed away, with little recourse other than filing a long and tedious lawsuit against the landlord as recently (2007) occurred at La Barca, 2 minutes south of Rosarito Beach. When considering a purchase on leased land, there are some items you may want to research: • What length lease term is available, and what are the terms for acquiring it?* • * Note most campos today are only offering much less than ten year leases, which means you could lose all much quicker. • What are the rules of the community? What happens to a person who fails to obey the rules?* • Read a sample of a current lease agreement in the campo you are considering. 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, preferably notarized with a Notario Publico. 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 may protect you somewhat in court, but likely not much. • Make certain you have a receipt for proof of payment each month. It offers some 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 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, give us a call or 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. Some agencies also still sell on lease land, as it is quick, lower cost, and they get paid their commissions quickly, as it is not real estate and does not require a proper closing procedure. It can be done o'nite. **NOTE: As an example of what can go severely wrong, we have seen a lease which has more than one really tough (unreasonable and one-sided) clause in it. Examples follow: 1. Upon termination of the lease, the tenant is NOT permitted to remove any fixed structure, only those on wheels and at all times mobile. This can be pretty tough with some of the lease properties available. 2. "Should the landlord, for any reason, feel it necessary to call police in regard to a tenant's noise, parking, speeding, or any other reason, the landlord has the right to terminate the lease immediately." That's right, just calling, with no regard to whether the tenant is guilty of anything. It can happen. 3. Should you wish to sell, the landlord has zero obligation to allow a transfer of your lease rights and can refuse to renew for a possible new tenant. All we have seen reserve this right. Sale becomes impossible and the clock is running on your remaining lease. There are several in the area who used to give 10 year leases, but on renewal only offer month to month, making it all but impossible to sell your interest, while others quietly have their entire campo property currently for sale to developers. At the end of the day, the potential pitfalls and risks are real and should not be ignored in buying anything on rented land, when one could just bank the money, collect interest, and use that to pay rent only in another home. Either way, there is no real ownership, no title, and no appreciating asset to count on. For the above reasons, MLSbaja will not market or sell on lease land, as it is in no way a real estate investment and has far too many risks and pitfalls. For those of you still interested, one of the popular "for sale by owner" sites where many try to sell untitled property, along with questionable explanations, is www,bajaquest.com Simply ask your self why they want out and offer you the deal of the century?? For information on REAL Estate and 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.
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.
| Comments or Questions always appreciated please contact LeaseComments@MLSbaja.com |
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| The information on the MLSbaja.com website is believed to be accurate ,however; any prospective Buyer should as always, perform due diligence and consider competent legal advice from a Mexican Attorney to confirm the validity of any documents or statements before committing to any contract. |
| Updated Feb, 2009 NOTE: Special Topic, "99 Year "Club Membership" at CASTILLOS DEL MAR, ROSARITO There is much confusion, a variety of stories, and a lot of misunderstanding about a unique community just South of town in Rosarito formed over 35 years ago as a "Club Membership" for 99 years. (Kind of like buying a membership in a Golf and Tennis Club, without any Golf Course or Tennis Courts??) The community is nicely located, appealing to many, and appears very desireable....but....As of October 2006, at this writing, we know of no other such situation in Mexico, and numerous attorneys have suggested it is an unsafe investment, no bank will lend on it, and no title insurance company will cover these homes. It appears to some to be in direct violation of Federal Lease Law. Additionally, transactions in here are NOT real estate transactions, as is evidenced by the fact they do NOT require a Notario Publico to effect the "Transfer of Rights" Recent rumors from anxious sellers indicating the real owner is "in Process" of selling real title are completely unfounded in writing, and in any case if this were true, why has it not been done for over 35 years?? If considering buying, make the real bank trust or escritura transfer an essential condition of the offer! As with any and all offers, it is best is to make eligibility for title insurance a condition, as evidenced by your own letter of commitment from a title insurance company, before releasing any money, and this will not happen. Please read below for further clarification, then decide for yourself or ask your independently chosen attorney before ever buying here. We too, hope the rumors will come to pass as reality, but until they do, Buyer Beware, and MLSbaja.com WILL NOT sell in this community at this time. |
| NOTE: Special Topic, CASTILLOS DEL MAR, ROSARITO and "99 Year "Club Membership" More on this after the following article |
| Regarding Working, Living and Investing in Mexico |
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