|"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 (Yes there are plenty of cons trying to sell on lease land)
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 some. Almost unbelievably, today there are even some building half million dollar and up
homes….on leased land!.... in locations like Medio Camino and the Ejido in La Mision
Is this insanity, fraudulent representation, 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 month 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 nine years, eleven months 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 unilaterally choose to not renew.
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 beach front 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 trailer 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 as well as losing 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 Corridor 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
• Before signing any lease, have your own, not the seller's 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 bajasunsets.net
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
|Comments or Questions always appreciated please contact LeaseComments@MLSbaja.com
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should be sent to email@example.com
© Copyright 2004 - MLSbaja.com - All Rights Under Copyright Reserved --Ya, that cost a bundle, so please do not "borrow"
without asking?? No Doscientos Pesos Mordida here, Thanks
|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 Sept, 2013 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 many to be a direct violation or circumvention of Federal Lease Law Term Limits, and is in reality nothing more than a private
contract between the registered landowner of the entire community and the tenants with a "club membership". This private contract could be
terminated at any time and the only recourse would be civil action as "homeowners" here do not have a registered title.
A such, 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 (who know the real story) 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. Even better, ask
any Notario Publico what your rights and potential liabilities may be. Verify the above with any Notario Publico and beware any story you hear from any
seller for your own peace of mind. We see no reason to take the substantial risk of buying nothing more than a questionable private contract when
properly titled properties are available at similar pricing. We too, hope the rumors will come to pass as reality, but until they do,
Buyer Beware, and MLSbaja.com WILL NOT sell in Castillos del Mar at this time.
|NOTE: Special Topic, CASTILLOS DEL MAR, ROSARITO and
"99 Year "Club Membership" More on this after the following article
Investing in Mexico