BAJA INFORMATION UPDATE
THE REAL FACTS YOU NEED TO KNOW

BY RICK SIEMAN
10/28/99

There have been some frightening headlines lately regarding Baja. The big one has been about the people losing their homes in Punta Banda and the other eyeball-snapper was about the un-insured American who had a traffic accident and was held for 18 hours. I've read the headlines in the US papers about both things, and have watched the TV news and heard much about these things on the radio, as well. Much of what I've heard has been completely wrong, and the media people reporting it were uninformed. Recently, I spent a considerable amount of time with a Mexican business professional friend of mine, helping him prepare a newsletter for his insurance customers. In the process, we explored Mexican law to a great extent, spent time with various Baja agencies and officials and got some real facts. So, if you want to learn something, read on. Be warned, much of what you will read will be on the "dry" side, but this piece is designed to inform, not entertain.

THE PUNTA BANDA HOME NIGHTMARE

About 300 Americans living in Punta Banda ( a beachside community just south of Ensenada) are having huge problems. They're being evicted from their homes, and are screaming long and loud for justice. When I first heard about the situation, it sounded bad. Further investigation revealed some alarming facts. First off, for those who don't know, I've lived in Baja for 6 ½ years. I have purchased three homes and sold two, with no problems whatsoever. The reason my purchases (and sales) were no problem, is that I found out what was required (by Mexican law) to acquire property without a hassle. Before I even looked for a home in Baja, I spent an hour with an American who was a Mexican lawyer. The cost was $100. I then spent an hour with a good Mexican attorney, who verified what I had been told by the first attorney. They cost was $20. All told, time and money well spent.

THE FEDERAL ZONE

You've heard that no Americans can own beachfront property in Mexico. Guess what? No one - including Mexican citizens - can own land in the Federal Zone. The Zone is the land that is 20 meters from mean-average high tide; about 66 feet. In other words, if you drew a line in the sand where the average high tide was, and then took another measurement 20 meters back from that, all that land cannot be owned by anyone - period. You can, however, use the land for a guaranteed period of time with a Federal Zone Concession. It will cost you an application and processing fee, a monthly fee, and a renewal fee whenever the term for the Concession has expired. The average fee will be between $3500 and $5000 and will depend on the amount of land. The average monthly fee will be about $70 every two months. The reason I know about Federal Zone Concessions is that part of my first house was right on a cliff over-looking the ocean, and allegedly in the Federal Zone. Allegedly? Well, in 1994 (could be wrong on the year?) a little known law was passed that exempted property from the Federal Zone if the land was on an angle - or cliff - more than about 30 degrees. The reasoning was that you could not reasonably be expected to utilize land on a steep cliff. This ruling had no effect whatsoever on people whose land was on a normal flat beach. In fact, many homes in Baja are split on both normal land and Federal Zone land.

LAND OWNERSHIP AND BANK TRUSTS

No foreigner can own land in Mexico (corporations excepted) that's within approximately 30 miles from the border, or the coastline. To get around this barrier, Mexico has come up with a Bank Trust. Here's how it works:

• You select the property you want and contact a Mexican bank.
  
• They do all the paper work (with the help of a notary publico) and make sure the title to the property is free and clear, with no leins or encumberances.
  
• They charge you a one-time fee for the trust, which varies, depending on the value of the property.
• Figure about $4000 for a nice house.
  
• There's a yearly fee of about $250 to $300 to maintain the trust.
  
• You get a title called a Fidecomiso that is a legal binding document.
  
• The bank is the registered owner and you are the beneficiary of the property. You can live in it, or sell it, or even rent it out if you want.
  
• You get all the benefits.
  
• The Trust is good for 50 years, and is easily renewable for another 50, and another after that.
  
• You can leave the house to your kids (or anybody else) if you die.
  
• You are protected with a bank trust and people do not lose their homes when they have a bank trust.
  
• In effect, the responsibility for a clean hassle-free title (trust) is with the bank. It's up to them and that's what they charge you for.
  
• This is the way to acquire property in Baja.
  

NOW, THE WRONG WAY!

• The worst way to acquire property in Baja is to rent it.
  
• The next worst way is to lease it.
  
• The longest a lease is legal in Mexico is one day less than ten years.
  
• Any lease longer than ten years is illegal and does not have to be honored.
  
• All the stuff you've heard over the years about 33-year and 99-year leases is simply not valid. Sure, people have made deals over the years with Mexican landowners for ultra-long leases and have had no problems. It's because they were dealing with an honorable person who lived up to the lease. However, you must be aware that the long-term leases are no more binding than a hand-shake.
  
• If you rent or buy land in Mexico, you must have some sort of a resident permit, normally an FM-3.
  Therefore, even if you bought land and then let your FM-3 expire, you lose your right to that land until you renew it.

SO WHAT HAPPENED IN PUNTA BANDA?

The people who bought (?) the land in Punta Banda violated nearly every rule I just pointed out. Not one of them acquired a Bank Trust! In addition, they did the following:

• Many of them rented land, then built homes on that land.
• Many of them signed long-term leases.
• It was common knowledge that the land they "acquired" was in dispute, and had been in dispute for a very long time. One family had a legal claim to the land, yet the land had been give to an "ejido" (workers cooperative) group.
• Why anyone would build a home on leased or rented land, knowing that the courts were fighting over the ownership, puzzles me greatly.
• In fact, one former US attorney, retired, rented a lot in Punta Banda, built a home on the lot, and is now complaining that the real land owners want him to leave the rented lot so they can sell it. The court recently decided on the rightful owners.
  
• These people "acquired" the land at a really low cost. That's how they got sucked in on the deal.
• The price was just too good to turn down.
  
• Some of them put a fortune into building a home on rented lots with illegal leases.

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While I feel genuinely sorry for the plight of these people, they didn't do their homework when coming to a foreign country. And now they're paying the price. Would they use this approach if they retired to Germany, or France, or Italy? Think about it. You're moving to a foreign country to live and you do not take the time to learn what you need to know! In the US, no one would think about even buying a car without getting a clear title, and these folks built luxury homes on rented and leased lots.

WHAT WILL HAPPEN?

Right now, a few of the Punta Banda residents have simply given up and left. Others are fighting the authorities who want them to leave. No one has been forcibly removed as of this date, which shows amazing patience from the Mexican government. The incident is already generating ugly press, and they don't want to provoke any more. The rightful land owners say they are willing to work out some kind of a deal, but details are fuzzy on this. The Punta Banda group is asking the US government to intervene for them. Consider this: What if you bought a boat in Mexico without a title, and then the real owner found out that you had his stolen boat and wanted it back? Would you ask the US government to help you out of this predicament? I'll post more on this situation as things develop.