Title insurance, so common in many parts of the United States and Canada, is in its infancy in Mexico. While the Public Registry system operates in much the same manner as in other parts of the world, the actual work is still performed manually. Deeds are handwritten into large books, a computerized system is still a dream and title plants are non-existent. Maps of subdivisions and properties are uncommon or incomplete.
Thus, information available to create a chain of title for a specific property requires a visit to the local public registry office in the municipality where the property is located, and may require hours of laborious research and investigation to determine if the property is private property, who the sellers are, and if there are liens or encumbrances on the property.
Few major United States title insurance companies have entered the marketplace and are now doing searches in certain parts of the country. One Mexican insurance company is also offering a policy. For those who wish title insurance, we need to have a general description of the property, the name of the current holder of title, preferably a copy of the deed, and the approximate amount to be insured. With this information, we are able to investigate the existence of any existing title data and confirm whether or not title insurance will be available for the specific property.
Many people have said that title insurance is unnecessary in Mexico. This is not correct. Those who acquire title in fee simple - in the interior of the country, rely upon the Notary Public to search title. Title search, in this case, consists of requesting and receiving a Certificate of No-Liens on the property, which is issued by the Public Registry Department. This certificate, plus the Seller’s declaration in the deed that the property is being delivered free and clear of liens and encumbrances, are the only assurances that title is valid. Should the Certificate of No-Liens be issued in error or due to oversight, or should the seller misrepresent the property, a civil suit against the seller may be the only legal remedy for resolving problems.
Those who acquire property in the Mexican Bank Trust (Fideicomiso) have felt comfortable in relying upon the trustee bank to research title. This is also inappropriate. The standard Fideicomiso (bank trust) document will have a disclaimer, in which the bank will supply a power of attorney to the legal representative of the beneficiary of the trust in order to settle title matters or problems, but the trustee bank will not be the responsible party if, indeed, title problems arise.
A title insurance policy will guarantee four important matters:
1. That title to the estate or interest described in the policy is as stated therein;
2. That there are no defects, liens, or encumbrances (registered easements, etc.) other than those stated in the policy;
3. That title is marketable;
4. That there is right of access to and from the land.
The standard exclusions from coverage in both the U.S. and Mexico are:
1. Laws, ordinances or regulations restricting the usage of land (zoning, construction, environmental protection - contamination)
2. Rights of eminent domain - unless recorded prior to date of policy
3. Defects, liens, encumbrances, adverse claims
a. Created, suffered or agreed to by claimant
b. Not a matter of public record but known to claimant
c. Created subsequent to date of policy
4. Taxes or assessments not shown as existing liens
5. Facts, rights, interests or claims not shown by the public records but which could be ascertained by an inspection of the land or by making an inquiry of persons in possession there of.
6. Easements, liens or encumbrances, or claims thereof not shown by public records but could be discovered by a physical inspection thereof,
7. Discrepancies, conflicts in boundary lines, shortage in area, encroachment or other facts in which a correct survey would disclose.
Exclusions from coverage (Mexico only)
1. Water rights or claims or title to water (All water rights are owned by the Mexican government);
2. All substances and deposits described in article27 of the Mexican constitution, the dominion of which is reserved to the Mexican government; (i.e.) minerals, petroleum and related hydrocarbons, salt and precious gems;
3. Confiscation or expropriation by insurrection, rebellion, revolution, civil war, military or usurped power, through the efforts of a political, revolutionary constituted government of the nation or one of itssub-entities;
The powerful reasons for obtaining a policy of title insurance, when available, are to insure against error by searchers, fraud and forgery in deeds. If a mortgage or pledge guarantee is involved and the lender is a foreign institution, a policy of title insurance will generally be required in order to make the loan.
Written by Linda Jones Neil, founder of The Settlement Company
This article is provided by The Settlement Company. It is the first escrow company in Mexico, and is dedicated to processing the trusts and title transfers of Mexican real estate for foreign buyers and sellers for properties located ANYWHERE in Mexico. The company frequently sponsors seminars on the various aspects of real estate ownership in Mexico and holds membership in AMPI, NAR and FIABCI and PROFECO Certificate 00063/96 www.settlement-co.com