In Quintana Roo, a destination with continuous growth in tourism and investment, some people consider options such as “transfers” to acquire properties. Although these may seem attractive at first due to their apparent simplicity and lower costs, such transactions carry significant legal and tax risks. In this article, we break down the legal complexities, tax obligations, and safer alternatives for buyers, such as direct property purchases or the settlement of mortgages and loans, based on Mexican federal, state, and municipal regulations.

What Is a Real Estate “Transfer” and Why Is It Risky?

A real estate “transfer” involves the assignment of rights over a property, which differs significantly from a direct sale. Legally, Mexico does not explicitly recognize the term “transfer” in the Federal Civil Code, creating considerable uncertainty for the buyer, who does not necessarily acquire full ownership but rather limited rights over the property.

Legal Basis:

• Federal Civil Code: In Mexico, property sales are clearly defined and regulated, granting the buyer full ownership rights. However, a “transfer” lacks an explicit regulatory framework, which can lead to legal ambiguities and potential disputes over property title.

This ambiguity makes “transfers” risky, as buyers may face legal disputes due to the lack of an official property title or encounter limitations regarding their full rights over the property.

Tax and Fiscal Implications

Transactions conducted through a “transfer” are not necessarily subject to the same tax regulations as a standard property sale, which can create serious issues for both parties involved. The Income Tax (ISR) and the Property Acquisition Tax (ISABI), both mandatory in a formal sale, can be bypassed in a “transfer,” exposing the parties to potential fines and penalties.

Legal Basis:

• Income Tax Law (ISR): It establishes that any profit obtained from the sale of properties is taxable, and failing to report it can lead to penalties.

• ISABI (Property Acquisition Tax): This state tax applies to all property transfers, ensuring that the state receives its share in every formalized sale.

This highlights the importance of conducting a direct property sale, with a notary overseeing and legalizing the transaction, ensuring full compliance with tax obligations.

Nationality Restrictions

For foreign buyers, Article 27 of the Mexican Constitution imposes significant restrictions. If the property is located within 50 km of the coast, foreigners can only acquire rights through a bank trust (fideicomiso). “Transfers” often lack the structured protection of these agreements, exposing buyers to the risk of having their property rights invalidated.

Legal Basis:

• Article 27 of the Mexican Constitution: It imposes territorial restrictions on property acquisitions by foreigners, allowing them only through trusts (fideicomisos) within the restricted zone.

This article underscores the importance of ensuring that any property sale involving foreign buyers is conducted through a trust (fideicomiso) or a Mexican company, guaranteeing compliance with ownership requirements and protecting the buyer under current laws.

Advantages of Settling Loans and Direct Property Sales

A direct property sale and the settlement of loans and mortgages offer a safe and formal alternative. By conducting a formal sale, a notary is involved to ensure that all legal requirements are met, providing certainty regarding ownership of the property.

In the case of mortgage settlement, this process ensures that the buyer acquires the property free of any liens or legal restrictions, fully complying with all tax obligations.

Legal Basis:

• Civil Code of Quintana Roo: It specifically regulates property transfers and ensures the legal validity and security of formally conducted real estate transactions.

This process, being overseen by financial institutions and notaries, provides far greater security than a “transfer,” which is neither officially reviewed nor registered.

Recommendation for Safe Transactions

For those seeking legal security and peace of mind in their investment, direct property sales and loan settlements are the recommended options. These transactions, formalized by a notary, comply with all legal and tax obligations, protecting both the buyer and the seller.