BajaNomad

Requirement to Improve Vacant Land

tim40 - 4-16-2007 at 10:15 PM

We are considering the purchase of approximately 1.25 acres on the water (approximately 90 feet water front). We have heard conflicting information associated with the amount (in dollars) of improvements required by X period of time post purchase.

1. How much must be invested in improvements
2. How long from purchase date does one have
3. What technically would be considered the purchase date
4. What if one fails to make all improvements within the required time; what are the potential penalties?
5. Does anyone know of a case when #4 was enforced?

Russ - 4-17-2007 at 06:30 AM

All very good questions! Here are a couple more:
6. What permits are needed? Local & Federal
7. Who / where do you get these permits
8. If the land has already been graded prior to purchase who is responsible for permits not obtained?

losfrailes - 4-17-2007 at 06:33 AM

Sounds like Russ' reply comes from experience at Punta Chivato.

longlegsinlapaz - 4-17-2007 at 06:37 AM

Wait for others to chime in as well....BUT....to the best of MY knowledge: (1) there is no designated dollar amount, (3) legal purchase date would be the final date on the front exterior cover of your fideicomiso, (4 & 5) applies ONLY if you sell the land.

The Feds want to discourage purchasing land, holding it for a few years & then reselling it in it's original state for the sole intended purpose of making a financial profit. I believe that if unimproved land is sold within a (2) 3-year period, the Feds assume the intent was investment or monetary profit & the capital gains taxes are higher than the typical approx. 28-30%. I've heard this theory from numerous people over the years. And I know people who own land & have for YEARS without making a single improvement.

Having owned & build on two different waterfront properties, my concern would be for a more important issue....have the official Federal Maritime Zone (FMZ) survey done & monuments placed before you do any construction near the waterfront edge & sides of the land. If you infringe on the FMZ, any & all improvements immediately become the property of the Feds & as such, you are not allowed to move them to correct any mistake! Be aware that the FMZ is flexible because of high-tide line, so your property could very well be reduced in size over the years based on high-tide activity....and yes, atypical storm surges DO count! There are monetary fines for infringing on the FMZ and these ARE enforced; unless you buy the FMZ Concession (large upfront fee and ongoing annual fee) which in my mind is too $$$$$ for the additional land use "rights" it gets you.

Bob and Susan - 4-17-2007 at 07:04 AM

article 14 of the foreign investment law gives the Ministry of Foreign Affairs the deciding rights on permits for seting up a fideicomiso (bank trust)

these (trusts) are to benefit the economic and social issues of the Nation.
they issue you the permit to place the property into a fidicomiso (trust)

"sometimes"...they can require a signed commitment from the beneficiary to invest money into the property in order to give the permit for the fideicomiso.

the Ministry of Foreign Affairs has in the past established a 2,000 sq. meters limit (21,520 sq. ft about a 1/2 acre) for foreigners who want to buy land using a fideicomiso (bank trust)

above that 1/2 acre size they have in the past required a $250,000 investment within 2 years

everything is NOT written in stone and things do change

this is a question best asked your lawyer when purchasing the property

Packoderm - 4-17-2007 at 07:07 AM

"above that 1/2 acre size they have in the past required a $250,000 investment within 2 years"

Is that pesos or dollars?

And that seems to shut the door on purchasing land with the intent to save it from development.

[Edited on 07/17/2004 by Packoderm]

Diver - 4-17-2007 at 07:13 AM

How does this differ if you hold your land in a Mexican Corporation ?

Bob and Susan - 4-17-2007 at 07:14 AM

yep...dollars

keeps investors from "turning and burning" too:biggrin:

Bob and Susan - 4-17-2007 at 07:16 AM

you have to make money with a coporation

you cannot just live on a parcel owned by your corporation

Diver - 4-17-2007 at 07:18 AM

Quote:
Originally posted by Bob and Susan
you have to make money with a coporation

you cannot just live on a parcel owned by your corporation


We know that part but are wondering if any requirements for improvements/timeframe apply.

Bob and Susan - 4-17-2007 at 07:23 AM

nope...no time frames for improvments...

just build a b&b like shari;D

remember now you need an accountant and you need to pay fees;D

Dave - 4-17-2007 at 08:03 AM

Quote:
Originally posted by Bob and Susan
article 14 of the foreign investment law gives the Ministry of Foreign Affairs the deciding rights on permits for seting up a fideicomiso (bank trust)

these (trusts) are to benefit the economic and social issues of the Nation.
they issue you the permit to place the property into a fidicomiso (trust)

"sometimes"...they can require a signed commitment from the beneficiary to invest money into the property in order to give the permit for the fideicomiso.

the Ministry of Foreign Affairs has in the past established a 2,000 sq. meters limit (21,520 sq. ft about a 1/2 acre) for foreigners who want to buy land using a fideicomiso (bank trust)

above that 1/2 acre size they have in the past required a $250,000 investment within 2 years

everything is NOT written in stone and things do change

this is a question best asked your lawyer when purchasing the property


I had the understanding that the parcel size was much larger, but:

I would strongly suggest holding title as a corporation. There are no limits as to parcel size and you can always split off a trust at a later date. Just consult with your attorney to keep a handle on tax liability.

cabobaja - 4-17-2007 at 08:23 AM

You are required to improve vacant land if you purchase any property over 2000M2. There is no set $$ amount. It depends on where the property is located. If it is beachfront, as opposed to property located, as example, 3 miles from the beach, the beachfront improvement will be 1000's of dollars more.

It is best to speak to the Trust Manager at the bank that is to hold your trust. He has all the right information and can assist you.

oladulce - 4-17-2007 at 06:52 PM

We have Fideis. on two adjoining 5000 sq. meter lots in Baja Sur (which sounds like the same size as yours Tim)

One investment clause is $400,000 dollars and the other is $350,000 dollars and the time frame for the investment is 2 years.

The investment requirement includes the cost of the land.

At least 6 of our neighboring property owners who purchased their land via corporations have recently converted them to fideicomisos, now that they are thinking about building homes.

Russ - 4-17-2007 at 10:42 PM

OK. So I got the bank trust, got all the permits that I and the locals were aware of, built some improvements to satisfy the trust agreement and am living happily when two fed agencies bust my bubble and tell me "mucho enfracion" (sp). Now it's been over a year and I have followed their request to address the issue as outlined. But can NOT get any answers on how to settle what ever issue (s) there are. In fact I can not get an answer to what the issues are. I can not build a house without federal permits and can't get permits until the above is settled. I suppose there should be a question in there somewhere ...... A lot more than one! I am not alone in this problem. Pretty much all of Punta Chivato has the same problem. The problem is the fed agencies will not address the problem. Did I mention there is a problem? Ahh, the question. Sleep well all.

tim40 - 4-18-2007 at 09:38 PM

Thank you all for the valuable information. Check me and see if I have the concensus opinions correct please.

1. Buy the land via a corporation (realizing it cost more and there are fees associated with it) and there is no time limit or dollar spend requirement?

2. Buy via a trust and there is a requirement over 2000 meters squared for an investment. The amount could vary depending on location. The Band Trust agent (my name for her/him) should know the details.

3. If in a Corporation at a later date want to do something less than the required dollars amount could sub-divide a piece less than 2000 meters squared and place in a trust.

4. Get a good lawyer to check/confirm all details before plunking over the cash to purchase?

What else? Thank you

Diver - 4-18-2007 at 10:37 PM

Build a nice house with a pool and open bar and invite all your Nomad friends to stop by !! :biggrin:

Bob and Susan - 4-19-2007 at 05:28 AM

1. Buy the land via a corporation (realizing it cost more and there are fees associated with it) and there is no time limit or dollar spend requirement?

the land will not cost more...
the cost of setting up the corp is the ONLY EXTRA cost
the bank trust cost money EVERY year and...
the corp needs an accountant to file docs....
its a trade-off
the corp does not have a requirement to invest into the property

2. Buy via a trust and there is a requirement over 2000 meters squared for an investment. The amount could vary depending on location. The Band Trust agent (my name for her/him) should know the details.

the bank WILL NOT know the details!!!
the Ministry of Foreign Affairs assigns the amount required to invest
this amount is NOT fixed in stone
the size is NOT fixed in size either but 2000 sq meters is a "rule of thumb"

3. If in a Corporation at a later date want to do something less than the required dollars amount could sub-divide a piece less than 2000 meters squared and place in a trust.

no dollar amount is required from a corp
this is how foriengers buy large parcels and split them for profit
corp buys the land
corp splits the land....this costs a little
corp sells the land in pieces...now corp could pay taxes on profit
those pieces go into a bank trust with individual deeds

4. Get a good lawyer to check/confirm all details before plunking over the cash to purchase?

GET A LAWYER
GET ADVICE FROM THE LAWYER
HAVE A NOTARY DO THE PAPERWORK
set of the purchase contract that if you cannot get clear title you can walk with deposit and ALL cash
actually...if you can get away with it...
write in the sales agreement that the seller will pay ALL cost if clear title cannot be transfered
FIND A PIECE OF PROPERTY

now...do not expect it will be easy to build!!!
"you're not in kansas anymore"
walmart and home depot aren't in every town

PROFEPA Approval

bajabeachbabe - 4-19-2007 at 02:10 PM

We are in a similar situation as we have bought two lots side by side with each about 30 meters of beachfront. All of the information provided on this thread agrees with what we have been told. We are going the corporation route.

Additionally, I wanted to mention that if you are on the water you need to get approval from PROFEPA before doing any clearing. We are being told that for lots greater than 2,000 sq. meters you need to have a biological survey too. PROFEPA will then tell you which plants you can't remove. You need to have this approval in order to get your building permits. One of our neighbors didn't follow the procedure and cleared his lot without approval. He got hit with a $10,000USD fine!

We are just getting ready to go through this process, so I'll add additional information as we wind through the system. :(

cabobaja - 4-19-2007 at 02:49 PM

To receive a building permit you will need a environmental study my Semarnat. At least in the Municipio of La Paz.

tim40 - 4-19-2007 at 10:00 PM

Thank you all. Great information as always. We have the land selected and are leaving in the morning to formalize the purchase process. We have dealt in Mexican residential properties and smaller lots prior...this larger lot is new turf for us.

Paladin - 4-22-2007 at 01:36 PM

Is there any problem with someone just buying 3 2000sq mt lots side by side in my name and 2 sons???
Would that solve some of the improvement requirements??