Americans Fuel Yucatan Land Grab!

The competition heats up! From the Wall Street Journal.

As Boomers Snap Up Property
In Mexico's Riviera Maya,
Some Encounter Legal Woes

By MICHAEL ALLEN
April 18, 2006; Page D1

A big cadre of American baby boomers looking to retire someplace sunny and cheap is fueling a land rush in the Riviera Maya, a small idyllic slice of Mexico's Yucatan peninsula. But many land-seekers are encountering a variety of obstacles, including skyrocketing real-estate prices, confusing laws and con artists.

Real-estate prices have spiked so quickly -- roughly doubling in the past five years -- that unscrupulous promoters sometimes try to flip property they don't even own. The warnings against this potential trouble are everywhere: "This property is not for sale," advises a hand-lettered placard posted in Spanish on a fenced-off beachfront lot, one of several near Tulum, about 80 miles south of Cancun. "Don't be caught by surprise." The land rush is occurring at the beginning of a demographic tidal wave. With more than 70 million American baby boomers expected to retire in the next two decades, many without adequate pensions or health plans, some experts predict a vast migration to warmer -- and cheaper -- climates. Often, such buyers purchase a property 10 to 15 years before retirement, use it as a vacation home, and then eventually move there for most of the year. Developers increasingly are taking advantage of the trend, building gated communities, condominiums and golf courses.

Real-estate prices near Tulum's picturesque beaches and Mayan ruins have nearly doubled in five years.

Mexico, already thought to be home to as many as one million American citizens, or roughly a quarter of all U.S. expatriates, is set to get the lion's share of new arrivals. From the long-time artists' enclave of San Miguel de Allende in the hills of central Mexico to fast-growing sports-fishing and beach communities of the Baja peninsula to Puerto Vallarta on the Pacific coast, there is plenty to lure a sun-seeking retiree.

No place has boomed in recent years like the state of Quintana Roo in Mexico's far southeast corner. Anchored by the high-rise resort destination Cancun at one end and cosmopolitan Playa del Carmen an hour to the south, Quintana Roo is the country's fastest-growing state, with over a million residents. An estimated 1,500 to 3,000 American citizens live there more than six months out of the year, along with a few thousand more Canadians, Europeans and South Americans.

The hottest section is near Tulum, just down the beach from a massive Mayan fortress overlooking the Caribbean. While the area retains a funky '60s vibe (there's a nude beach -- unusual for conservative Mexico), in the past several years some swanky hotels and real-estate developments have been launched. One was the Colombian drug lord Pablo Escobar's beachfront mansion. He was gunned down before he got a chance to enjoy it, but now it's a Buddhist-and-Mexican-themed boutique hotel, known as Amansala's Casa Magna and run by American Melissa Perlman. Austin developer Greg Schnurr recently launched Los Arboles, the first big master-planned community in Tulum, where he's carving 250 five-acre sites out of the jungle. (Though it isn't near the beach and lacks some permits, he has pre-sold 31 of the lots, which go for $50,000 each, mostly to Americans and Europeans.)

But Mexican real-estate law can be tough to navigate. Under the Mexican constitution, foreigners are allowed to own land outright anywhere except within 50 kilometers (31 miles) of the coastline or 100 kilometers from a national border. Within the so-called restricted zone, they can hold the property in a trust, or fideicomiso. While they don't officially own it, they retain the right to use it and sell it for a renewable 50-year period.

In Tulum there is an additional real-estate wrinkle: Several miles of virgin beachfront are claimed by an ejido -- a form of communal ownership that's fairly common in Mexico. The ejido is composed of impoverished peasants who were given the land years ago by the government, before anybody thought the property was worth anything. Now it could fetch tens of millions of dollars. Under current law, ejidos can be "privatized," subdivided and sold, subject to unanimous approval by ejido members and time-consuming government approvals. Until that happens, foreigners are technically blocked from buying pieces of it, according to real-estate experts.

Unfortunately, anxious buyers sometimes don't want to wait. They find an individual ejido member who claims ownership of a parcel and buy it at a steep discount, on the promise that they will receive full title when a privatization is completed. Such arrangements have given rise to endless title disputes.

(Top) A guard watches over property that American Lee Bufford says belongs to her. The beachfront land is now at the center of a title dispute. (Bottom) This undeveloped lot near Tulum was recently listed for sale for $550,000.

Lee Bufford, a retired Atlanta bakery entrepreneur, says she bought a beachfront lot from a local man eight years ago for $50,000. It was ejido land and she didn't get a proper title, hoping to get that done later. But 3-1/2 years ago she was laid up by a bad automobile accident in the U.S. and couldn't make it down for a while. Word spread that she had died, and she says the man reoccupied the property. Now, after $75,000 in legal expenses, she says she has been told the man is fighting for control with a group backed by an ex-politician from Mexico City. Last month, a corpse turned up on a nearby property minus arms, legs and head. "It's been a nightmare," says Ms. Bufford.

Conflicts over title aren't uncommon in Mexico. In 2000, some 200 American homeowners were evicted from their luxury development on the Baja coast, after a court ruled against the developer in a convoluted title dispute.

Still, such hardships may be on the wane in much of Mexico, as the real-estate business matures. If you're interested in making a purchase, experts say there are a few basic steps to help avoid heartache. First, ask a prospective seller to provide three documents before proceeding with any negotiations: 1) a copy of the title, known informally in Spanish as an escritura; 2) a certificate of freedom of liens and encumbrances; and 3) the latest tax statement for the property. These documents will help establish that the seller really owns the property free and clear.

Second, hire a reputable attorney before signing any documents. The nearest U.S. consulate can provide a list of attorneys in good standing. Third, arrange for title insurance. In recent years major U.S. players such as Stewart Title and First American Title have gone into business in Mexico and there is a thriving locally based industry, as well. For a cost of about $5 per $1,000 of property, a title insurer will protect a buyer against prior liens by tax authorities in the event that somebody else claims title. Finally, make sure to place the property in a fideicomiso, or trust. Fees run around $1,000 to $1,500 up front, plus about $400 a year, but that is offset by the very low property-tax burden.

"In Mexico, you can buy safely but you've got to do your homework," says David Wiesley, president of FirstMexico Group LLC, San Diego, and a pioneer in the Mexican title-insurance business.

Write to Michael Allen at [email protected]