Procedures and Payments for Acquiring Real Property
If you are considering acquiring property this year, we suggest you take into account the necessary procedures (paperwork, formalities, etc.) and payments since the purchase-sale transaction, in addition to the expense of a real estate property, includes certain other expenses such as: an appraisal of the property, taxes, and fees, as well as professional notarial fees related to notarizing (i.e., the legal formalization process through notarized documents), etc.
Here is a list of said procedures and payments:
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Advances paid to Notaries: Although an advance is not mandatory, it is a common practice in order to begin the procedures involved in the purchase-sale; upon completion of such purchase-sale, these advances are a credit on the amount owed.
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Notary’s Professional Fees: These are subject to the tariff set by the State where the purchase-sale transaction is executed. In Yucatan, there is no flat, mandatory professional fee tariff for notaries, but most notaries do use one. Said tariff is set pursuant to a table which indicates the applicable fee to be charged by the notary depending on the property value. In addition to charging for the analysis, approach and resolution pertaining to the transaction, some notaries charge a separate fee for their assessment in finalizing the transaction and therefore add a Value Added Tax to their professional fees. In addition, depending on the notary, certain expenses for administrative management (handling of official matters) may be charged.
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Certificate of Existence or Absence of Liens: This is necessary to ensure there is no previous title/right to the asset (property) intending to be acquired, or to ensure that the property is not any type of security, guarantee or collateral that might hinder the full exercise of ownership of same. In Yucatán, the fee for this is $377.00 pesos.
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Fee for Registration in the Public Registry: This is used in order to publish ownership of the asset (property) and place oneself as the lawful owner to thus best defend/protect the property vis-à-vis third parties. The fee for this in Yucatán is $377.00 pesos. Payment of this fee depends on the number of legal acts that are carried out in a single notarial instrument, i.e., if rectification of measurements of a property and the purchase-sale of said property are reflected and certified thereby in one public notarial instrument, it would be considered two legal acts and therefore two registration fees will be paid. Likewise, a fee will be paid for the registration of each lot resulting from the division of a real property. In the Commerce section, this fee is $846.00 pesos
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In Yucatan, there is a fee paid to the Public Registry of Property prior to registering the public notarial instrument transferring ownership, known as the qualification (legalization) fee, which has a cost of $ 94.00 pesos.
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If a power of attorney or mandate is granted in a public notarial instrument, the fee due for issuing said public notarial instrument is $163.00 pesos. This fee is applied per power of attorney and not per attorney-in-fact, i.e., if three (3) attorneys-in-fact are named in a public notarial instrument, but they are collectively granted one power of attorney, then only $163.00 pesos will be due. On the other hand, if different powers of attorney are granted to several persons, the fee due is $ 163.00 pesos for each power of attorney granted. In the event the power of attorney is granted to a business corporation, the fee is $282.00 pesos.
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There is another fee known as the "Public Notarial Instrument License (or Certification)", which is based on the value of the consideration, i.e., the fee paid for a $ 50,000.00-peso notarial instrument will not be the same as that paid for one in the amount of $ 1,000,000.00 pesos. The amounts are as follows:
For Notarial Instruments or Contracts in amounts:
1. Up to $ 10,000.00 pesos - $ 377.00 pesos
2. From $ 10,000.00 to $ 20,000.00 pesos - $ 564.00 pesos
3. From $ 20,000.00 to $ 50,000.00 pesos - $ 846.00 pesos
4. From $ 50,000.00 to $ 80,000.00 pesos - $ 1,104.00 pesos
5. From $ 80,000.00 to $ 110,000.00 pesos - $ 1,435.00 pesos
6. From $ 110,000.00 to $ 500,000.00 pesos - $ 2,234.00 pesos
7. From $ 500,000.00 to $ 1,000,000.00 pesos - $ 2,821.00 pesos
8. For $ 1,000,000.00 pesos and over - $ 3,290.00 pesos.
These amounts also apply in the setting-up of corporations or legal entities, taking the total capital stock as a basis.
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In the event the public notarial instrument has no assigned value, such as in the case of a donation or adjudication because of inheritance, the "Public Notarial Instrument License (or Certification)" fee will be $259.00 pesos.
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Should a Last Will and Testament be executed via a public notarial instrument, the fee is $234.00 pesos.
- Taxes: Attention should be paid to the following three taxes, since the percentage of notarial costs pertaining to taxes and fees is around 85% of the total:
The Value Added Tax: Depending on what the real property is to be used for, this tax may or not be incurred. If it is for commercial use, then such tax is due; however, if it is for residential use or only land, then no tax is due.
Income Tax: If income is expected, then this tax is incurred; however, it that is not the case, then nothing is taxable. In order to know if this tax is incurred, we recommend reading the following: http://www.yucatancompass.com/articulo-lo-que-debes-saber/12/exencion-de-isr-por-la-enajenacion-de-casa-habitacion.
Tax on the Acquisition of Real Property: This is a municipal tax, calculated via a table, with a progressive tariff rate depending on the value of the real property. In the municipalities of Yucatan, this tax is 2% of the value of the consideration, except for the Municipality of Progreso, where it is 3%.
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Certificates of Non-Indebtedness for (Potable) Water and Property Taxes. In Yucatan, the fee to be paid for the Certificate of Non-Indebtedness for Property Taxes varies from municipality to municipality; for example, in Merida, the fee is $59.00 pesos and in Progreso it is $25.00 pesos. Likewise, the fee to be paid for the Certificate of Non-Indebtedness for Potable Water also varies from municipality to municipality. In Merida the fee is $70.00 pesos and in Progreso the fee is $100.00 pesos.
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After the completion of the registration of a notarial instrument for disposal/sale or otherwise transfer (conveyance of title) of property (e.g. purchase-sale, donation, etc.), or due to the division or rectification (of measurements) of a parcel of real property, the Cadastral Certificate for same should be updated with the public notarial instrument information as well as the name of the owner. The fee to be paid for this is $266.00 pesos in the Municipality of Merida, and $40.00 pesos in the Municipality of Progreso.
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Finance Institutions: If the transaction were to be finalized under the guidance of a credit/finance institution, all expenses forecast by the banking institution acting as lender shall also be paid, which includes items such as research expenses.
The foregoing list includes the most representative expenses, but should not be confused with transcendental aspects when executing (formalizing) a purchase-sale, such as verifying that the seller is the lawful owner of the asset (property), or ensuring the identity of the selling party or the powers and authority of his/her legal representative, if any, in addition to setting the price and forms of payment, just to mention only a few of the basic aspects found within this type of contract.