The Punta Banda Incident
Firstly, foreigners can own land in Mexico. Outside the “restricted zones” (50 kilometers from shorelines and 100 kilometers from international borders), foreigners can hold the direct deed to property with the same rights and responsibilities as Mexican nationals; inside the “restricted zone”, foreigners can control land through fideicomisos, or bank trusts, again, with the same rights and responsibilities as Mexican nationals.
Secondly, what happened in Baja is not an example of the Mexican government taking foreigner’s land anytime it wants. In fact, no property controlled by foreigners through a properly constituted fideicomiso bank trust has ever been repossessed by the Mexican government.
Here’s the Punta Banda story: The land in question is called Punta Banda, a peninsula on the Pacific Ocean near Ensenada. In 1973, the original owner’s rights and boundaries were properly set, platted, and filed. These owners had records of ownership going back to the 1950s. The nearby ejido, or communal farm group, advanced a competing claim to the parcel, but it was denied and the issue of true ownership was settled in the 1973 plat.
This old controversy about this particular parcel was still well known locally when, in 1987, a new map of the area suddenly appeared showing the land in question as part of the ejido. This new plat was apparently approved by several officials in the Secretaria de la Agriaria (SAR). The ejido then “sold” development rights to a Mexican company; the company then sub-leased lots to American investors who wanted to build beach homes on them.
The plat the ejido and the development company used to start development was in direct conflict with the original owner’s plat approved 15 years earlier. How this second plat was made and approved was the subject of a court case brought by the original owners. The presiding judge in the case rightly decreed that the second plat was bogus. The ejido had no right to lease it, therefore the American investors had no right to sub-lease it or build on it.
The land and all improvements made to it were ordered returned to the original owners. During the course of the case, the American lessees were advised that they could lose everything, and some cut their losses and left. By the time those remaining were actually evicted, they’d had a year to prepare for whatever the court ruled.
Subsequent lawsuits are ongoing, but in the opinion of many observers, its obvious that some combination of SAR officials, ejido leaders, and developers colluded to produce the new, bogus map and cash in on the resulting development by American investors.
In short, the Punta Banda incident was indeed a “land scam”, but it was actually put right by the Mexican government. The land the American investors sub-leased was not the developer’s or the ejido’s to offer. The fact that the land was the subject of controversy was widely known in the area. How many people passed up this once-in-a-lifetime Mexican beachfront investment opportunity because they smelled something fishy? We’ll never know… Land scams abound all over the world.
Fortunately, over the last several years many US-based Title Insurance Companies have set up shop in Mexico, and the question: Should I get Title Insurance? Is answered with an emphatic YES! Always…