Do I need my own legal counsel for a closing? Is the notary public necessary or even sufficient?
In real estate transactions, as in any other transactions, the majority of the time the problems arise when trying to short-cut the process in an effort to save some money, short cuts that ironically ends up costing more.
In a real estate transaction usually the parties that intervene are the legal counsel of the seller, the legal counsel of the buyer, the real estate agent, the Notary Public, the Appraiser, and in certain circumstances, a tax expert when there are issues of possible capital gains. As a principle or rule of thumb, all of these parties are strongly recommended to have in a closing, as all of them fulfill a very specific and important role.
The goal of a real estate transaction not only to have a smooth transaction, but also to have a secure one as well, one that brings as an end result the security of the seller in getting paid without having any tax issues, and the security of the buyer´s investment.
I often see transactions where seller and buyer do not have a legal counsel and as a consequence they rely solely on the Notary Public and the help of the real estate agent, and such professionals end up fulfilling such roles even after they have recommended that seller and buyer hire the services of a legal counsel to represent their interests.
I have great friends that are Notary Publics and have many friends that are real estate agents, and I strongly believe that when seller and buyer totally rely on them to conduct the closing, not only are they putting a burden on such professionals to perform actions that are not their responsibility, especially if something happens to go wrong with the title, the tax basis of the transaction, an issue with the legal representation, an issue with the legal description of the property, etc., but more importantly, they are putting a burden on themselves by risking the security of the transaction, or its appropriateness.
I have also seen transactions where seller and buyer do not get the Notary Public involved, and thus although money change hands in terms of purchase price, the transactions remains for years in a private contract, which of course is not registered.
In my opinion the role of a real estate agent is to coordinate the sale or purchase of a real estate, and in doing so gather as much information as it can regarding such property, as well as gathering the appropriate information from seller and buyer as needed to have the closing, and of course more than anything, to provide its expertise as to the physical condition of the property in terms of functionality and quality.
The role of the Notary Public is the formalization of the deed that will contain the title by which seller will transfer ownership to the buyer. In other words, the deed that will ultimately get registered in the Public Registry. Without the Notary Public such transactions cannot be deemed as formalized according to Mexican Law. However, the Notary Public is an impartial party and does not represent the seller nor the buyer, and is not responsible to perform a throughout due diligence on the property, or the chain of title to the property, nor is he responsible for providing legal advice to the seller or the buyer in terms of the appropriate value to be used at the closing, which in itself could create a tax issue in the future.
The role of the legal counsel is basically to provide proper due diligence as to the chain of title and determine the legal status of the property, determine the appropriateness of the legal representation of the parties when executing the formalization of the deed, and provide legal advice as to any tax issues that may arise either at the closing or perhaps in the future.
When each party fulfills its role professionally and with a high standard of ethics, the transactions usually go smooth and are, most of the time, secure for seller and buyer.
Keep in mind that you do need to have all of such parties involved in order to carry out a proper real estate transaction (Real Estate Agent, Notary Public, Legal Counsel, Appraiser and in some cases the Tax Expert), as each one of them perform very important tasks that are needed for a pleasant and secure transaction, and in choosing them do your homework.
If you need any legal assistance or advice either in real estate transactions or in other investments in Mexico, please do not hesitate to contact us at (602) 266-0225, or at email@example.com.
Miguel A. Tapia, Salazar International Advisors. Attorney at Law Licensed in Mexico with a Masters Degree in International Trade Law for the University of Arizona.