Mexico real estate: Buy at your own risk

LA CRUZ DE HUANACAXTLE, Mexico — Doug and Dru Davis sold their San Diego County home several years ago to buy a $200,000 house on the beach.

The value of their new place increased fivefold — until developers moved the beach.

The couple's serenity was shattered last fall when construction crews began dredging the bay in front of their property to reclaim land from the sea. A planned marina, hotel and high-rise condos now threaten to block their view.

Instead of watching whales glide a few hundred yards off their patio, the couple fear they soon will be looking at garbage bins, a service road and beer trucks.

"This is sending a terrible message to investors," said Doug Davis, 61. "You think you're buying oceanfront property, and then the [Mexican] government lets someone build in front of you."

Flush with equity from the run-up in U.S. real-estate prices, American boomers are snapping up properties in Mexico.

But while the Mexican government has made it easier to purchase in coastal zones once off-limits to foreigners, some buyers are finding out the hard way that consumer protection hasn't kept pace with soaring demand.

No agency on either side of the border keeps statistics on the number of Americans who have encountered problems. But interviews with homeowners, real-estate experts and government officials reveal deals gone sour and a host of potential pitfalls.

Some would-be buyers have had brokers disappear with deposit money. The homes of others have been seized in land disputes. A few have landed in jail.

U.S. officials warn that Mexico's murky land-records system exposes foreigners to complex title disputes in courts that may not give them a fair shake.

"There is a history of problems," said Liza Davis (no relation to Doug and Dru Davis), public-affairs officer at the U.S. Consulate in Tijuana. "We ask people to go in with their eyes open."

The most high-profile dispute in recent years was the eviction of dozens of U.S. citizens from the Punta Banda peninsula south of Ensenada in Baja California in 2000.

The homeowners, mostly retirees, built their dwellings on so-called ejido land, communal farmland that has been the source of complicated title struggles nationwide. Mexico's Supreme Court ruled that the group from whom the Americans negotiated their land deals was not the rightful owner, forcing some to abandon homes worth hundreds of thousands of dollars.

Such extreme cases are the exception rather than the norm, according to international tax expert Patrick Martin, a partner in the San Diego law firm Procopio, who said there are plenty of satisfied Americans who have bought Mexican property.

"If done properly and carefully, it can be a very attractive investment," Martin said.

But in La Cruz de Huanacaxtle, the Davises and other homeowners said they did meticulous research before purchasing. They just never imagined that someone would be allowed to build on land reclaimed from the sea, effectively elbowing them off the waterfront.

Doug Davis said he was stunned by the lack of transparency when he and other mostly American homeowners began asking questions about the $50 million project, being developed by four well-known local businessmen. The 17 affected property owners had to hire attorneys to obtain basic information about building and environmental permits.

The homeowners said the original plans called for a much smaller marina development and that officials had yet to show them permits authorizing the expansion in front of their homes.

Armando Zepeda Carrillo, an official with Mexico's Secretary of the Environment and Natural Resources, said the expanded project obtained all necessary permissions. The agency has not responded to requests by the Los Angeles Times to view those documents.

The local prosecutor denied the homeowners' request to halt the project until the developers and government could demonstrate all approvals were in place. Heavy-equipment operators continue to dig and dredge, just yards from the homeowners' seawalls.

Dru Davis said she was taking antidepressants to cope with the stress. The couple fears that their property, which they calculate is worth more than $1 million, could lose half its value.

In Rosarito, about 1,400 miles north in Baja California, Bob Torres says the $63,000 he lost on a modified trailer home was nothing compared to being deprived of his liberty.

Torres and his wife, Aide, secured a $300-a-month long-term lease in 2002 on a lot in a seaside trailer park called La Barca.

Starting with a 35-foot travel trailer, they added on little by little, eventually creating a two-story, four-bedroom structure with a deck.

Torres, 60, said things changed dramatically last year when Fidel Valdespino, son of the longtime owner, took charge of a major portion of La Barca after his father's death.

Torres said he arrived one weekend in September to find the water pipes to his dwelling had been severed. Other former tenants said their water and electricity had been cut about that time, access to the public beach blocked with debris and that a rash of burglaries swept the park. An abandoned trailer sprouted English graffiti that read: "Gringos go home. This is Mexico."

The word was that Valdespino was trying to pressure tenants to give up their leases to make way for a condominium development. Many fled.

Among the holdouts were Bob and Aide Torres. Arriving at La Barca on March 18, they were arrested after Valdespino reportedly alleged they had damaged the water pipes. A local judge found them guilty without hearing their testimony, unusual even for Mexico's legal system, according to their attorney, Jose Heing Chig Bazua.

The frightened pair spent three days and nights in the notorious La Mesa penitentiary in Tijuana. They were released after signing an agreement with Valdespino to remove their dwelling from La Barca within 30 days.