It is a common misconception that foreigners cannot own Real Estate in Mexico,
but the reality is that they can. However, there are restrictive zones,
as described below, and we have to consider the following alternatives:
Outside the Restricted Zone, a foreigner or foreign corporation can acquire any
type of real estate as any Mexican National, holding the property as a
direct owner complying with Mexican law.
Within the Restricted Zone, a foreigner or foreign corporation may obtain
all the rights of ownership but it must be in a bank trust known as Fideicomiso.
Another alternative is to purchase non-residential property through a Mexican
corporation which can be, under certain conditions, 100% foreign-owned, with a
provision in its by-laws that the foreigners accept to be subject to Mexican
laws and agree not to invoke the laws of their own country.
Also, that the real estate acquired be registered with the Foreign Affairs
Ministry and is used for non-residentialactivities. In other words,
under said conditions, foreigners can acquire, directly, properties destined
for tourist,commercial and industrial use.
The Restricted Zone
The Mexican Constitution regulates the ownership of the land and establishes
that "...in a zone of 100 kilometers along the border or 50 kilometers along t
he coast, a foreigner cannot acquire the direct ownership of the land." These
areas are known as the "Restricted or Prohibited Zones". Nevertheless,
the latest Mexican Foreign Investment Law, which became law on
December 28, 1993, makes the allowances mentioned above.
Fideicomiso or Bank Trust:
Any foreigner or Mexican National can constitute a Fideicomiso (the equivalent
to an American beneficial trust)through a Mexican bank in order to purchase
real estate anywhere in Mexico, including the Restricted Zone. To do so,
the buyer requests a Mexican bank of his/her choice to act as a trustee
on his/her behalf.
The bank, as a matter of normal course, obtains the permit from the
Ministry of Foreign Affairs to acquire the chosen property in trust.
The Fideicomiso can be established for a maximum term of 50 years and
can be continually renewed every 50 years. During these periods you
have the right to transfer the title to any other party, including
a member of your family.
The bank becomes the legal owner of the property for the exclusive
use of the buyer/beneficiary who has all the benefits of a direct owner,
including the possibility of leasing or transferring his/her rights
to the property to a third party or to a pre-appointed heir.
During this period,the foreigner is considered as a Mexican National.
The trustee is responsible to the buyer beneficiary to ensure precise
fulfillment of the trust, according to Mexican Law, assuming full
technical, legal and administrative supervision in order to protect
the interests of the buyer/beneficiary. Fideicomisos are not held
be the trustee as an asset of the bank.
For practical purposes, even in unrestricted zones many foreigners
and Mexican Nationals, for that matter, prefer to hold their
property under a Fideicomiso.
Most real estate transactions are "opened" after a written purchase
offer is accepted by the seller and when a purchase-sale agreement
(promissory contract)is signed by both parties. In most cases, a deposit
is required by the broker in order to transmit the offer to the seller.
If the transaction is being conducted directly with the seller,
it is highly recommended that real estate broker or a lawyer be consulted
before signing any papers or handing over any money.
In some areas it is common practice to deliver to the seller, as an advance
payment, the equivalent to a 20-50% (including the initial deposit)
of the total price upon signing the purchase-sale agreement which should
contain a penalty clause applicable in case there is a breach of contract
by any of the parties. Normally, when signing the escritura or
official deed, which needs to be certified by a Notario publico or
notary public,the balance is paid and the property is delivered.
This should not take more than 45 days. In certain resort areas the
custom of using "escrows" is being implemented.
Notario Publico or Notary Public
The Notario Publico is a government appointed lawyer who processes
and certifies all real estate transactions, including the drawing
and review of all real estate closing documents, thus insuring
their proper transfer.
Furthermore, all powers of attorney, the formation of corporations,
wills, official witnessing, etc. are handled and duly registered
through the office of the Notario Publico, who is also responsible
to the government for the collection of all taxes involved.
In connection to real estate transactions, the Notario Publico,
upon request, receives the following official documents, which,
by law, are required for any transfer:
A nonlien certificate from the Public Property Registry based
on a complete title search. A statement from the Treasury or
Municipality regarding property assessments, water bills, and other
pertinent taxes that might be due. An appraisal of the property
for tax purposes.
Cost of the Fideicomiso
Based on a present tariff, the bank charges the person desiring
the Fideicomiso an initial fee (approximately $1000-2000 US)
for the drawing up of the agreement and establishment of the trust,
plus a percentage according to the value of the property.
In addition the bank charges an annual fee (depending on the
value of the property)to cover its services as a trustee.