How Foreigners Can Own Mexican Real Estate:
 

Purchasing property in Mexico is not the same as in the US or other parts of the world. It is important that you have a good understanding of how this system works and what to expect when considering an investment in Mexico. Most important is that you should make sure you are dealing with a reputable Real Estate company that is registered to operate in the area you are looking to make a purchase. - Long Realty Rocky Point

It is a common misconception that foreigners cannot own Real Estate in Mexico, but the reality is, they can. However, there are restrictive zones and processes to consider, as described below.

Outside the Restricted Zone, a foreigner or foreign corporation can acquire any type of real estate, just as any Mexican National and, hold 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 held in a bank trust known as, a "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 try invoking the laws of their own country.
Also, that the real estate acquired be registered with the Foreign Affairs Ministry and is used for non-residential activities. In other words, under said conditions, foreigners can acquire directly, properties destined for tourist, commercial and, industrial use.

 

There is no such thing as a 99 year lease like in the US, and never has been, as reported by some tourists and the American media.

By law, leases for terms of in excess of ten years are neither legal, nor valid in any Mexican court, nor have they ever been. 

Neither is a 10-10-10 renewable for 30 years.  By Mexican law, no residential lease in excess of 10 years less a day is legal.
You may see a commercial lease like this but never residential. Case closed!

 

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 inland along the 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. Yes, Puerto Peñasco is in the restricted zone, as are all popular tourist areas along the coast.

 

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 their 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 automatically renewed for another 50 year period and so on. 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. (FYI- there is no inheritance tax in Mexico)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. 

For practical purposes, even in unrestricted zones many foreigners and Mexican Nationals, for that matter, prefer to hold their property under a Fideicomiso. 

 

Process:

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. (similar to the US) If the transaction is being conducted directly with the seller, it is highly recommended that a real estate broker or a lawyer be consulted before signing any papers or handing over any money. The purchase/sale document, which includes either deed of rights or transfer of rights of beneficiary in a property, also contains a description of the property, price to be paid to the seller and, any special terms or conditions of the sale. It will not provide valid notice to third parties unless it is recorded in the Public Registry office of the municipality in which the property is located. 

In certain resort areas, the custom of using "escrow" services is being implemented. Sometimes it is common to deliver to the seller/escrow, as an advance payment, the equivalent to a 20-50% (including the initial deposit) of the total price, upon signing the purchase/sale agreement. The agreement should contain a penalty clause, applicable in case there is a breach of contract by any of the parties.

Until the buyer is formally named as a beneficiary in a public document before a Mexican Notary, title to the rights in the property remain with the last legally registered owner, which would be the seller. While the seller holds title to the property it is his asset. He may mortgage it or sell it again, it may be attached in satisfaction of a judgment/lien, he may die without a will. In such a situation, there may not be any remedy for the purchaser who neglected to correctly register his deed - his interest, his investment may be lost. In short- use common sense and due diligence. 

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 45-60 days ish. Be comfortable with your purchase, the real estate companies and those who provide the closing services are professional people. And remember to keep a sense of humor, "mañana" only means, "not today" :) Welcome to Mexico, you are now free to enjoy life and your new property.

 

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 $400-500usd) 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, usually around the same $400-500usd) to cover its services as a trustee.

 

 

Disclaimer: This information is correct to the best of Long Realty Rocky Point's knowledge. You may wish to look for more information from a different source or, on a website with mexican legal information to get the most up to date information.

 

 

VIVA MEXICO !