Mexico Purchasing and Owning Real Estate in Mexico

Foreigners can legally purchase and own real estate in Mexico. If the property is located within 50 kilometers of the coast or within 100 kilometers of the Mexican border, you will need to go through a bank trust ("fideicomiso") to purchase the property.

Rules of the Game

A good understanding of the trust issue (Fideicomiso) allows a protection mechanism for foreign buyers. This understanding provides the basis for realizing that investing in Mexico is a wise, safe and rewarding endeavor that allows you to enjoy your chosen lifestyle.

Ensuring that all aspects of your chosen property are in proper order avoids any legal or financial complication when you decide to sell your property to upgrade or realizing a return on your investment. At Realty Executives Mexico we will assist you in not only realizing the dream of the lifestyle owning property in Mexico affords, but guide you through the process to ensure all is in order with your purchase.

Remember to only utilize a reputable Real Estate firm in Mexico. This one simple step will ensure that you are guided through the steps to a secure transaction for your investment.

Real Estate in Mexico

All too often citizens of the United States, Canada and other countries assume that property purchases in Mexico are carried out automatically in a manner similar to their native countries. The first rule of any property purchase in Mexico is, always work with a Real Estate Brokerage firm. Purchasing property in Mexico different than in other parts of the world and a professional Real Estate Agent is your safest way to success.

We are here to protect your investment and ensure that you are satisfied with your transaction. Our evaluation of a potential property of interest will guide you to determine if that is the right investment for you. Your best interest is our primary concern.

We take the time to show you how Mexico's real estate transactions function and how the supporting legal system has responded to the industry's needs. It is essential that you have an idea of how thissystem works and what to expect when considering an investment in Mexico. We are at your service at any time for consultation.

Mexican Real Estate lawand how it relates to foreign investment

Article 27 of the Mexican Constitution regulates the ownership of its territory by establishing that “in a zone of 100 km. (62 miles) along any border or 50 km. (31 miles) along the coast, foreign entities cannot acquire direct ownership of the land and waters.” Until recently, foreign investors were allowed ownership of real estate only located outside of the “Restricted Zone”.

Recognizing the demand by foreign interests for ownership of real property, and the importance of making these desirable properties available to foreigners for the potential positive impact on the economy, the Mexican government implemented a series of Foreign Investment Laws beginning in 1973, modified in 1989 and modified again in December of 1993 to incorporate the provisions of the NAFTA treaty.

Creation of the Land Trust (Fideicomiso)

For those who wish to acquire property for residential usage, and who have a valid entry visa, current Mexican law requires that title to the property be transferred to a Mexican bank. It is necessary to establish an individual land trust (fideicomiso) in which the foreigner becomes the beneficiary of that trust. The bank handles all of the paperwork including filing the permits with the Ministries of the Interior and Foreign Affairs. In general, the bank has the responsibility to the government and the new owner to ensure precise fulfillment of the Trust agreement, assuming full technical, legal and administrative responsibility in fulfilling all requirements in protecting the interests of the beneficiary, you!

The bank owns the real property rights, and the beneficiary (equitable owner) owns the personal rights to use, rent, modify or transfer his rights to a third party. Ownership of these personal rights is evidenced through a deed prepared by a Mexican Notary, signed by the representative of the trustee bank and duly registered with the appropriate local authorities.

The Foreign Investment Law of 1993 stipulates a term of 50 years for the Trust with opportunity to renew the trust for multiple 50 year increments. The filing for this renewal must take place on the forty ninth year and between the sixth and seventh month prior to expiration. By requesting renewals every 50 years a property may be held by a family or business entity in perpetuity.

Since by law, Mexican banks enjoy government protection against bankruptcy, the Trust is indirectly guaranteed by the government . As a practical matter, even in unrestricted zones many foreigners prefer to hold their property in Trust.

Protection of the purchaser interest

All real estate transactions are processed through the office of a “Notario”, a qualified government appointed lawyer who acts on behalf of the government to ensure the proper transfer of all real estate transactions. Among the officials many important duties is to register with the appropriate government agencies the deed transferring rights to the new beneficiary. This is the single most important step in protecting a foreigners investment in Mexico since it remains the ultimate proof of ownership if the property is ever disputed.

The purchase/sale document, which includes either deed of rights, or transfer of rights of beneficiary in a property, is generally valid between the parties to a transaction. It most likely contains a description of the property, price to be paid to the seller, and any special terms or conditions negotiated in the sales process. IT WILL NOT however provide valid notice to third parties unless it is recorded in the Public Registry office of the municipality in which the property is located.

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 legal registered owner. While the seller holds title to the property it is his asset; he may mortgage it or sell it again, it may be liened for satisfaction of a judgment; or in testate. In such a situation, there may not be any remedy for the purchaser who neglected to correctly register the deed.

To ensure proper registry of the property, an official appraisal of the property, notarized bank instructions, a property tax certificate and certificate of no liens must be obtained. Sellers Capital Gains Tax and Buyer's Acquisition Tax (2% of the sales price) must be paid in conjunction with registering the deed by both the tax office (Treasury) and the Public Registry. If this process is not completed the buyer is not fully protected. Contact us if you will have any questions