How Foreigners can own
Mexican Real Estate

Alternatives
The Restricted Zone
Fideicomiso or Bank Trust Process
Notario Publico or Notary Public
Cost of the Fideicomiso

Alternatives:

It is a common misconception that foreigners cannot own Real Estate in Mexico, but the reality is that they can. However, there is a 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 Fidelicomiso.

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-residential activities. In other words, under said conditions, foreigners can acquire, directly, properties destined for tourist, commercial and industrial use.

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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 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.

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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 automatically renewed for another 50 year period. 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.

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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. 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.

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.

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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 $500 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.

propertysales@sanfelipebaja.com

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