Buying in Mexico

Overview

Foreign property ownership in Mexico is highly regulated by the Mexican Law and the Constitution making it a safe investment. This applies particularly to property ownership in the so-called Restricted Zone, which is described by the Mexican Constitution as land within 50 kilometers (31.07 miles) from the coastlines and 100 kilometers (62.14 miles) from the borders. In 1971, in the effort to increase foreign investment in Mexico, the Mexican Constitution was amended to allow foreigners to purchase property in the Restricted Zone through a Bank Trust called Fideicomiso(FEE-DAY-E-CO-ME-SO). Furthermore, with the establishment of the North American Free Trade Agreement (NAFTA) in the early 90s, the fideicomiso has become a very straight forward, trusted mechanism that millions of Foreigners have utilized to their benefit over the last decades.

Fideicomiso - Real Estate Trust

Fideicomiso is an equivalent to a beneficial trust and it is the only legal mechanism that foreigners can use in Mexico to acquire land in the so-called Restricted Zone. Thereby, a foreign buyer requests from a Mexican bank of his/her choice to act as a trustee on his/her behalf. The bank obtains a permit from the Ministry of Foreign Affairs on behalf of the foreigner to acquire the chosen property in trust. The bank then holds the property in trust on behalf of the owner for the exclusive use of the buyer/beneficiary and is responsible to the buyer for full technical, legal, and administrative supervision of the trust. The buyer can nominate other beneficiaries of the trust as well as specify who will be a beneficiary of the trust after his/her death.

Initially, the trusts were created for 30 years with a possibility of renewal. From 1993, the Fideicomiso has been issued for 50 years with the right to be renewed indefinitely at a yearly fee. The beneficiary of the trust has total rights to the property and he/she can develop it, rent it, lease it, sell it, and deed it at any time during the ownership period.

General procedure of buying property in Mexico:

1. Find a property you like - Boardwalk Residences of course
2. A sales agreement is prepared including detailed costs, inclusions and exclusions, deadlines as well as the buyer and the seller cancellation penalties if either party pulls out
3. If you are buying a property in the Restricted Zone, you will need to set up a real estate trust (fideicomiso)
4. You need to get a copy of the Land/Property Deeds from the seller so your Notary Public can run due checks on the property to be purchased
5. Your Notary Public will carry out an official appraisal of the property
6. Your Notary Public will request from you a presentation of official documents that include, but are not limited to your passport, birth certificate, marriage certificate and your travel visa
7. The seller will need to present to your Notary Public documents that include, but are not limited to the original property deed, up-to-date tax receipts for the property (shown as paid), public utilities bills & up-to-date details of land-services fees (shown as paid)
8. The seller is responsible for the Capital Gains Tax
9. You will make a property payment simultaneously when the deed is signed over to you, which is done in the office of your Notary Public
10. You will need to settle the Notary Public fees as well as other taxes associated with purchasing a property.

There is a common misconception among foreigners investing in Mexico that once the initial 50 year term of the fideicomiso expires, the beneficiary loses all rights and benefits of the sale of the property held in trust. This is not the case. On the contrary, the beneficiary has a contractual right under the trust agreement with the Mexican bank to all benefits that may result from the use or sale of that property, even though he/she does not directly hold title to the property. Under Mexican Law, the bank, as a trustee, has a fiduciary obligation to respect the rights of the beneficiary.

The fideicomiso is not a lease. The beneficiary can instruct the bank to sell or lease the property at any time. The beneficiary can develop and use the property to his/her liking and benefit, within the provisions of the law.

Because this process is so well established; international companies such as Stewart Title and First American Title offer title insurance to buyers of properties in Mexico. Furthermore, international lenders such as GE Capital provide mortgages in USD on properties purchased in Mexico for North American buyers.