Sadly, there are many misconceptions about real estate in Mexico. You have likely heard stories of people who bought a home and subsequently had it ‘confiscated’ by the government. You may also have received Newsletters promising wonderful properties at very low prices. An interview on CNBC’s Squawk Box (July 2005) reported that you need a Mexican National on title when you buy a home. No wonder people are apprehensive! This is simply not true. The Real Estate ‘Expert’ on CNBC’s Squawk Box July 2005 was totally incorrect. There is no case where you need joint title with a Mexican National when buying residential real estate in Mexico. We would dearly love to be invited on their show to correct some of these misconceptions. So, can Foreigners really own property in Mexico? Absolutely! Yes, non-Mexican citizens can purchase property in Mexico. Even as a tourist, you may buy real estate in Mexico. With proper advice, it is safe and easy. Foreigners, who buy real estate in Mexico have the full protection of the Mexican law.
Direct Deed in Mexico
The deed is the history of the property and will indicate who is the legal owner. The Direct Property Deed (Escritura Publica en Dominio Directo) is outright ownership of the property. The buyer is listed on the deed as the direct owner, and there is no yearly fee to maintain the deed as there is with a bank trust. In 1989 the Mexican government amended the law to allow direct foreign real estate ownership in all but the “restricted zones” (see below). In the interior of Mexico, foreigners can obtain direct outright ownership of property by deed (escritura) and have his or her own name on the title, and effective September 1995, can even name beneficiaries (spouse, parent or offspring). The property will not be confiscated by the Mexican government. The government actively invites foreign ownership in Mexico. That is why they created the Trust deed described below.
Yes, foreigners can even buy property on the coast.
On the coast, and close to the borders, (in what is called the ‘restricted zone’), foreigners are welcome to buy property, but there are restrictions. The most important one is contained in Article 27 of the Constitution, which states that “foreigners cannot own property within 100 kilometers (60 miles) of the border and 50 kilometers (30 miles) of the coastline.”
Bank Trust (Fideicomiso) Knowing how important foreign investment is to Mexico, the government has created two ways to get around this restriction: Through the use of a Trust (Fideicomiso) Through a Mexican corporation
There are three parties involved in the trust: The owner of the property (Trustor) The bank (Trustee) The person who will receive the benefits of the trust (Beneficiary or buyer) Although the Trust (Fideicomiso) does not give direct ownership (deed or title) to the foreign beneficiary, it does establish the legal basis in which the bank holds the legal title to the property in order to act on the foreigner’s behalf. This Trust deed assures the foreign buyer of all rights and privileges of ownership. The Foreign Investment Law, a Constitutional amendment created in 1973 and amended again in 1994, allows the trust to be established for a term of 50 years and is renewable any time during its existence, for life, by simple application. The Bank holds the trust deed for the beneficiary (buyer of the property). The property is not part of the bank’s assets and cannot be liened or attached for any other obligations. The purchaser is the beneficiary and has all the rights of enjoyment of the property, including the ability to renovate, rent, mortgage, sell or pass on to their heirs. The control of the property is always in the hands of you, the beneficiary, and not the bank’s. This trust system was established by the Mexican government to protect foreigners interested in buying and owning property in Mexico. By making ownership pass through the trust process, the bank is required to check ownership, insurance and liens against the property. This automatic review ensures valid ownership and that there are no outstanding indebtedness on the property. All real estate transactions involving a trust are governed by federal law. Multiple properties may be held in a single trust. It was never the intent that the properties pass to the government at the end of the trust period, which has been a common fear of purchasers. This simply does not happen. There is a cost to set up the trust plus an annual trustee fee charged by the bank for management of the trust. The cost varies by bank and you are advised to shop around. The Mexican Government issues trust permits only to a Mexican Bank. Banks have statutory responsibility to follow instructions to them by the beneficiary. It is an obligation not to be taken lightly. Banks are highly regulated in Mexico and their fiduciary responsibility is pivotal of the Fideicomiso. They are the cornerstones upon which the entire process functions. Banks are controlled and regulated by the Banking National Commission and protected from bankruptcy through FOBAPROA, a federal fund.
NAFTA Agreement Under the NAFTA agreement, Mexico may not directly or indirectly expropriate property except for a public purpose. If it became necessary to expropriate, swift and fair market compensation must be paid, with any accrued interest.
Comments