Buying Safely

Can foreigners really own property in Mexico?

Inside the "restricted zone"

Foreigners in Mexico are not allowed to hold direct ownership of any land within 100 km/ 62 miles of the borders and 50 km/ 31 miles of the coastline. However, in order to encourage foreign investment in Quintana Roo and other parts of the country within this "restricted zone", the Mexican government provided a way around this difficulty and implemented a special bank trust called Fideicomiso. Its purpose is to help non-residents to buy Mexico real estate everywhere in the country and to ensure a safe and secure transaction.

Outside the "restricted zone"

Residential properties outside the "restricted zone" can be acquired directly by foreigners without the need for a bank trust or a corporation.

What is a Fideicomiso or Bank trust?

Foreigners wishing to purchase land for residential purposes in the "restricted zone" must do so through a Mexican bank trust called a "Fideicomiso". This can be done through Scotia Bank, HSBC (Largest Bank in the World), Banamex (Citigroup) Santander (largest Spanish Bank) or any bank you choose.

The Mexican bank acts on behalf of the foreigner in all matters related to the property held in trust.

The beneficiary retains the use and control of the property to mortgage, improve, lease and sell without restrictions and pass the property to heirs. Trusts for real property must be recorded at the Public Registry of Property of the location of the property. A bank does not guarantee the title of the property and is not responsible for any damages to the beneficiary in the event of a title defect.

Is the trust an asset of the bank?

No, the deed to Mexico real estate property is held by the bank for the beneficiary (Purchaser) but it is not considered an asset of the bank therefore not exposed to any legal action that the bank might find itself in. It is the beneficiary's property.

What are the costs involved in the trust?

Prices vary from Bank to Bank regarding set up fees, and also annual service charges can vary. The annual service fee will cover legal obligations (e.g. the filing of necessary documents annually) by the bank on your behalf.

Typically banks charge $1,500 USD as a set up fee, $500 USD to register the trust and then around $500 USD each year thereafter.

It may be worth checking with your bank as they are all in competition for your business.

How long is the trust good for?

The duration of a trust is currently 50 years, and the term may be automatically renewed for another 50 years upon request. The cost of this will be about $500 USD.

What is a "Notario Publico"?

In Mexico, the Notary Public (Notario Publico) is a public official appointed by the State Governor. A Mexican "Notario" is an attorney who must be a Mexican citizen. They also provide for strict security of original records and documents and records the documents with the Public Registry of Property (Registro Publico de la Propiedad).

When buying real estate and you reach an agreement, go to the Notary Public first. The buyer chooses the Notary Public.

For real estate transactions you do not need an attorney. The Notary Public is completely capable and legally authorized to carry out the transaction.

They are both responsible and liable for collecting the capital gains taxes at closing.

Why buy through a corporation?

Many investors prefer to purchase property though a corporation as this would be ran as a business such as buying and selling land, renting property, or when owning more than one property.

How much is the Cost to set up a Corporation?

Typically to go through an attorney there would be a $1,500 USD set up fee and around $100 USD per month

What are the closing costs?

Total Closing Costs including: taxes, Notario fees, setting up the escrow, appraisal fees, origination fee, application, establishing the trust, obtaining the SRE Permit will cost around 5%-7% of the sale's price.

Can the Government take my property?

Only through legal condemnation proceeding for a public good (i.e. road building) they must then compensate the owner based on the assessed tax value. This same process would be called Eminent Domain in the USA, Compulsory Purchase in the UK or Expropriation in Canada.

Who is involved in real estate transactions?

Normally, there are four parties involved in any Mexico real estate transaction in the restricted zone: Real estate company, Buyer's Attorney, Bank and Public Notary.

Can I obtain title insurance for my property?

Title Insurance options have become much more readily available over the past decade. Many U.S. based companies have developed expertise in providing the services needed to support North Americans. We recommend Stewart Title or First American which both have offices throughout Mexico.

What is Ejido land?

Ejido land (communal agricultural land). The land was owned by the federal government and the members of the ejidos "ejidatarios" were permitted and required to use and work the land, however no one could sell, lease or use the land for collateral. That is until January 27th, 1992 when a new law passed allowing the privatization and sale of ejido land. The right to use this type of land can be purchased, but always a risky deal. It is important to understand that ejido titles can only be sold, or transferred to other members of the ejido community. Individual ejido members must obtain a full title through the "Domino Pleno" process before the title can be transferred to a foreign buyer. If this is not the case this will not be your property, you will only be allowed to use it.