Updated on December 2, 2015
Under the Mexican constitution, foreigners aren’t allowed to acquire property title in a direct way within the restricted zone. This is by no means a definite restriction that avoids foreigners from enjoying property in Mexico.
The restricted zone is the area defined as being within 50 kilometers along coastline and 100 kilometers along borders. Mexico’s Foreign Investment Law allows foreigners to acquire indirect title to land in the restricted zone by one method; through a bank trust.
The Mexican Congress has implemented a system which by means of a Mexican banks foreigners to acquire the property and place it in trust for the sole “use and enjoyment” of a beneficiary. This right includes the right to re-sell the property at fair market value any time during the trust. The preceding makes it possible for foreigners to have same rights as direct owners of a property.
A “fideicomiso” (equivalent to a Beneficial/Bank Trust) is a three-party contract by means of which the seller (settlor/fideicomitente) irrevocably transfers to a bank (trustee/”fiduciario”) real property so that a third party (beneficiary/”fideicomisario”) can use and enjoy such real property. The transfer of the real property from the seller to the bank is a definite and irrevocable transfer of title. Under Mexican law only an authorized Mexican banking institution can be a trustee.
Any Foreigner or Mexican can constitute a “Fideicomiso”, in order to purchase Real Estate in Mexico, including property inside the Restricted Zone. The buyer will hire a Mexican bank to act as a trustee on her/his behalf.
The “Fideicomiso” is established for a 50 year renewable period. During this period the Bank becomes the legal owner of the property all to the exclusive administration for the benefit of the Buyer/Beneficiary, who will have the use and possession of the property at all times. The foreigner may live on the property undertaking any alterations and/or improvements and at the same time having the ability to instruct the Bank on mortgaging, renting, selling or transfer the title of the property to another individual or corporation. The “Fideicomiso” can be used as a form of will for the property acquired in Mexico due that the law allows the foreigner to assign secondary beneficiaries in case of death. During this period, the Foreigner is able apply for a Mexican residence or FM3 visa.
The Bank is responsible for the Buyer/Beneficiary to ensure precise fulfillment of the trust in accordance to Mexican Law, assuming full technical, legal and administrative supervision in order to protect the interests of the Buyer/Beneficiary. Note: The property held in a “Fideicomiso” is not considered an asset of the Bank at any time. The Bank only does what it is told by the owner.
For practical purposes, even in unrestricted zones many Foreigners and Mexicans, for that matter, prefer to hold their Real Estate under a “Fideicomiso”.
Course of action
As a buyer you provide the bank with the following information:
- Copy of the Real Estate title or deed indicating the exact surface area and boundaries.
- Blue prints of the property.
- Name of the beneficiary or beneficiaries, nationality, address and phone number.
- The agreed purchase price.
Upon receiving the information and documents, the bank will present an application for a Trust permit at the Foreign Affairs Ministry. Once obtained, the Trust Contract is executed and legalized before a Public Notary.
A Public Notary is an attorney at law that has been entrusted with public faith by the Mexican government to attest specific legal transactions and is the only one authorized by the Mexican Government to formalize title transfer procedures in his book of records called “Protocolos”. The resulting documents are then registered at the Public Registry of Property and Commerce of the State, giving legal evidence of the title under the buyer’s name.
If you sell the property to another foreigner, you may assign your beneficial interest to the new purchaser. The assignment of rights must be formalized before a Mexican Public Notary prior to the federal and local taxes and fees payments that arise from the transfer of beneficial rights.
In all cases the Buyer/Beneficiary must pay all fees, taxes and expenses from the purchase and formalization of the Trust Deed before the Mexican Public Notary, including in these the costs of the permit that must be obtained from the Ministry of Foreign Affairs and registering the Trust Deed at the National Registry of Foreign Investments.
In the event of the Beneficiary’s death during the Trust’s span, the beneficiary has the right to appoint a substitute Beneficiary or Beneficiaries; these would acquire all rights and obligations stemming from the Trust Contract.
Through such designation the foreigner’s heirs will never need to follow any probate proceedings before any Mexican Courts that could cost time and legal fees. They would only need to present the death certificate and identifications to the bank, which in turn would give instructions to a Public Notary in order to register the heirs as the new owners (Beneficiaries) of the Trust Contract.
This is another way to invest in Mexico: Establish a Mexican corporation. This resource is exclusive for industrial or commercial purposes and it is not for residential purposes.
This procedure is not complicated and allows you to sponsor yourself to work in the country as well. In the last several years, this avenue has become popular because with the help of an attorney or accountant you can found a Mexican corporation that will be the owner of the Real Estate, without the need of a Bank Trust.
Do you have any questions? Please contact us, we will be happy to help you.