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Buying real estate in Mexico

Many people believe that you can only lease real estate in Mexico. This is not true! Foreigners can buy real estate in Mexico, and thousands do. Here is how it works:

The Mexican constitution does not allow foreigners to have their names directly on deeds of land within 50 kilometers of the coast, and 100 kilometers from the border. This is the Restricted Zone and we will deal with that later. In all other areas of Mexico foreigners can own land just like Mexicans, with their names directly on the deed of land.

Land ownership is guaranteed in the constitution and the rights of land owners are secured there. The rights to land are just about the same as in other countries. For a foreigner to own land, the foreigner must obtain a permit from the Secretary of State for Mexico. This is all done by the lawyer (Notario), who does the deed transfer.

The permit is usually automatic and once obtained, the Notario can transfer the deed. The deed even allows you to name some beneficiaries in case of death, but they can only be a spouse or blood relatives of the owner. This may avoid the need for a will and probate.

In the Restricted Zone, Mexican law provides a way around the constitutional restriction. There, the laws provide that foreigners can own land, but they must use a Mexican bank to hold the deed (the arrangements are called Fideicomisos). The name of the bank is on the deed, but the foreigner is granted all the rights of ownership, and the bank has no rights to the property. The bank holds the deed in trust and the foreigner is named as the beneficiary of the trust. The trust agreements are for 50 years and they are automatically renewable. Also, the foreign owner can decide to start a new trust with a different bank and start a new 50 year trust at any time, by paying the set-up fees and the deed transfer fees. When the foreign owner decides to sell the property, the buyers can assume the trust or take out a new one for another 50 year term. The deeds do not form part of the bank's assets, and cannot be attached by a bank creditor.

The foreigner must obtain the permit to own land from the Secretary of State, just as in direct deeds, so that is proof that the Mexican government considers this to be "ownership" of land. The bank will charge an annual fee to maintain the trust. This can run from $300 to $500 per year. There is also a set-up fee to start the trust.

One benefit is the right to name multiple beneficiaries in case of death, and they do not all have to be blood relatives. For this reason some people have used Fideicomisos instead of direct deeds even in areas that allowed direct deeds. Also, since the deed is in the name of a bank, the bank has to investigate the status of the deed first, offering a further security level.

Another option for the foreign purchaser is to form a Mexican Corporation to buy the land. The laws now allow a foreigner to own 100% of a Mexican corporation. A Mexican corporation can have it's name directly on a deed of land in the restricted zone, but they must show some commercial use for the property. Renting the property for some of the year has been deemed a commercial use. The advantage here is the saving of the trust set-up and annual fees, but there are charges for setting up a corporation and some annual costs are incurred there too.

Lastly, there are leases around too. Generally they should be avoided as the foreigner does not have as much protection as they do with Fideicomisos. Mexican leases are only enforceable for a maximum term of 10 years. With leases, you need to check out thoroughly if the person leasing to you has the right to do so, and has undisputed title to the property. Foreigners on a development on the Baja found out the hard way that this step should not be ignored.