| BUYING REAL ESTATE IN MEXICO |
| Buying Real Estate in Mexico |
| Can a foreigner owner property in Mexico ? Yes - Americans, Canadians and other foreigners may obtain direct ownership of property in the interior of Mexico. However, under Mexican law, foreigners cannot own property outright within the restricted zone. Instead, a real estate trust must be set up to hold title for the foreigner. Since foreigners are not able to enter into contracts in buying real estate in Mexico, they must have a bank act on their behalf, much as a trust is use to hold property for minors because they also can not contract. The restricted zone encompasses all land located within 100 kilometers (about 62 miles) of any border in Mexico, and within 50 kilometers (about 31 miles) of any coastline in Mexico. However, in order to permit a foreigner buying real estate in these areas, the government of Mexico created the fideicomiso which is, roughly translated, a real estate trust. Essentially, this type of trust is similar to trusts set up in the United States, but a bank in Mexico must be designated as the trustee and has title to the property and is the owner of record. The Government of Mexico created the fideicomiso to reconcile the problems involved in developing the restricted zone and to attract foreign buying power. This enabled foreigners, as beneficiaries of the trusts, to enjoy unrestricted use of land located in the restricted zone by buying real estate in Mexico. There is a common misconception among foreigners buying real estate in Mexico that once the trust expires (50 years), 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 does not hold title to the property. Under Mexican Law, the bank, as trustee, has a fiduciary obligation to respect the rights of the beneficiary. A real estate trust in Mexico 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 liking and benefit, within the provisions of the law. Generally, the law allows most activities engaged in by foreigners. You do not have to be resident in Mexico for buying real estate, so there is no need to qualify for resident status under immigration laws in order to have a property investment in Mexico. Mexican Law on property ownership is comprehensive and provides protection for the seller and the buyer in all property transactions, provided that the law is followed, and you ensure that all necessary documentation is present and that the procedures are adhered to. Your Notary Public is the most important person in this process, and he/she will guide you. Do not confuse the role of the Notary Public in the US or UK with its counterpart in Mexico: they are quite different. In the UK for example, almost anyone can become a Notary Public. Not so in Mexico, where the role is appointed directly by the State Governor (the highest seat in State Public Office) - The Notary Public has the power to witness and certify important business documents which require absolute authenticity. The appointment also holds responsibility for the management and secure storage of original records. Under Mexican Law, the deed to the property must be prepared by a Notary Public of Mexico. As a buyer of real estate, it is your right to choose the Notary Public, and it should be your first port of call. The Notary Public will ensure that all documentation and permits are in order so that the transaction can proceed. Everything official to do with your transaction should be done via the Notary Public: Do not take anyone's word about documentation (like property deeds) being valid. Take copies to the Notary Public for official verification. The lawyer that speaks english would be advisable but not necessary. The Notary Public and/or your lawyer will do a series of checks on the property and ensure that the property has a clean history, and that there are no liens on the land (e.g. an old unpaid mortgage). Your Notary Public should also check that all land taxes have been paid during the last five years (if applicable) and that utilities (electric, gas, water and phone) have also been paid during the last two years. By Law, you are not liable to debts after these times. The Notary Public of Mexico is legally responsible to ensure that all documents are in order and that all legal procedures have been adhered to. He will do a thorough check and will not destroy his reputation by hiding any problems, or potential problems from you. While buying real estate in Mexico through a Fideicomiso may seem complicated, the process should not be an impediment to purchasing your dream beach house. Fideicomisos have been tried and tested over time. There is an enormous amount of foreign investment flowing into Mexico now through foreign residential real estate purchases in the Restricted Zone. The Mexican government does not want to lose this source of foreign investments. In fact, this process of buying real estate in Mexico has been getting much easier year after year, especially the last 3-5 years. |
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