Laws and Tips Regarding Real Estate:

Owning property in Mexico -

Can foreigners really own property in Mexico?  Yes, you may obtain direct ownership of property in the interior of Mexico, however, under Mexican law, foreigners cannot own property outright within the "restricted zone."  The "restricted zone" encompasses all land located within 100 kilometers of any Mexican border and within 50 kilometers of any Mexican coastline.   In order to permit foreign investment in these areas, the Mexican government created the "fideicomiso," (FEE-DAY-E-CO-ME-SO) which is, roughly translated, a real estate trust that is currently created for a period of fifty (50) years.  It is now permitted to renew the trust for another fifty (50) years.

 

How does it work? -

Since foreigners are not able to enter into contracts to buy real estate, they must have a bank act on their behalf, similar to a trust used to hold property for minors as they also cannot enter into contracts. This trust agreement is created for the benefit of the foreign buyer, executed between a Mexican bank and the seller of property in the "restricted zone."   The bank, acting on behalf of the foreign buyer, takes title to the property and then has a fiduciary obligation to follow instructions given by the foreigner who is the trust beneficiary.  Thus the beneficiary retains and enjoys all the rights of ownership while the bank holds title to the property.  Mexico currently requires all foreigners to apply for and obtain a permit from the Ministry of Foreign Affairs prior to contracting to acquire real estate which is done by the trustee (bank) at the time a trust is set up.  The beneficiary (foreigner) is entitled to use, enjoy, develop, modify, and even sell the property, at its market value, to any eligible buyer.

 

Rights of the Beneficiary -

There is a common misconception among foreigners investing in Mexico that once the trust expires, 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 the foreigner 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.  The real estate is not a lease.  The beneficiary can instruct the bank to sell or lease the property at any time.  The beneficiary can also develop and use the property to his liking and benefit, within the provisions of the law, which generally allows most activities in which foreigners may engage.