How to Buy Real Estate in Mexico
The law declares that the Mexican nation has original ownership to all land and water in Mexico, as well as minerals,
salts, ore deposits, natural gas and oil; but that such ownership may be assigned to individuals.
The Mexican Constitution prohibits direct ownership of real estate by foreigners in what has come to be known as
the "restricted zone."
The restricted zone encompasses all land located within 100 kilometers (about 62 miles) of any Mexican border, and
within 50 kilometers (about 31 miles) of any Mexican coastline. However, 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. Essentially, this type of trust is similar to trusts set-up in the United States, but a
Mexican bank must be designated as the trustee and, as such, has title to the property and is the owner of record.
The Mexican Government created the "fideicomiso" to reconcile the problems involved in developing the restricted
zone and to attract foreign capital. This enabled foreigners, as beneficiaries of the trusts, to enjoy unrestricted use
of land located in the restricted zone without violating the law.
A "fideicomiso" is a trust agreement created for the benefit of a foreign buyer, executed between a Mexican bank
and the seller of property in the restricted zone. Foreign buyers cannot own real estate in the restricted zone due to
Constitutional restrictions. The bank acts on behalf of the foreign buyer, taking title to real property. The bank, as
trustee, buys the property for the foreigner, then has a fiduciary obligation to follow instructions given by the
foreigner who is the trust beneficiary. The trust beneficiary retains and enjoys all the rights of ownership while the
bank holds title to the property. The foreigner is entitled to use, enjoy, and even sell the property that is held in trust
at its market value to any eligible buyer.
In order to allow foreigners to enter into the agreement contained in the Calvo Clause, Mexico requires all foreigners
to apply for and obtain a permit from the Ministry of Foreign Affairs prior to contracting to acquire real estate in
Mexico. This is currently done by the trustee/bank at the time a real estate trust is set-up.
Given the changes made for 1997 in the foreign investment Law, and the fact that a buyer can now apply for and
obtain a trust permit in a matter of days, it is always better to secure the trust permit from the Ministry of Foreign
Affairs before entering into any contract.
The bank, as trustee, must get a permit from the Ministry of Foreign Affairs to establish a real estate trust and
acquire rights on real property located within the restricted zone. The purpose of the trust is to allow the trust's
beneficiary the use and exploitation of the property without constituting real property rights. The beneficiaries of the
trust (fideicomisarios) may be:
* Mexican corporations with foreign investment
* Foreign individuals or legal entities
The law defines "use" and "exploitation" as the right to use or possess the property, including its fruits, products, or
any revenue that results from its operation and exploitation by third parties or from the bank/trustee.
The law does not clarify how trust permits will be issued. Article 14 of the law states that the Ministry shall decide on
issuing the permits "...Considering the economic and social benefit, which the realization of such operations imply for
the nation." The basic criteria used to determine such benefits are likely to change somewhat with the publication of
the new foreign investment regulations. However, it is reasonable to anticipate that some of the unwritten rules used
by the Mexican government in the area of real estate trusts will be included in the new foreign investment
regulations. It is also possible that some of the confusing elements will be eliminated. It is important to understand
the application of the current regulations, even if they are going to be replaced, as well as some of the unwritten
policies the government has used in the past, to better understand what criteria will be used by the Ministry in the
future. Typical Closing cost fees when you buy.
The Ministry of Foreign Affairs must grant any petition for a trust permit that complies with the stipulated
requirements within 5 working days following the date of its presentation to the Ministry's central office in Mexico
City. It must be granted in 30 days if the application is submitted to one of the Ministry's state offices. The Ministry of
Foreign Affairs must confirm the registration of any property acquired by foreign-owned Mexican corporations a
maximum period of 15 days following the filing of the petition. In both cases, if the maximum period passes with no
action by the Ministry, the trust permit or registration are considered authorized.
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 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 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.
In San Carlos Sonora we have a Home Inspection Company you can hire to do a home Inspection on your home
before you buy.
For more information email: suenoteam@gmail.com
How to sell !!
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copyright © 2007, Pam Brame all rights reserved
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