Frequently Asked Questions about Legal Purchase in Mexico

Can Non-Mexicans legally own property in Mexico?
Everyone who is not Mexican by Birth can Legally Own Property In Mexico!

Foreigners may obtain direct ownership of property in the interior of Mexico. But, under Mexican law, foreigners cannot acquire direct ownership of residential property within the area 100 kilometers from the border and 50 kilometers from the coastline. This area is known as the restricted zone. It is possible, however, to acquire beneficial rights to use, improve, and enjoy property in the restricted zone through a Bank Trust or Fideicomiso authorized by the Mexican Government under the Ministry of Foreign Affairs. The Fideicomiso is established for indefinitely renewable terms lasting 50 years each. The trust grants the beneficiary (you) the right to use, rent, modify, or sell the property. Two advantages of the bank trust are avoidance of probate and transfer tax upon sale and a built-in beneficiary mechanism. Property acquired for commercial use by foreigners may be owned without the need for a bank trust, provided that the property is held in a Mexican corporation.

In a typical transaction, a preliminary sales agreement or offer letter will be used. This is like an agreement to agree and is subject to a formal sales agreement which will be executed at closing. The preliminary agreement should provide for a price and terms and a closing date conditioned on the issuance of the trust permit if necessary.

Real estate transactions in Mexico are “closed” by a Notary Public, an official, highly respected government lawyer who acts as a neutral intermediary. Among other things, the notary is responsible for the formalization of the final real estate contract, collection of transfer and capital gains, and recorded of the transfer with the Public Registry. However, the notary is not your lawyer; as with any investment, you may want to seek independent Mexican legal counsel before proceeding. Elimar Properties will be happy to refer you to a trusted legal representative.

A closing specialist like Sekura Law offers legal counsel, escrow services, funds disbursement, and power of attorney services and will accompany you at the notary closing to review official documents for your signature. A foreigner interested in acquiring real estate in Mexico should follow all of the formalities under Mexican law. We will inform you what these are. We will recommend competent legal, tax, and other professional advice as you need it.

If you still need a few questions answered about how it works, please contact us. We will be happy to go over it personally.

Yes! You can own real estate in Mexico!
Here are the basic principles on how:
  • A foreigner may acquire rights over real estate in Mexican coastal and border zones through a trust, called Fideicomiso, which is a legal instrument similar to those in the United States.
  • Through this trust, real estate is administered by a qualified and licensed bank on behalf of the beneficiary of the trust (the owner). The legal effect of the trust allows the beneficiary to act as the owner of the real estate, and thus, the trust complies with Mexican laws.
  • The beneficiary has the right to the full use, enjoyment and profit from the real estate. The beneficiary can rent the property, borrow against the property, and sell the property.
  • Mexican law provides that the original trust term of 50 years may be renewed for additional 50-year periods upon written request by the beneficiary of the trust.
  • When the beneficiary desires, the property may be sold outright or sold subject to an assumption of the existing trust. All proceeds belong to the beneficiary of the trust subject to paying all appropriate taxes.
Mexican property trust AKA "fideicomiso" explained
Why Do Non-Mexicans Need a Trust…

FIDEI COMISO – TRUST – FOR REAL ESTATE INVESTMENTS

WHY: For historical reasons, in 1917 the Mexican Congress considered it a matter of national security to limit foreigners from owning property within 100 kilometers (62 Miles) of the borders, and 50 kilometers (31 Miles) from the coast, this has hence been included in the Constitution. Currently, even though it is true that foreigners still cannot record direct title in the so-called “Restricted Zone”, as of 1971 they can establish a Trust of Ownership using a Mexican bank’s trust services (in Mexico, only financial institutions can act as trustees). Also, Mexican companies in which foreigners hold stock no longer need a trust as long as the property is for business purposes (commercial, industrial, agricultural, etc.)

HOW: On the one hand, the bank holds the title but by law, it can only act under instructions of the Beneficiary (“owner”, for practical purposes) of the trust. On the other hand, the owner can act just as if he had recorded direct title, with the only “limitation” in case he/she sells the property, to have the bank sign the transfer documents to the new owner. Of course, all real estate rights, obligations, and profits belong to the owner.

HOW MUCH? The bank and closing fees for establishing the trust, varies from one institution to another but is usually close to 7% of the assessed value at the time of purchase. There is also an annual fee usually around 600 usd to maintain the trust.

HOW LONG? Trusts are contracted for up to 50 years and the cost to establish it is now the same regardless of the specified period; thus the bank automatically drafts a contract for the longest term, unless the client instructs otherwise.

WILL IT CHANGE? Given the trend of new laws and Mexican politics, it is almost sure that in 15 years or less, this procedure will not be mandatory. When this happens, canceling the trust and taking direct title should take only some paperwork that can be handled by mail plus a small notary fee.

Mexican property purchase deal timeline
Mexican Property Purchase Procedure for Non-Mexicans

The following is a deal timeline guide that will be very helpful in allowing you to keep track of what phase of your deal we are in.

Please print or save this page to your favorites so that you can refer back to it often J Thanks! Eli

 

Timeline of events for property purchase in Mexico/purchase procedure for Non-Mexicans:

1.) Make a written offer containing details of price, dates, conditions, items included or excluded, special circumstances, etc. Attach a copy of your passport to the offer. (Keep in mind that in the USA and Canada, the offer typically becomes a legal contract. Here the offer is first negotiated and the next step is the legal sales contract.)

2.) Negotiate price and terms of offer.

3.) Consult with a closing specialist to receive an estimate of closing costs and fill out forms for your trust or Fideicomiso. Prepare a power of attorney documents if you will not be in town to sign documents. (We recommend Sekura Law for your closing specialist. If you are on your way out of town, don’t worry! The rest of the process can be done via email, phone, and wire transfer)

4.) When the offer to purchase is accepted make an earnest money deposit in the escrow account provided by the closing specialist of your choice via bank wire transfer.

5.) Simultaneously, a licensed Mexican attorney provided by the closing specialist will draft a legal purchase contract for you. Due diligence is conducted while the contract is being prepared so that when the contract is signed it is usually free of conditions and binding. Both purchaser and seller shall sign the agreement and the deal plan begins.

6.) Your attorney will initiate the process of the bank trust or Fideicomiso by collecting a 50% of closing costs fee from the purchaser the balance will be due just before closing.

7.) Follow the format for the deal plan outlined in the contract regarding deposits that should be made to the escrow account or sellers account and any other tasks that should take place

8.) Close the deal. Meet in person or through a power of attorney to sign the Escritura or deed and simultaneously pay all outstanding balances. Congratulations! J

Mexican notary public
Mexican Notary Public

In Mexico, a “notary public” (Notario Publico) is much different than what is referred to as a notary public in the U.S. A Mexican notary public is, in fact, a lawyer who is also a public official appointed by a Mexican state (or Federal District), or by selection after a rigorous application process and examination. Such an appointed is considered a delegation of governmental authority for the certification or official recognition of certain acts and documents. Mexican notaries are also allowed to practice law in some states. Their public duties and authority include authenticating facts that become irrebuttable unless the notary is proven to have committed fraud; conducting title searches (not unlike many of the functions performed by U.S. title companies); acting as public recorder, and examining wills and contracts as to proper form. The position of notary public in Mexico is much coveted, and one acquires it only after years of apprenticeship under the guidance of another notary public. People who do business in Mexico will undoubtedly come in contact with a Mexican notary public when they incorporate Mexican companies, record certain types of contracts, buy or sell land or property, authenticate power of attorney, or engage in other business. The Mexican performs the legal tasks necessary to close a real estate purchase but typically does not offer to represent a purchaser or a seller. For this reason, the purchaser and seller should have their own attorney to review the entire closing process for their benefit.

Mexican Public Registry of Properties
Mexican Public Registry of Properties

There are various types of public registries in Mexico, the function of which is to record various legal acts. One of the main public registries is the Public Registry of Property, where public deeds, are recorded transferring ownership of real property or creating security interests in real property, such as through mortgage instruments, among other documents. In all cases involving real property purchase or sale agreements and agreements creating mortgage guaranties over real property, it is an indispensable requirement that the notary instruments evidencing such legal acts be recorded in the Public Registry of Property in the state where the respective real property is located. The effect of recording is to give notice of the legal act, allowing any person to verify who is buying and selling specific real property or identifying the debtor and creditor in a credit relationship secured by a mortgage. Upon recording the legal act, all third parties are deemed to have constructive notice of the existence and legality of the act. The laws specifically provide a precise list of the legal acts and agreements that require recording with the Public Registry.

Elizabeth Gregg

Owner/Broker

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