HOW FOREIGNERS CAN OWN
REAL ESTATE IN MEXICO ByJim Bacher Some Alternatives It is commonly a misconception that foreigners cannot own real estate in Mexico, the reality is that they can. However, there is a restricted zone, as described below, and we have to consider the following alternatives: Outside the restricted zone, a foreigner or foreign corporation may acquire any type of real estate just as any Mexican national would, holding the property as the direct owner in compliance with Mexican law. Within the restricted zone, a foreigner or foreign corporation may obtain all the rights of ownership but it must be in a bank trust, known as a fideicomiso. Another alternative is to purchase non-residential property through a Mexican corporation, which can be, under certain conditions, 100% foreign-owned. Providing a provision in its by-laws states that the foreigner is willing to be subjected to Mexican laws and agree not to invoke the laws of their own country. Also, the real estate is required to be registered with the foreign affairs ministry and is used for non-residential activities. In other words, under said conditions, foreigners can acquire, directly, properties destined for tourist, commercial and industrial use. THE RESTRICTED ZONE The Mexican constitution regulating the ownership of the land established that: "…in a zone of 100 kilometers along the border or 50 kilometers along the coast, a foreigner cannot acquire direct ownership of the land". These areas are known as the "restricted or prohibited zones". The latest Mexican foreign investment law, which became law on December 28, 1993, makes for allowances as mentioned above. FIDEICOMISO OR BANK TRUST Any foreigner or Mexican national can constitute a fideicomiso (the equivalent of an American beneficial trust) through a Mexican bank in order to purchase real estate anywhere in Mexico, including the restricted zone, to do so, the buyer requests a Mexican bank of his/her choice to act as a trustee on his/her behalf. The trustee bank then obtains the permit from the ministry of foreign affairs to acquire the chosen property in trust. The fideicomiso can be established for the maximum term of 50 years and can be automatically renewed in perpetuity for another 50-year period. During these periods you have the right to transfer the title to another party, will or hypothecate, including to members of your family. The bank becomes the legal owner of the property for the exclusive use of the buyer/beneficiary who has all the benefits of a direct owner, including the possibility of leasing or transferring his/her rights to the property to a third party or to a pre-designated heir. During this period, the foreigner is considered as a Mexican national. It is advised that a Migration permit FM2/3 be applied for at this time. The trustee is responsible to the buyer/beneficiary to ensure precise fulfillment to the trust, according to Mexican law, assuming full technical, legal and administrative supervision in order to protect the interest to the buyer/beneficiary. Fideicomisos are not held by the trustee as an asset of the bank. For practical purposes, even in unrestricted zones many foreigners, and Mexican Nationals for that matter, prefer to hold their property under a fideicomiso. THE REAL ESTATE INDUSTRY The real estate industry in Mexico is similar in many ways when compared to that of the United States, which is probably the most advanced in the world. It is developing quickly, taking advantage of today's technology. The only national professional real estate organization in Mexico is the "Asociacion Mexicana de Profesionales Inmobiliarios" or A.M.P.I. (Mexican Association of Real Estate Professionals) with 24 chapters in 398 cities. This organization is somewhat similar to the national association of realtors (NAR) in the United States. Each area most likely will have a local MLS, listing and marketing service that also serves as a watchdog on their members. LICENSING At this time, there are no government laws regulating real estate brokerage and sales in Mexico. Anybody can, in effect, offer properties for sale and, therefore, caution should be taken to search out an established and reputable real estate company. A potential buyer may want to check with the local Chamber of Commerce or Notario's in the area of interest, prior to signing an offer. ESCROW, TITLE INSURANCE AND HOME INSURANCE It is the Notario Publico who, in effect, acts as a "holding agent" for the involved parties and for this reason there are few escrow companies in Mexico. Many escrows are held outside of Mexico if requested. At the present time there is no general use of title insurance in Mexico, although some American companies are providing coverage in major resort areas of the country such as Los Cabos. Fidelity and Stewart Title are the names most prominent. Many insurance companies do provide full home coverage throughout Mexico. WITH PROPER KNOWLEDGE AND PRUDENT ACTION YOUR INVESTMENT IS SECURE |