Foreign Ownership in Mexico
Foreigners can safely buy property in Mexico and enjoy the full rights of ownership
Buying in México is quite different than buying in the USA. However, it can be done in a completely safe manner. The most important component in the purchase of real estate in México is a qualified, knowledgeable, local real estate specialist from a reputable, recognizable company working for your benefit. They can guide you to safely accessible property and guide you through the purchase process with the seller, lawyer, and notary.
It is a common misconception that only Mexicans can own real estate in México. There are two legal vehicles foreigners can use to safely own property in México:
1 – Fee Simple – Escritura – for property not in the Restricted Zone (see below). If the property is in the Restricted Zone, it can be purchased by a corporation that is wholly owned by foreigners. The latter is more typically used with commercial property, but it has also been used for residential property.
2 – Bank Trust – Fidecomiso – where the Bank becomes the trustee holding title and the buyer becomes the beneficiary of the trust. The buyer enjoys all of the same rights they would have in fee simple ownership: the rights to buy, sell, lease, use, bequeath, improve, transfer and encumber. A Fidecomiso works much the same way as a family trust in the United States. This is the simplest, safest way for a foreigner to hold real property in coastal México.Read more on Mexican Bank Trust.
What is the Restricted Zone?
Article 72 of the 1917 Mexican Constitution defines the Restricted Zone as any property that lies within 100 kilometers (62 miles) of the border and 50 kilometers (31 miles) of the coast. This Zone was established to protect the sovereignty of México after the incursions by other countries in the 1800’s. In 1973, the Foreign Investment Law was established to allow non-Mexicans to hold title in the Restricted Zone through a 30-year renewable bank trust. In 1993, the Foreign Investment Law was amended to allow bank trusts to be renewable for 50-year periods. Associated legislation was overhauled and tightened up. The new legislation, in conjunction with NAFTA, created a stable and safe investment environment. These changes are, in part, propelling the current surge in investments in Mexican coastal real estate. Read more on Mexico’s Federal Zone .
The Mexican government can NOT and does NOT Seize Foreigners Property.
There have been stories in the news that imply that the Mexican government can arbitrarily confiscate foreign-owned properties. In every case, the properties in dispute were lawfully owned by another party and the courts where merely acting to return the property to the rightful owner (not the Mexican government). A qualified, local real estate professional can guide you past any potential risk in this area.
What protection does NAFTA provide?
There are provisions within NAFTA that protect investments made by US citizens in México and provide a specific, impartial resolution process for any issues that arise. In recent years, major US developers, hotel chains and institutional investors have invested hundreds of millions of dollars in Cabo San Lucas. Now their attention is focusing on Northern Baja, and buyers should have a high level of confidence in investing this area today.
Why is investing in Mexican real estate so popular these days?
Buyers can now get title insurance through reputable US companies like First American Title. This has become available as a result of the Foreign Investment Law.
Plush, Rivera-style, coastal homes in exclusive, secure, resort settings are priced in a range that is significantly more accessible than prices north of the border. The resort communities of Northern Baja are as luxurious and upscale as their cousins down south with the added advantage of being driving distance from most of the southwest and less than 1 hour from the San Diego Airport.
Given the quantity and popularity of quality pre-sale opportunities, the importance of dependable escrow services has become imperative. Escrow services have created another level of security for transactions. However, read escrow instructions carefully as they can vary significantly and the release of funds is not always the same as in the US. When considering a pre-sale, make certain to ask the right questions:
• Certificate of no liens?
• Title insurance for the project?
• Can a Fidecomiso eventually be obtained and what is the time frame?
• What are the details of the escrow programs?
Be an Informed Investor
Land deeded to the indigenous communal people of México. This land must go through a process of agrarian reform and privatization before it can be sold. Seek competent legal advice before proceeding.
The 99 year lease
A land lease is not an ownership vehicle. Land leases can only be established for less than 10 years. There are no 10+10+10 agreements that are legally binding. There is no longer the legendary “99 Year Lease”. In fact, there really never was. Land leases are not an investment and involve nothing more than the right to use the land for a period of time. Any improvements remaining at the end of the lease will revert to the landowner.