Legal Information

“Owning Property in Mexico” by Linda Neil

 The bank Trust for ownership of Real Estate Property to Mexico

Article 27 of the Constitution of the Republic of Mexico prohibits foreign ownership of real estate property within thirty miles of any coastline or sixty miles of either border. This is referred to as the prohibited, or restricted zone.

In 1973, recognizing that many foreigners would enjoy owning property in Mexico, and would bring needed dollars to the country through such ownership, President Echeverria approved the bank trust, fideicomiso, form of ownership, which is available to non-Mexicans.

This law governing ownership under a bank trust was further expanded in the Foreign Investment Laws of 1989 and 1993. Properties located within the prohibited, or restricted, zone which includes the entire Baja Peninsula, may be acquired by a foreigner through a Mexican bank trust, which designates the buyer of the property as the beneficiary of the trust. Legal title is placed in the name of the bank selected by the buyer as his trustee. The bank administrates the property in accordance with the instructions of the buyer/beneficiary.

The buyer/beneficiary enjoys the same rights of ownership as does a Mexican national. He may build on the property, tear down existing buildings, modify them, rent, lease or sell at anytime conforming only to the general laws of the country established for all persons.

The term of the trust is fifty years and it can be renewed for additional fifty-year period. In other words, title to the property may rest in one beneficiary indefinitely, provided that it is renewed within the terms established by the law.

The procedure for establishing the fideicomiso, the bank trust, is as follows:

1. Application is made to the Secretary of Foreign Relations for the permit to establish the trust.
2. Upon receipt of the permit, the trustee bank send instructions to the notary public for preparation of the deed to the beneficial rights.
3. Applicable taxes are paid
4. The deed is recorded in the minicipality where the property is located.

The cost of the permit to establish the bank trust is currently less than $1000 U.S. dollars. Annual bank administration fees generally range from $300 to $400 US dollars. An official appraisal, notary fees, certificates, registration costs, must be paid, however, to obtain a registered deed in the buyer's name.

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Additional notes
1. Having sold over a dozen properties in the last years, the seller has become well versed with the legal procedures and is prepared to help the buyer with all the necessary paperwork at the Notary Public, Banks and Public Registry Offices, etc. ; a transaction which has a market-value from five to ten thousand dollars. Actual closing costs such as an official appraisal, notary fees, certificates, registration costs, must be paid, however, by the buyer, so he obtains a registered deed in his name. These additional costs currently are around $2500 U.S.dollars.
2. Since NAFTA, there exists now the possibility to finance property in Mexico through a U.S.morgage company. Currently several companies offer financing programs; the individual packages from the different banks are relatively similar. However, down payments and interest rates differ, so it is a good idea to shop around a bit. Once the U.S. morgage company has approved your loan, they will go through a Mexican bank (see above), which will contact a Public Notary to draft the required Bank Trust document. The trust will be registerd by the Public Notary with the Trustee Bank. Afterwards, you make payments to the U.S.Morgage company as you would with any loan. Currently, Collateral Morgage Company and Union Bank are offering financing in this area.