Mexico's Real Estate Laws
Have you ever considered buying a property in Mexico? Mexican real estate laws now allow foreigners to buy property, except for the restricted zone. The restricted zone is the coastal area (50 km of any Mexican coastline) and the area within 100 km of the borders. If you are buying a house, apartment, condo... in the non-restricted zone the transaction will be easy. When buying in the restricted zone, you will have to buy the property rights through a bank trust.
A bank trust or fedcicomiso is a transaction between a foreigner and a Mexican bank that is used to buy the rights to use, enjoy, improve a property that is located within the restricted zone. The bank, as a trustee, is the legal owner of the property, the investor is the legal beneficiary. The trustee handles all transaction that involve the property on behalf of the beneficiary.
The bank has to follow all terms that are stated in the trust agreement and has a fiduciary obligation to follow all instructions that are given by the beneficiary. The bank just holds title to the property.
As the beneficiary you own all the property rights, that means you can even build upon your property if you follow legal and zoning regulations. A beneficiary is obliged to pay all fees punctually, including property taxes, utility bills, water... .
As the beneficiary you can also decide to sell your property rights to anyone and keep the profits you make from the sale. Of course the profit will be a subject to applicable tax laws and you will have to pay some expenses that are regular fees when you sell a property. As a foreign investor you can also choose to sublet or rent your trust and keep the rent if the period does not exceed ten years.
A trust agreement has to be drawn up with a notary public, a lawyer. The beneficiary will need a permit from the Ministry of Foreign Affairs. You will also need a registration in the Registry of Foreign investments. All these permits and registrations will be charged. The bank will also charge one percent of the amount of the transaction. The expenses will all add up to between 11.5 and 12.5 percent. The bank will charge you one percent of the property value annually for its services.
The trust has a time period of 50 years and can be renewed when this period is over. This new fifty-year term will be permitted by the Mexican government.
When the trust is being set up, a substitute beneficiary will be assigned. In case of death of the beneficiary this person will have the same rights and no will has to be probated.
If you decide to buy a property in Mexico, you should appoint a first-class notary public. The notary public will then check with the Public Registry of Property that there are no liens or encumbrances on the property and if the title is in good legal standing. He will also file an application to the Ministry of Foreign Affairs. When this is all done and okay, then the proper sale can be made. Be sure to have lawyer look over the contract, before it is signed.