Foreigners may obtain direct ownership of property in the interior of
Mexico. 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 Fidecomiso authorized by the
Mexican Government under the Ministry of Foreign Affairs. The
Fidecomiso is established for a 50 year renewable term and grants the
beneficiary the right to use, rent, modify or sell the property. An advantage
of the bank trust is the avoidance of probate upon the death of the
beneficiary when a substitute is named.
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. Depending on the type of business, it is often possible for a
foreigner to own 100% of the Mexican corporation.
In a typical transaction, a preliminary sales agreement will be used. This is
like an agreement to agree and is subject to a formal sales agreement
which will be executed at closing by a Notario Publico. The preliminary
agreement should provide for a price and terms—generally, cash as
financing is not readily available—and a closing date conditioned on the
issuance of the trust permit if necessary. Other due diligence
contingencies may be negotiated, but they are not customary.
Real estate transactions are “closed” by a Notario Publico, an official,
highly respected government lawyer who acts as a neutral intermediary.
Among other things, the notary is responsible for formalization of the final
real estate contract, collection of transfer and capital gains taxes and
recordation of the transfer with the Public Registry. The notary is not your
lawyer, however, and as with any investment, you may want to seek
independent Mexican or U.S. legal counsel before proceeding.
American title insurance is available for Mexican real estate whether
acquired directly or through a trust.
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