CAN FOREIGNERS ESTABLISH PROPERTY RIGHTS IN THE MOST DESIRABLE AREAS OF MEXICO?
Yes! You can own property in the Mexican coastal and border areas via the Fideicomiso (Real Estate Bank Trust).
WHAT IS A FIDEICOMISO AND HOW DOES IT WORK?
As a foreigner, you can acquire irrevocable and absolute ownership rights to property in Mexico through a 50 year perpetually renewable and transferable Real Estate Bank Trust called a “Fideicomiso.” This trust is the legal equivalent for deeded ownership (commonly referred to in the U.S. as fee simple) and is provided specifically for non-nationals to own property in the ” Restricted Zones” of Mexico (border and beach areas.) The bank trust system of ownership is the legal way for foreigners to establish property rights to residential property in these areas that is sanctioned by the Mexican government, and provided for under the Mexican Constitution, thereby offering protection for your interests.
The Mexican Government issues an SRE permit to the Mexican bank we choose to work with to create the fideicomiso. Clear, lien-free title to the property is then incorporated into the fideicomiso designating you as the beneficiary of the trust. The bank is the administrator of the fideicomiso on behalf of the beneficiary (you) in all transactions involving the property. The beneficiary (you) retains the use and control of the property and makes all decisions concerning the property. You have the same “bundle of rights” as owning property with fee simple title. You have the right to use, enjoy, lease, improve, mortgage, sell, inherit and will the property.
Some people have chosen to accept title through a Mexican Corporation, thereby holding title as Mexican entity. Technically if you are purchasing property as an investment (i.e. rental property, multiple properties, a partnership, or future development) you should hold title through a corporation. Many Foreigners have been told that by holding title through a Mexican Corporation, you can save time and money vs. a fideicomiso. What is not disclosed is that a Mexican Corporation is legally obligated to file taxes monthly, with the filing done by a certified Mexican Accountant, among other obligations. Also, holding title through a corporation significantly changes your capital gains taxes should you decide to sell the property. Please consult an accountant or attorney to discuss the best options for your tax situation.
LEASED LAND OR FIDEICOMISO, WHAT’S THE DIFFERENCE?
This is one of the most misunderstood aspects of Mexican Real Estate. Many people don’t know that in Mexico, the only legal lease is for a maximum 10 year period. Additionally, the Mexican Government only recognizes lease contracts that are in Spanish and Notarized by a Mexican Notario Publico.
Please remember you do not get title to your leased property. Should the landowner decide to sell the campo, or not renew your lease you will lose your lease rights, unless specified otherwise in your notarized contract.
Another confusing issue is Ejido properties. For an in depth explanation of Ejido land, please visit Real Estate Attorney Rafael Solorzano’s Facebook Page, Baja Legal Advice here:
https://www.facebook.com/groups/534958289989059
UNDERSTANDING THE PROCEDURE FOR A FIDEICOMISO
Once an agreement is reached between Buyer & Seller and a Promise of Purchase Agreement is signed by both parties, the next step is the Closing Process. The Bank applies for a Permit from the Ministry of Foreign Affairs which comes from Mexico City on the Buyer’s behalf. Once the permit has been approved, an Official Land Survey and Certified Appraisal is ordered. At this time 2 No Liens Certificates are also ordered, ensuring the property has no encumbrances prohibiting the sale and transfer. Once the permit is approved and all the official documents are ready, the next step is to present all of the paperwork to the Notario Publico. It is the Notario’s job to oversee the transaction and document the sale. When this step is completed, the transaction is then recorded in the Public Registry Department. The time frame for the entire procedure can be 90 days up to several months, depending on the property.
The Buyer will receive their completed fideicomiso which about 70 legal sized pages, all in Spanish. The final document will include the trust, No liens Certificates, Appraisal, Survey, Public Deed, Buyer Information, and Public Registry.