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A: The only way a foreigner can own property in Mexico without a bank trust is to become a Mexican citizen or to have a corporation.
Foreigners can't own real estate in Mexico?
A: Not true. In most of Mexico, Americans, or any other foreigners, can own land outright with what is called a fee simple title, the same as we have in the United States. Only in the restricted zone -- 50km (31.05 miles) from the ocean and 100km ( 62.1 miles) from the borders -- is it true that foreigners can't hold a fee simple title. "
Perhaps the main reason for establishing the restricted zone is that the Mexicans lost so much territory to the United States in the 19th century -- about one third of their country: Texas in 1845, and in 1848 through the treaty of Guadalupe Hidalgo the territory that became California, Nevada, Utah, most of Arizona, and parts of New Mexico, Colorado, and Wyoming. The treaty was signed shortly after American forces had captured Mexico City. The United States paid only $15,000,000 for all of this land. And in 1854 through the Gadsden Purchase the United States acquired the rest of what is now Arizona and New Mexico. It's not surprising that Mexico was a little nervous about allowing foreigners, especially Americans, to acquire any more land.
But old wounds heal, and now the United States and Mexico are working hand in hand. NAFTA has promoted good business relationships, but even before NAFTA, Mexico wanted to make it possible for foreigners to invest in their country, so in 1971 they developed the bank trust (fideicomiso) as a way for Americans to buy residential property in the restricted area.
Americans can't own real estate unless they have a Mexican partner?
A: Not true. It used to be that for a partnership or Mexican Corporation, foreigners had to have Mexican partners who owned at least 51% interest. This is no longer the case. Under the new Foreign Investment Law of 1993, a Mexican Corporation can be owned 100% by foreigners, and the corporation can buy and own any property with a fee simple title, as long as its use is non-residential.
A Bank Trust is a Lease Agreement?
A: Not true. Under a Bank Trust the beneficiary (buyer) has all the rights of ownership: the right to buy, sell, lease, use, bequeath, improve, transfer, and encumber. On the other hand, a Lease Agreement would grant only the right to use. If a lessee made improvements, such as building a house on the property, that house would belong to the landlord. Nor could the lessee sell the property or borrow money on it.
The Mexican government can take away foreigners' property at any time?
Not true. The Bank Trust is established by the government and gives foreigners the same rights of ownership as Mexican citizens. The only difference is that they never receive the actual fee simple title. It is held in trust for them by a bank. When first established, the term of a Bank Trust was for 30 years only and was made renewable for another 30 years. In 1993 the term was extended to 50 years, and renewable for another 50 years and so on.
Not long ago the United States media featured a group of Americans in Baja California who complained that they were being "evicted" from their property. And that they had "purchased" homes in an upscale development in 1986, even though they had been warned that the developer's title to the land was in dispute and that litigation was pending. The courts eventually decided in favor of the Mexican landowners, and the Americans were dispossessed.
A similar thing happened some time ago in Cholla Bay, a community near "Rocky Point" Puerto Penasco, Sonora Mexico. Residents who had held Lease Agreements for many years and built improvements on "their" property were "evicted" when the owners decided not to renew the Lease Agreements. Although the Americans were outraged, the property owners were entirely within their rights. In the United States it was reported that "the Mexican government" had taken away their land. In fact, it was simply the law being enforced. They build houses on land witch they did not own !
Investment opportunities in real estate abound and are as well one of the safest for real estate investments. Foreigners can own coastline land with Bank Trusts held by Mexican banks. These Bank Trusts are set up with 50-year renewable beneficiary rights without limitations. Land and homeowners can enjoy the rights of ownership equally protected by the Mexican government.
This bank trust allows foreigners complete control over real estate in the restricted zones. Under the Fidiecomismo, the Mexican bank, through the Bank Trust, holds the title to the property in any restricted zone. The owner who is the beneficiary of the Bank Trust administers the Bank Trust and therefore controls the property. The owner is free to transfer ownership, rent or improve the property at their will. Foreign owners may also enjoy capital gains on sold property and can also instruct the Bank Trust to pass the property on to their heirs.
Mexican law also protects beneficiaries of the Bank Trust from any problems that the bank may have. A Bank Trust can never be seized to satisfy judgments against the bank. Mexican law, in 1994, established that Bank Trust deeds are to be 50-year terms and are renewable indefinitely in 50-year increments.
Mexican notaries, Notaria Publica, are government appointed attorneys specifically trained to handle the legalities of property transfers. Notaries are the only ones legally able to transfer title. They also make sure the title is clear from the local to the national level, make sure no liens exist and collect any taxes due on the property. Notaries perform title searches similar to American title companies guaranteeing your property is unencumbered.
Rental properties and other businesses can be owned by foreigners by forming a Mexican Corporation. In this case, the Mexican Company, which would hold the title, owns the property and a Bank Trust is not needed. The only benefit being a few hundred dollars for annual trust fees.
Closings are performed by the Notaries and most properties require only 30-60 days to complete the closing process, although it may take considerably longer to receive the Bank Trust or actual title. You can purchase oppcional Title Insurance but this generally is not needed with the Notary system.
If you plan to rent your property, understand you will need a passport to obtain your FM3 to conduct business in Mexico, even if you are using a reservation management company. Our Service Concierge, is able to assist you with those documents as well as bill paying and an assortment of other services. Tax bills, as well as utility bills are not sent to you in the mail therefore, using a bill paying service is an added convenience.
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