The ABC of acquiring residential property in Mexico by foreigners.
Last Updated on Wednesday, 17 February 2010 21:54 Written by Administrator Friday, 22 January 2010 18:46
I wrote this article for the first issue of this magazine and my first thought was that if I had this opportunity, I will like to write an article for newcomers and hopefully regular readers of this magazine, so let’s start from a very basic point of view:
The Political Constitution of Mexico (1917) provides in fraction I of article 27 that: “Only Mexicans by birth or naturalization can acquire the domain of land, water and its accessories or in order to obtain concessions over mines and water resources and the Mexican State can grant the same right to foreigners, only if they agree before the Ministry of Foreign Affairs to consider themselves as nationals (i.e. Mexicans) in relation to such goods and to not invoke for that reason the protection of its governments regarding those goods, under the penalty in case of breaching this agreement, of losing the property acquired under such agreement in favor of the Mexican Nation. In a range of 100 kilometers along the border and 50 kilometers within the beach a foreigner can not acquire the direct domain over land and water resources”.
In English, this provision means that foreigners can not acquire property directly 100 kilometers from the border and 50 kilometers from the beach (a.k.a., restricted zone), with the understanding that foreigners can acquire inland property with no restriction other than giving a notice and in both cases they have to submit themselves to the Laws and Jurisdiction of Mexico, waiving the protection of their governments under the penalty of losing this property.
Then, you will be thinking, how can I acquire full ownership of a residential property in Mexico? And my response to your question is the following:
A) Foreign Investment Law (1993) and its regulation (1998), provide that foreigners can acquire the rights to use and enjoy beach front property with residential purposes through a bank trust, which involves three parties:
· A Settlor (fideicomitente) of the trust who in plain words is a seller who transfers his/her property into a trust upon the payment of a price;
· A Trustee (fiduciario) that is a banking institution that manages the property in favor of a beneficiary and trustee can be changed for another banking institution, and
· A Beneficiary(ies) of the trust who is (are) a foreigner(s)
The beneficiary can use and enjoy the property, (enjoy is a legal term in Mexico that refers to the right to obtain a benefit derived from the property), and ultimately transfer his/her trust rights or the property itself. These two benefits shall be instructed to the Trustee.
The term of a trust is of 50 years and may be renewed for another 50 years. During this period the property can be transferred, not to mention that the beneficiary is entitled to appoint a substitute beneficiary or substitute beneficiaries (heirs), with the understanding that such bank trust can be used as a Will limited to the property.
B) Once you have obtained a trust permit it is necessary that the trust is formalized before a Notary Public in Mexico, which is a very different figure from a Notary Public of a Common Law System, in general terms in Mexico the Notary Public is an auxiliary of our Judicial System that gives public faith and certainty of the legality of an action signed before him.
The three parties involved (Settlor, Trustee and Beneficiary) need to sign a public deed or instrument prepared and signed also by a notary public formalizing the trust, and this deed needs to be recorded in the corresponding Public Registry of Property in order to be valid before any party.
The notary’s fees, taxes (excepting for the income tax) and expenses to formalize a trust are paid by costume by the Beneficiary (Buyer) and may vary between 5% to 6% of the price of the property.
Once your trust deed is registered, you just need to pay your property tax and your bank fees (Trustee), annually.
C) When you are willing to acquire property in Mexico, please consider that a title search shall be done, a preliminary contract prepared, your trust permit application filed, the trust signed before a notary public, and then finally your deed is recorded. Please be aware that this process can take 1–2 months and 2 months more to have your bank trust registered.
Please notice that this article is written from a general point of view and is just limited to residential property, so do not consider it as a legal advice. As I have written in previous articles, every transaction has its own peculiarities and characteristics, so please look for legal advice from the lawyer of your preference who can understand your needs and is able to understand the differences between two legal systems, so you can acquire property in a safe and secure manner.
Mexico’s legal system can be a little bit different, but if things are done adequately you can be confident that you will be acquiring property not only in a safe and secure manner, but also efficiently.
Agustin Galindo is a Mexican Attorney at Law, founder of Galindo Abogados, S.C., which is located in Zihuatanejo, Guerrero, Mexico and his contact information is the following
This e-mail address is being protected from spambots. You need JavaScript enabled to view it
, tel. 011(52)7555549915 and fax 011(52)7555549916, website: www.galindoabogados.com