Can foreigners buy real estate in Mexico?
The answer is Yes. According to Article 27 of the Mexican Constitution, foreigners can buy real estate.
However, there is a restricted area in which foreigners may not acquire direct ownership of real estate, this area includes one hundred kilometers along the borders and fifty on the coasts, such properties may only be acquired through other legal concepts such as Bank Trust (the banking institution holds the deed to the property but it is the foreigner who holds the rights over the land) or by a Mexican company with foreign capital and foreign partners.
* How does a trust work?
According to the Ley General de Títulos y Operaciones de Crédito, a trust is a contract by which a person transfers to another certain goods or money to be allocated to a lawful order. In Mexico, as a general rule, they can only act as trustees some financial institutions, which gives greater security to the parties involved in this agreement. This figure can be used for as many purposes as possible, briefly say that the kind of trust that is commonly used by foreigners to acquire ownership of property in the restricted area is called “Irrevocable trust transferring ownership (Fideicomiso Irrevocable Traslativo de Dominio)” through of this one person (seller) transfers the ownership of the property of the trust irrevocable (bank) and how this, in turn, can only act on that property with express instructions from the trustee (foreign buyer).
Mexican law allows foreigners to acquire the rights to use, enjoy and dispose of real estate located in coastal and border areas of Mexico. Through a trust agreement (“Trust”), foreigners can acquire land in Mexico for tourist or industrial purposes, with the same rights and obligations as a wholly owned awarded.
* What is a Trust?
In Mexico, banks are allowed to open trust accounts and do trust operations. The Trustee (Bank ) has legal title to the real property during the term of the Trust and is also empowered with the rights necessary to achieve the objectives of the contractual agreement creating the trust.
*What characteristics does a Trust have?
The legal effect of the trust is to keep trustee and temporary ownership of real estate.
In the Trust Agreement, the current owner of the land appears as the settler or trustee (“trustee”) and therefore comes the title of the property to the Trust (bank) who holds the property during the term of the contract Trust – ten, twenty, thirty, forty or fifty years to the buyer. The buyer appears as the beneficiary (“trustee”), is the person who has the use, enjoyment, and the full availability of the property.
A foreigner cannot register property titles within the restricted area, can certainly be a beneficial entitlement of the trust deed owner. In some ways, it is similar to own 100% of the shares of a corporation, and therefore it is practical purposes as property.
* What rights and obligations acquired the beneficiary holding a Trust?
The beneficiary will get the possession, use and enjoyment of property, that is, you can live in the property and carry out all modifications and/or improvements. It also has the ability to instruct the Trustee (bank) to sell, mortgage, or transfer real property that is the subject of usufruct to another person or corporation.
If the beneficiary sells the property to another foreigner, you can designate or give the same benefits to the new buyer. This designation of rights must be formalized before a Mexican Notary, payment of federal and local taxes and fees arising from the transfer of beneficial rights. It also has the obligation to pay property taxes, such as property taxes, condominium maintenance fees, water, electricity, and an annual fee of Trust, among others.
* What are the fees of the Trustee?
Fees vary from one bank to another but generally go between $2,500 USD to $3,500 USD for the establishment of the Trust; including permission from the Ministry of Foreign Affairs. The annual fee between $400 and $800.
* What other expenses will cover the beneficiary of the Trust Agreement?
You must pay all charges, taxes and expenses arising from the purchase and the formalization of the Indenture to Mexican Public Notary. You must also cover the cost of the permit, which must be obtained from the Ministry of Foreign Affairs, and record the Indenture on the National Register of Foreign Investment.
* What if the beneficiary dies during the legal term of the Trust Agreement?
The beneficiary is entitled to appoint a substitute beneficiary or beneficiaries to acquire all rights and obligations under the Indenture in the case of death of the beneficial owner during the period of validity.
Through this appointment, your heirs will not have to follow the procedures of legalization before the Mexican courts, which could cost time and legal fees. They only need to submit the death certificate and identification to the bank, which in turn will instruct a notary public in order to register their heirs and new owners (beneficiaries) of the property in trust.
* What happens when the Trust Agreement expires?
A presidential decree was issued on December 27, 1993, to establish a new Foreign Investment Law. According to Article 13, the Ministry of Foreign Affairs may authorize the renewal of Trusts within the restricted to the expiration of its mandate area. Moreover, the Ministry for Foreign Affairs may also authorize a new real estate trust to be transferred from one trust to another for a period of up to 50 years, when the beneficiaries of the original Trust and the new are different.