“…But you don’t really own your land!”
It’s the one thing that always comes up when talking about buying property in Mexico; the restriction on foreign investors from holding direct ownership of any land within 100 km of borders, and 50 km of coastline. This notion is a simplistic way of summing up a complicated issue. It is a common restriction held by many countries around the world and not one to be overly concerned with.
The truth is, you CAN buy property in Mexico’s most desirable locations. You just need to know how to do it! Below are some answers to the most frequently asked questions about buying property in Mexico.
OWNING PROPERTY IN MEXICO
Can foreigners really own property in Mexico?
Inside the “Restricted Zone”
In order to encourage foreign investment in this “restricted zone”, the Mexican government provides a special bank trust called Fideicomiso. Its purpose is to help non-residents to buy real estate everywhere in the country and to ensure a safe and secure transaction.
Outside the “Restricted zone”
Properties outside the “restricted zone” are not subject to any restrictions. Land can be acquired directly without the need for a bank trust.
What is a Fideicomiso or Bank trust?
A Fideicomiso is a Mexican bank trust. It can be done through any major bank of your choosing, such as Scotia Bank, HSBC, CitiGroup or Santander (largest Spanish Bank).
The bank, in this case, works on your behalf on all matters related to the property, and records the trust at the Public Registry of Property. You, as the beneficiary, retain all rights, usage and control of the property without restriction to improve, lease, sell or pass on to your heirs. One thing to remember is that the title of the property is not guaranteed by the bank, so any damages or title defect is not their responsibility.
Is the trust an asset of the bank?
No, the deed to Mexico real estate property is simply held by the bank for you. It is not considered an asset of the bank, and for all intents and purposes, the property is yours.
What are the costs involved in the trust?
Typically banks charge $1,500 USD as a set up fee, $500 USD to register the trust and then around $500 USD each year thereafter. The annual fee covers all legal obligations and filing of necessary documents on your behalf. These fees may vary from bank to bank, so it is a good idea to do your research.
How long is the trust good for?
The duration of a trust is currently 50 years, and the term may be automatically renewed for another 50 years upon request. The cost of this will be about $500 USD.
What is a “Notario Publico”?
In Mexico, like Canada and the US, a Notary Public (Notario Publico) is a public official appointed by the State Governor. They handle all legal aspects of your transaction, and oversees the security and filing of documents with the Public Registry of Property (Registro Publico de la Propiedad).
BUYING THROUGH A CORPORATION
Why buy through a Corporation?
If you are planning on buying more than one property to run as a business or rental property, you may want to consider buying as a corporation.
What is the cost of setting up a Corporation?
A Corporation needs to be set up through an attorney, and the cost is typically around $1,500 USD plus an $100/month to maintain and file any necessary paperwork.
CLOSING COSTS
What are the closing costs when buying property?
Closing costs will vary, but you can expect the total closing costs to be about 5-7% of the purchase price of the property. This includes taxes, Notario fees, setting up the escrow, appraisal fees, origination fee, application, establishing the trust and obtaining an SRE Permit.
MORE QUESTIONS?
Can the Government take my property?
The Government can only obtain your property through a legal process of condemnation, and only then for public good, such as road construction. They must then compensate you based on the assessed value of the property. This same process would be called Eminent Domain in the USA, Compulsory Purchase in the UK or Expropriation in Canada.
Can I obtain title insurance for my property?
Title Insurance is becoming more and more common in Mexico. There are several US based companies that will insure your title. Obtaining title insurance would be considered a wise value-added option, considering the relatively low cost.
What is Ejido land?
Ejido land (communal agricultural land) is land that was owned by the federal government, and the members of the ejidos were permitted and required to use and work the land. Up until 1992, there was a restriciton on selling leasing or using the land for collateral. In 1992, a new law passed allowing the privatization and sale of ejido land amongst other members of the ejido community. In some cases, the land title can be transferred to a foreign buyer, but only after going through a “Domino Pleno” process.