Can foreigners own land in Mexico?

 

It is a common misconception that foreigners cannot own Real Estate in Mexico, but reality is that they can.    A foreigner or foreign corporation can acquire any type of real estate (outside of the restricted zones) as any Mexican National, holding the property as a direct owner complying with Mexican law.

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What is the "Restricted Zone" ?

The "Restricted Zones" or "Prohibited Zones" are the areas 100 kilometers along the border and 50 kilometers along the coast.  The Mexican Constitution regulates the ownership of this land and establishes that  a foreigner cannot acquire the direct ownership of the land. Great news, though -  the latest Mexican Foreign Investment Law (effective December 28, 1993) makes certain allowances as follow:

1. Within the Restricted Zone, a foreigner or foreign corporation may obtain all the rights of ownership but it must be in a bank trust, known as Fideicomiso.

2. Another alternative is to purchase non-residential property through a Mexican corporation which can be 100% foreign-owned.  The conditions of this form of purchase are that; the foreigners register the real estate with the Foreign Affairs Ministry, accept to be subject to Mexican laws, and agree not to invoke the laws of their own country.  With this option, foreigners can directly acquire properties destined for tourist, commercial and industrial use.

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What is a Fideicomiso?

A Fideicomiso is the equivalent to an American beneficial trust.  Any foreigner or Mexican National can obtain a Fideicomiso through a Mexican bank in order to purchase real estate anywhere in Mexico, including the Restricted Zone. The process is as follows:

1. The buyer requests a Mexican bank of his/her choice to act as a trustee on his/her behalf.

2. The bank or notario obtains the permit from the Ministry of Foreign Affairs to acquire the chosen property in trust.

3. The bank becomes the legal owner of the property for the exclusive use of the buyer.  The buyer maintains all of the benefits of a direct owner, including the right to:  lease, transfer, sell, or will their rights to any other party, including a member of their family.

4. The Fideicomiso can be established for a maximum term of 50 years and can be automatically renewed for another 50-year period.

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How secure is it to invest in property in Mexico?

It's very secure to invest in property in Mexico - provided you conduct business with a REPUTABLE real estate company that you can ensure that you are investing in a clear and legitimate title.  Some of the main questions that arise with investment security are covered below:

 

Escrow

It is the Real Estate Company who, in effect, acts as a "Holding Agent" for the involved parties and for this reason there are few escrow companies in Mexico.

 

Insurance

Title Insurance:  At the present time there is no general use of title insurance in Mexico, although some American companies are providing coverage in some resort areas of the country. 

Home Insurance: Insurance companies do provide full home coverage throughout Mexico.

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What is the process for investing in property in Mexico?

Most real estate transactions are conducted with the following process:

1. Find the right property for you with a reputable real estate agency, and ensure that it has a clear and legitimate title. 

2. Submit a written purchase offer with a deposit on the property to the real estate broker. 

3. Upon acceptance by the seller, a purchase-sale agreement (promissory contract) is signed by both parties.  Often an advance payment of 20-50% of the total price is delivered to the seller. (The purchase-sale agreement should contain a penalty clause applicable in case there is a breach of contract by any of the parties)

4. Sign the official deed (escritura), which must be certified by a Notary Public (Notario Publico).

5. The balance is paid and the property is delivered. 

The above process should not take more than 45 days.

 

The important role of the Notary Public

1. The Notario Publico is a government appointed lawyer who processes and certifies all real estate transactions, including the drawing and review of all real estate closing documents, thus insuring their proper transfer.

2. Furthermore, all powers of attorney, the formation of corporations, wills, official witnessing, etc. are handled and duly registered through the office of the Notario Publico, who is also responsible to the government for the collection of all taxes involved.

3. In connection to real estate transactions, the Notario Publico, upon request, receives the following official documents, which, by law, are required for any transfer:                                                          -  A nonlien certificate known as a “Libertad de Gravamen” from the Public Property Registry based on a complete title search.                                                                                                                    --  A statement from the Treasury of Municipality regarding property assessments, water bills, and other pertinent taxes that might be due or copies of the latest utility receipts.                                            - -  An appraisal of the property for tax purposes.

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What are the costs involved?

Closing Costs

 

Buyer:  It is common practice that the buyer covers the following:

 

Transfer or acquisition tax:  Each of the Mexican States to determine its own tax. The range may be from 1-4%, of the tax appraisal value (which is generally less than the sales value).

Closing costs:  this includes the notary fees and expenses, and may vary from 3-5% of the appraised tax value or more, depending on the particular State. The percentage is applied to the highest value of the following:

      - The amount for which the property is sold.

      - The value of the official tax appraisal.

      - The value designated by the property assessment authorities.

Cost of the Fideicomiso:  This cost includes the following:

     - Bank fee for the permit, drawing up of the agreement, and establishment of the trust (approx $2,400 USD).

     - A percentage according to the value of the property.

     - An annual fee (approximately $500 USD) to cover the bank's services as a trustee.

 

Seller:  It is common practice that the seller pays the real estate broker's commission, and capital gains taxes if applicable.

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Is financing available?

Yes!  There are several companies that offer International Financing for Americans.  To request more information, click here

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Can I rent out my newly acquired property?

Absolutely!  This is a great option to have your property pay for itself. 

 

The normal and basic terms of a lease agreement are: six month to one year contracts are common, particularly in housing. Commercial and industrial properties are normally leased for longer terms with predetermined formulas to adjust the rent annually. - In some cases a co-signer or a bond is necessary.

 

In Cozumel, generally, the following are the responsibilities of each party for long term and vacation rentals:

 

Long Term Rentals

Landlord: Property & applicable taxes, garbage collection.

Tenant:  A deposit equivalent to 1 - 2 months rent is normally required. The tenant usually pays all utilities as well as condo maintenance fees, telephone, cablevision, and other optional services such as special area security.

 

Short Term, or Vacation Rentals

Landlord:  Property & applicable taxes, garbage collection, utilities, property maintenance fees, telephone, cablevision, and other optional services such as internet and special area security.

Tenant:  A security deposit of a pre-determined amount is normally required, and a fee for cleaning services may be charged.

 

Rental services and property management services are available.  To request more information, click here

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Why should I invest with Buy Cozumel and Cozumel Living?

It is important when buying real estate to work with an individual and a company that you can understand and trust. 

 

With Buy Cozumel and Cozumel Living, you will be assured:

• Prompt and professional service.

• That you are working with a legitimate, legal, tax paying Mexican Corporation that is American owned and operated.

• The backing of a well-respected Notary with extensive knowledge of real estate law to ensure titles are legitimate, free, and clear.

• Direct US customer service number.

• Although legal contracts in Mexico must be executed in Spanish, all contracts have been translated by an official government certified translator and will be supplied to you in English. 

• Ease of monetary transactions through US dollar bank wiring, or PayPal.

• You are working with a reliable, hard working, dedicated real estate agent and agency who will put your needs first, and help to make your dreams of owning and living in paradise a reality.

To contact Cindy regarding any of the above FAQs, click here.

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