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REAL ESTATE

1. Restricted Zone

The area restricted to foreigners has been deregulated. This zone is the band of national territory within a width of 100 km. along the borders, and 50 km. along the shoreline. The Law of Foreign Investment permits Mexican corporations with a majority of foreign capital to acquire properties located within a said region if these lands are not destined for residential use. These acquisitions must be registered with the Secretariat of Foreign Affairs (Secretaría de Relaciones Exteriores).

On the basis of the Law of Foreign Investment, the Secretariat of Foreign Affairs authorizes credit institutions to acquire real estate located within the area restricted to foreigners through trusts. The trust fund is to permit the use and exploitation of such real estate by the trustees without creating rights in favor of said trustees. Authorization will be necessary in the following cases:

  • When Mexican corporations, without the foreigners exclusion clause, seek to acquire rights to the use of properties that are destined to residential ends; and
  • When private foreign individuals seek to acquire the rights to the use or exploitation of real estate for any purpose.

The effect of operation for this trust fund is originally granted for a term of 50 years and, it may be indefinitely renewed for equal term periods.

2. Foreign Corporate Ownership of Land

The LIE establishes that foreign companies may not hold direct title to real estate located in Mexico. They may, however, hold the beneficial interest in such real estate under a Mexican trust.

Requirements for foreigners to acquire Real Estate in Mexico

    Q. Can a foreigner buy real estate "under his own name" in Mexico?

    A. According to present Mexican laws, the only way a foreigner is permitted to own real estate in Mexico "under his own name" is under a migratory status of "immigrant or resident" subject to permission of the "Secretaria de Relaciones Exteriores" (Ministry of Foreign Affairs) and provided that the property does not fall within the so-called prohibited zone.

    Q. What is the "prohibited zone".

    A. The "prohibited zone" is a belt of land extending 100 km (62.1 miles) from the Mexican borders and 50 km (31.05 miles) from the nation's coasts.

    Q. Can a foreigner hold real estate under a third person's name?

    A. Mexican laws prohibit foreigners from acquiring land for a third person, unless this third person is a trust institution.

    Q. What is a trust institution?

    A. A banking institution that is authorized by the Mexican authorities to establish fiduciary accounts and conduct other trust operations.

    Q. Can a foreigner acquire real estate through a trust institution?

    A. Yes by entering into a trust agreement.

    Q . Who are the people involved in such a trust agreement?

    A. The present owner of the land becomes the trustor and the trust institution, which is the holder of the property would be the trustee. The person with the right to make use of the respective land would be the beneficiary, in this case the foreigner.

    Q. What kind of migratory status does a foreigner need in order to enter a trust agreement?

    A. Any foreigner could acquire land through a trust agreement.

    Q. Is it necessary to have a lawyer or legal representative in order to enter a trust agreement?

    A . No, since the trust institution will handle all legal matters for the foreigners.

    Q. What rights does the beneficiary have under this trust agreement?

    A. The beneficiary is entitled to make use of the land; in other words, he may reside on the land and undertake any construction necessary. Furthermore, if he/she obtains Mexican citizenship, he may give instructions to the trustee to place the land under his name; or if preferred, he may instruct the trustee to transfer the land under the name of any other person, provided that the person has the necessary legal capacity to acquire the land through transfer.

    Q . Upon the signing of the agreement what obligations will the beneficiary assume?

    A. The beneficiary cannot rent out the respective land unless the foreigner has the right migratory status in order to receive income from his properties in Mexico. He is also responsible for paying the taxes due on the land (real estate taxes and water service charges), and will have to prove to the trustee every six months that the agreed payments are up-to-date. He will also have to pay the trustee's fees.

    Q. What other expenses must be met when a trust agreement takes place?

    A. Notary's fees and expenses must be paid and in some cases it is necessary to pay for the cost of an appraisal.

    Q. How long may such a trust agreement last?

    A. A trust agreement is of indefinite duration, and ends when the trustee transfers the land to the beneficiary. This will take place when the beneficiary obtains the Mexican citizenship, or when a request is made to transfer the land to a person entitled to acquire real estate in Mexico.

    Q. What happens if the beneficiary dies during the duration of the trust agreement?

    A. The heirs of the beneficiary will inherit the beneficiary's rights under the trust agreement.

    Q . Can the "Banco de Mexico" draw up this type of trust agreement through its trust department?

    A. The "Banco de Mexico's" trust department, with its staff of highly trained specialists, is in the best position to handle this particular type of trust agreement.

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