Foreign Ownership of Real Estate in Mexico

by Diana Gibbs

Foreigners can own property fee simple in the interior of Mexico, including valuable sites in such tourist micas as Guadalajara and Cuernavaca and the Capitol of Mexico City. The property referred to as the “Prohibited Zone” runs along Mexico’s coasts and borders is a restricted area, which was established under the Mexican Constitution and extends 100 kilometers (about 62 miles) deep along the coasts.

This means that virtually all of Baja California is included in the “Prohibited Zone”. The Rosarito Beach / Ensenada / Cabo San Lucas type areas require a Mexican Bank Trust for a Foreigner to enjoy owning a home in “The Baja” or on the coasts of mainland Mexico such as Cancun, Acapulco, etc.

Four Ways to Hold Property in Mexico

1. Mexican Bank Trust ~ Fideicomiso (Pronounced Fed-e- co-mi-so)
2. Mexican Land Lease
3. Federal Zone Concession
4. Commercial Property

The Mexican Bank Trust

The Mexican Bank Trust was created in the early 70’s to promote tourist and retirement investments along popular coastlines by Mexican President Echeverriua, which authorized the 30-year Bank Trust program. This is the most secure method to hold real estate in Baja California.

Your Bank Trust must be established at an authorized Mexican Bank in their Trust Department. In 1989 President Salinas mandated the 30 year Trust be extended for an additional 30 years. Then, December 27, 1993, President Salinas extended the Trusts from 30+30 year arrangement to the new 50+50 year time period. The property you hold in a Bank Trust is yours to improve, build, sell, leave to your estate, etc. You’ll enjoy all the same rights you have in your U.S. fee simple real estate via the Bank Trust. Your Family Trust in the USA can also be the owner of the Bank Trust if you so desire.

There are several Subdivisions in the area that were set up as a Master Bank Trust by the developers 30 years ago. Two of those subdivisions were San Antonio Del Mar and Las Gaviotas. They both had the original 30-year Trusts, which expired March 2003. All the owners requested their new 50 + 50 Year Bank Trusts and those new Trusts have now been issued. When you decide to sell your home, in all probability, another foreign person will be purchasing your Bank Trust Rights. You will write a letter of instruction to the Bank that will include your new Buyer’s name and beneficiaries. The new Buyer can assume the remaining years of the Bank Trust or they can apply for a new 50 + 50 year Bank Trust. It is the Buyer’s choice.

If you sell your Trust Rights to a Mexican National, he has the option to take title in his name in the Trust or remove the property from the Trust and take title in “Escritura” (Mexican National form of Ownership). Sometimes the Mexican National will opt to pay the annual Trust fee and stay within the Trust, especially, if his most likely buyer would be another foreigner.

A Land Lease for More than 10 years is not Legal and never has been !

The Mexican Land Lease

Nearly every day clients ask, “Can I get a 99 year land lease?” A land lease for more than 10 years is not legal and never has been. Not the 10 + 10 + 10 year arrangement, either.

If you enter into a 10 + 10 + 10 agreement with a Mexican landowner and at the end of the first 10 years the landowner decides he does not want to recognize that second ten-year lease you thought you had, he does not have to do so.

You have no recourse, because you entered into that agreement which was designed to circumvent Mexican Law, thereby giving you no legal status to use the Mexican Court System. If you lease land, the lease should be 9 years and 11 months to stay with in the lease land laws. It is possible and perfectly legal for the Mexican land owner to give you a new 9 year 11 month lease at the end of your first 9 year 11 months and so on.

I only suggest Lease Land arrangement if you are #1. Limiting your second home investment to a smaller total purchase amount rather than a Bank Trust purchase and #2. Only if you can obtain a 9 year 11 month lease. Just be sure the total investment you are willing to pay for the structure on lease land is an amount you can average over a 10-year period and be willing to “walk away” from at the end of your first lease period of 9 years 11 months. That may not be the case, but know it could be the case in the future.

Lease Land Fees

Land lease rents run about $150.00 to as much as $600.00 per month. Most leases have a “cost of living adjustment” at the end of your lease for the next lease term. Usually there’s 3 to 10 % fee when you sell your structure that goes to the landowner and your buyer will probably have a nominal increase in the rent as well. Usually a 10% increase.

Commercial Property

Commercial property like the Ford, Sony, Zenith, Toyota and Sharp facilities are allowed to own their commercial piece of property as fee simple. This exemption was made to encourage the large investment for these type facilities that employ so many Mexican Nationals. You, as a foreigner, can also own a piece of land/building and business such as a restaurant, hotel, store, etc.

You no longer need a Mexican National to own the Mexican corporation or your commercial property. You then obtain a Work Permit Visa, as a foreigner, to operate the business and provide jobs for the Mexican people. For a Mexican corporation you need 2 shareholders & they can be from any country.

Those Buyers did not use the LEGAL SYSTEM available in Mexico to acquire their property the legal way. One Buyer at Punta Banda said, “I thought we had a Bank Trust”. My question is, when you buy a piece of property in the USA, do you “Think you have a Deed OR do you KNOW you have a Deed”? Common sense should prevail in any real estate transaction in ANY country.

There are many good Real Estate Agents in the Rosarito Beach area whom are AMPI Members, the Mexican equivalent to the National Association of Realtors and AMPI recognized by the National Association of Realtors worldwide.

If you’re considering making an investment in Mexico, use all the means available to assure your purchase is secure. As real estate professionals, we hear the concerns raised by buyers because of the publicity of the Punta Banda situation.

The media seems NOT to have reported that MANY of those owners did resolve their mistake many years ago and are still living there in the home they built. All these people knew there was a problem for 14 years. It was not a surprise!

Will I Lose My Home or My Land in Mexico Like the Newspapers Say?

They didn’t USE THE SYSTEM TO PROTECT THEMSELVES WHEN THEY PAID A FRAUDULANT “PERSON” FOR THE LAND!

These buyers did not seek legal advise BEFORE they wrote the check! Would YOU do that in the United States? Probably not! Would you do it in a foreign country? Probably not!

Use a Real Estate Professional with a good reputation, experience and longevity in the area. Once you select your property, make sure you USE the LEGAL SYSTEM to check the condition of the title, obtain a lien waiver certificate and close your transaction with a Notario.

Your Real Estate Agent will coordinate all phases of your closing.