Make no mistake about it. Your real estate buying experiences in Mexico will be very different from your real estate buying experiences in America or Canada. What you will soon find out is that the acquisition of property in Mexico depends upon zoning and other restrictions set forth by their laws. This doesn’t mean the experience will be unpleasant; it just means it will be something that you’re not quite already familiar with when purchasing in the United States or Canada.
The Truth about Real Estate in Mexico
Some people have a vague notion about the Mexican bank trust (or Mexican fideicomiso) and the zone restrictions for foreign real estate investors. It all started in 1917 when the Mexican Constitution forbid foreigners from purchasing “fee simple” property titles located within 62 miles of any Mexican border or 31 miles of the coastline. It wasn’t until the 1970s that Mexican businesses having foreign investments were granted permission by the Foreign Investments Law to buy property titles for real estate considered as commercial use properties.
At that time, no allowances were granted for foreigners or businesses with foreign capital to buy residential properties. It wasn’t until 1994 that national reforms amended the Mexican Constitution and allowed Mexican corporations with foreign investments the opportunity to purchase “fee simple” titles to real estate located in the defined restricted zones.
Since the provision was given to Mexican businesses with foreign capital to hold residential properties in 1994, changes have taken place within the Mexican bank trust system to accommodate the new provision granting foreign individuals and businesses with foreign capital to own titles within the restricted zone for residential use. Providing that the affairs of the property are governed according to the provisions of the law, the ownership will remain legal.
The involvement of a Mexican bank trust (or what is also known as a Mexican fideicomiso) grants permission to individuals who are not Mexican natives the ability to buy real estates within the “restricted zone” if the owner allows the “fee simple” property title to be held in a Mexican fideicomiso or Mexican bank trust. When the Mexican bank trust holds the title to a property owned by a foreigner, the bank becomes the Trustee or Fiduciary of the real estate.
This means the Mexican bank (and not the actual foreign entity) acts as the title holder of the real estate. Having the Mexican bank as the trustee means the ownership of the property is in accordance with the laws of the Mexican Constitution. The trust agreement recognizes the bank as the title holder but grants all use of the property to the foreign buyer who now is recognized as the beneficiary of the property. The role of beneficiary allows you to rent, refurbish, or sell the property whenever you want. In exchange for your permissions, you pay a one-time fee for the trust agreement and then pay a yearly maintenance fee. Keep in mind that the trustee does not have the right to exchange their role as trustee with someone else or give their role to someone else without your expressed written consent.