Mexico Real Estate is always in high demand especially among American citizens. But there are some laws that any foreigner interested in buying Real Estate in Mexico should be familiar with. Though under Mexican law, foreigners may obtain direct ownership of Mexican property in the interior of Mexico, foreigners cannot acquire direct ownership of residential property within the area 100 kilometers from the border and 50 kilometers from the coastline. This zone in Mexico is known as the "Restricted Zone". But there is an indirect way to purchase and enjoy Mexican property in the restricted zone through a Bank Trust or "Fideicomiso" authorized by the Government of Mexico. Fideicomiso is the legal equivalent of deeded ownership (commonly referred to in the U.S. as fee simple)

Earlier, foreigners were barred from owning Property in Mexico but With the North American Free Trade Agreement beginning January 1, 1994, the Foreign Investment Act of 1993 was passed by the Mexican congress to promote foreign investment into Mexico. This law allowed foreigners to own 100% of the shares of a corporation and purchase property. As a foreigner, you can acquire irrevocable and absolute ownership rights to Mexico Real Estate through a 50 year, and can be renewed every 50 years indefinitely, perpetually irrevocable and transferable Fideicomiso Trust. This enabled foreigners, as beneficiaries of the trusts, to legally enjoy unrestricted use of land located in the restricted area.

The Fideicomiso has couple of advantages of the bank trust. One is avoidance of probate and the second is transfer tax upon sale of Real Estate in Mexico.

How it works. Upon the purchase of Real Estate in Mexico through a Fideicomiso, the Mexican government issues a permit to a Mexican bank of the buyer's choice. The property Title is then delivered to a Mexican Bank which acts a "Trustee". The Bank then designates the buyers as the beneficiary of the trust. The beneficiary now can use the property. The Beneficiary has the same rights to lease, mortgaging, selling, inheriting, willing and improving the land as any other Real Estate owner in Mexico.

What Does a Bank do? There are selected banks that are authorized by the Mexican government to hold the Real Estate Fideicomiso. The process of getting authorization is very strict. The bank reviews property documents to ensure that they are complete and legal. Remember, you can tarnsfer Fideicomiso to any authorised Bank. The Property bought in Mexico under Fideicomiso cannot be expropriated by Mexican Government except for public purpose. In such cases Mexican Government has to pay market price with any interest accrued.

What does it costs? The costs incurred include:

1) Permit Fees from Secretary of Foreign Affairs, Mexico

2) Registration fees with National registry, Mexico City and

3) Annual Administration fees for the first year (depending on the bank)

4) The Bank acceptance Fees

5) 10% IVA tax

6) Closing costs which include the title search, appraisal fees, notary fees for the deed, tax certificate, filing fees, transfer taxes(2% of the purchase price) and recording fees.

Hope this clears lot of doubts from a prospective Foreigner Buyer interested in buying Real Estate in Mexico. If you still need a few questions answered about how it works, please call us. We will be happy to go over it personally.

Author: Tom Budniak