11.1 Mexican Legislation
The Mexican Constitution prohibits foreigners to make direct acquisition of land and waterways within a limit of 100 kilometers (62 miles) from any frontier and 50 kilometers (31 miles) from any coast; such regions are known as “restricted zones”.
11.2 The law to promote Mexican investment and regular foreign investments.
The purpose of this law is to promote Mexican and foreign investments; this encourages fair and balance development in consolidating the country’s economic independence. It specifies in which way capital should participate and how, by establishing a trust, foreigners can purchase Real Estate earmarked for industrial and tourism activities.
11.3 Investment in Real Estate
For the benefit and security of foreigners waiting to invest in Real estate located on the Mexican Border or coastal regions, the Government has decided to do away with various loopholes that had been used to bypass constitutional restrictions. The most common of these manoeuvres, which were jeopardizing foreign investments, were the Mexican interposition in name only and fictitious contracts or other legal instruments.
The government will take action against such methods but will grant full protection to foreigner who, through trust institution, can invest in Real Estate in restricted zones under the provisions of the aforementioned law.
11.4 Intervention of Trust Institutions
Through the Ministry of Foreign affairs, the Federal Government, after hearing the recommendation of the inter ministerial consultative in charge of studying the economic and social implications of specific project to which the law refers can authorize trust institution to act as trustees in acquiring Real Estate whose beneficiaries are foreigners.
11.5 Industrial and Tourism Development
The purpose of this agreement is to accelerate industrial and tourism development in coastal and border zones in accordance with the Mexican Constitution.
The law provides that trust institution can acquire land in such zones acting as trustees for foreign beneficiaries if it is used for industrial or tourism activities.
11.6 How the Trust Works
When a foreigner wishes to acquire the right of using and exploiting a property, he can instruct different Mexican bank institutions to purchase it and retain it in trust or a term of fifty years, provide the Ministry of Foreign Affairs grants the necessary permit.
11.7 Ownership of the Property and Rights of Beneficiary.
Upon acquiring a property in Trust, the Bank becomes its legal owner, subject to the clauses of the contract granting the beneficiary the rights to use, exploit, rent or sell the property.
If the beneficiary dies during the legal period of the trust contract, the beneficiary has the right to appoint a substitute (s) beneficiary (ies) who will receive all the rights and obligations that arise the trust contract.
11.8 Renewal of Trust
At the end of the trust’s term which, as mentioned before can be for a term of fifty years, the beneficiary has the following options:
- If there is no change in the Mexican Government’s present policy, it is possible that the trust agreement might be renewed for an additional period of more than 50 years. In case the authorities fail to grant such an extension, the trust will have to be terminated up by selling the property.
- No matter the alternative results, the beneficiary’s interests will be adequately protected. It should be pointed out that the beneficiary, at any time during the term of the trust agreement or at its termination, can arrange for the sale of the property to any person legally qualified to purchase the Real Estate.
11.9 Structure of the Trust
1. - The Trustor: A Mexican citizen or a Mexican corporation with no foreign participation; the original owner of the Real Estate, it’s the party places in trust.
2. - The Trustee: as indicated previously, the trustee is the Banking Institution which holds the trust over the land for the benefit of the beneficiary.
3. - The Beneficiary: the first beneficiary is normally the promoter, who acquires beneficial rights in order to develop the property and sell its beneficial interest to other parties in turn. The final beneficiary is a foreigner, since Mexican ordinarily will buy direct ownership.
11.10 Required Documents
1. - Title of the property (deed)
2. - Map of Location of the property
3. - Receipts of the payment
4. - Permit of foreign affairs. It is obtained by the bank institution
Costs:
- Permission with the Ministry of Foreign Affairs and Inscription to the National Registry of Foreign Investments: $13,500 Pesos
- Commission of Acceptance, one payment: $500 USD+ 10% Tax ($550 USD)
- Commission by payable administration in anticipated annuities: $500 USD+ 10% TAX ($550USD)
The commission for the administration will be adjusted in the same proportion that the Consumers Price Index establishes.
Any changes to the original contract will cost $300 USD+ TAX 10% ($330 USD)
NOTE: While this document is meant to help non-Mexican buyers better understand how real estate works in Mexico, it is not a legal opinion, nor is it intended as a substitute for potential buyers’ own due diligence. As with all business dealings, it is highly recommended that those seeking to purchase real estate in Mexico deal only with established, reputable companies. For a list of professionals that work in conjunction with ColdwellBanker please, call Patty Hernandez-Bradley directly
