Foreigners are welcome to invest in property along the coast, but there are restrictions. The most important restriction is contained in Article 27 of the constitution which states “that foreigners cannot own property within 100 kilometers (60 miles) of the border and 50 kilometers (30 miles) of the coastline.” The government, however, provides two ways to get around this restriction – through the use of a Trust (Fideicomiso) or a Mexican corporation.
Q: Can a USA or Canadian citizen own real estate in Mexico?
A: Yes, by placing the property in a bank trust. (Fideicomiso)
Q: Can I own property near or in front of the ocean?
A: Yes, laws passed in 1973 and 1993 have made it possible for foreigners, foreign firms, and Mexican firms with foreign participation to acquire interests in coastal real estate through a bank trust.
Q: Who is involved in a bank trust?
A: Three parties. The seller of the property is the Trustor, the bank is the Trustee (Fiduciario), and the buyer is the Beneficiary (Fideicomisario.)
Q: How much does the Bank Trust cost?
A: Based on the current tariff, the bank charges the person desiring the Fideicomiso an initial fee of approximately $500 USD for drawing up the agreement and establishing the Trust plus a percentage based on the value of the property.
Q: Are there additional fees for the Bank Trust?
A: Yes. The bank charges an annual fee to cover its services as a Trustee. This fee is based on the value of the property.
Q: How does the trust function?
A: Title of the property is transferred to a trust with a Mexican bank acting as Trustee. The Trust Agreement is formalized by the issuance of a permit from the Mexican Ministry of Foreign Affairs. The lot or home buyer is designated as Beneficiary in the Trust and the beneficiary rights are recorded in the public record by a Notary Public.
Q: What are my rights as a buyer?
A: The Trust is a legal substitute for fee simple ownership, but in many cases, the Trustee is the legal holder of the property. As Beneficiary, you have the right to sell your property without restriction. You may also transfer your rights to a third party or pass it on to named heirs.
Q: Is the Trust Renewable?
A: Yes. According to the Foreign Investment Law passed in 1993, trusts can be renewed for an indefinite number of successive 50 year periods. In effect they run in perpetuity.
Q: Who is involved in Real Estate transactions in Mexico?
A: Normally there are four players involved in a real estate transaction. These are the real estate company, the buyer, a bank, and a Public Notary.
Q: What role does a Public Notary play?
A: A Public Notary is a government-appointed lawyer who processes and certifies all real estate transactions including drawing up and reviewing all official documents to ensure the proper transfer of the property.
Q: What are these official documents?
A: The official documents which are required by law in order to transfer the ownership of property in Mexico include a non-lien certificate based on a complete title search from the Public Property Registry, a statement from the municipality regarding property assessments, water bills, and other pertinent taxes that might be due, and an appraisal of the property for tax purposes.
Q: If at a later date I decide to sell my property, can anyone buy it?
A: Yes. If the buyer is also a foreigner, you simply assign beneficial rights. If the new buyer is a Mexican National, you can instruct the bank to endorse the title in favor of the buyer.
Q: If the buyer is a foreigner, is his interest limited to the balance of my 50-year period?
A: No. Upon application, a foreigner automatically receives his own renewal 50-year permit. However, this is not mandatory.
Q: When buying or selling a property in Mexico, who pays the closing costs?
A: It is common practice that the buyer pays the transfer of acquisition tax and all other closing costs, including the Notary’s fees and expenses, while the seller pays his capital gains tax and the broker’s commission.
Q: How much is the transfer tax?
A: The real estate transfer tax ranges between 1% to 4% of the tax appraisal value, which is generally less than the sales value.
Q: How much are closing costs?
A: The rest of the closing costs, excluding the transfer taxes, vary from 3% to 5% of the appraised tax value. These percentages are applied to the highest value of the following: 1) the amount for which the property is sold, 2) the value of the official tax appraisal, or 3) the value designated by the property assessment authorities.