A bit of background
For foreigners, buying property in Mexico has only been possible since the 1973 Foreign Investment Law. Before that, the Constitution banned any real estate purchase from anyone who was not a Mexican citizen.
Today, the law allows foreigners to directly acquire property in Mexico as long as it is outside the “Restricted Zone” which includes all land within 100 kilometers of foreign borders or 50 kilometers from the sea.
In 1993 the Foreign Investment Law was amended to allow foreigners to acquire real estate in the Restricted Zone through a specific purpose trust called Fideicomiso de Zona Restringida (Restricted Zone Trust).
Restricted Zone Trust
A Restricted Zone Fideicomiso is a Trust that allows foreigners to acquire properties within said zone.
This kind of Mexican Trust has three parties:
- Trustor (Fideicomitente): Is the individual or company that contributes an asset (in this case, a real estate) to the Trust.
- Beneficiary (Fideicomisario): The individual(s) or companies that will benefit from the asset (real estate).
- Trustee (Fiduciario): It has to be a bank or financial institution in charge of the administration of the Trust and keeping the property title safe.
The Beneficiary (in this case, the foreign owner of the real estate) will have the ownership rights of the asset; that is, the Beneficiary will be able to live in it, rent it, sell it, and inherit it.
The Beneficiary will pay the Bank to manage the Trust (usually less than 600 dollars a year).
What is the process to set up a Restricted Zone Trust?
Purchase Agreement
Once the seller and the buyer agree on the terms and conditions of the sale, they should sign a purchase agreement. I strongly advise the buyer to execute due diligence on the property before signing a purchase agreement.
2. Notary Public and Bank selection
Usually, the buyer’s lawyer will contact the Bank and a Notary Public to set up the Fideicomiso.
However, certain Banks and Notaries are faster than others. Also, prices vary a lot.
Therefore, you must have a legal advisor who can walk you through the process and provide you with several options to decide.
3. Banks’ Due Diligence
The Bank will request several documents related to the property and the parties’ identifications.
It is part of the Bank’s due diligence, and it is mandatory to provide this information.
4. Notary Public’s Due Diligence
The Notary Public will request information and documents regarding the parties and the property, including an appraisal of the property and several public records regarding the legal status of the real estate.
5. Contract Drafting
The Bank, the Notary Public, and the parties’ lawyers will draft a Fideicomiso agreement.
6. Signing
Once the parties agree on the Fideicomiso agreement draft, the contract is signed in the Notary Public’s office.
After that, the Notary will file a copy of the agreement in the Public Registry of Properties.
The Fideicomiso remains valid for 50 years and can be renewed unlimited times for another 50 years.
It is essential to have good counseling when buying Real Estate in Mexico. Some risks include the legal standing of the property, the seller’s background, the reputation of the Notary Public, the speed and security of the Bank, and many other potential risks to consider.
Please send me an email to online@roelatam.com to schedule a call.
I strongly advise you not to purchase real estate without proper advice!