Ownership in Mexico

UNDERSTANDING PROPERTY OWNERSHIP IN MEXICO

Border and Coastal Zone:

Foreigners can buy property directly in mainland Mexico's interior with fee simple ownership, the same as in the U.S.  The Mexican Constitution of 1917 designated the area within 100 kilometers (62 miles) of Mexico's borders and within 50 kilometers (31 miles) of the coastline as a protected area, and consequently, off limits to direct real estate ownership by foreigners.  For many years this area was known as the Restricted Zone.

Article 27 of the Mexican Constitution was amended in the early 90’s allowing a foreigner to purchase the right to enjoy all the benefits of ownership that they enjoy in places like the U.S. or Canada. This change was directly targeted at the Restricted Zone. That means, they may hold, occupy, use, improve, develop, rent and sell real estate by purchasing a beneficial interest in a bank trust which holds the legal title to the property.  This bank trust is called a “Fideicomiso” and is very similar to a Real Estate Trust in the U.S.  Not only was the Constitution amended but they also implemented the Foreign Investment Act which allowed Foreigners to form and own Mexican Corporations. These two things in turn were then fortified and bolstered by the NAFTA Agreements in 1994.

Bank Trust Ownership:

When you establish bank trust ownership, the bank holds legal title to the real estate and acts as trustee while the beneficial interest in the trust is owned by you, the foreign individual.  The trustee bank is obligated to deal with the property only for the benefit of the beneficiary and takes its instructions from the beneficiary owner .  The beneficiary may be a foreign individual (you) or other foreign legal person such as a corporation. 

The trust exists strictly for the benefit of the beneficiary who is for all practical purposes the owner of the underlying property.   Real Estate “ownership” anywhere in the World is defined by your “Bundle of Rights”. The Bank Trust has the same “Bundle of Rights” as fee simple ownership in the states. It is important to know two things. 1) The trust is not an asset of the bank, which means if the bank has financial problems the trust is not affected. 2) 85% of the banks in Mexico are now foreign owned by such companies as Bank of America, Citigroup and HSBC.

Notario/Notary Public:

Closing a sale in Mexico is done through a Notario.  Although the term reflects a “Notary Public”, it is unlike a Notary Public in the U.S.  In Mexico, a Notary Public is a quasi-governmental official who reviews all documents of importance regarding the sale of real estate. A Notary Public in the United States typically has minimal training and responsibility, and generally a notary attests to the fact that a person has signed a document.