Foreign Ownership of Property
The Mexican Constitution regulates the ownership of land
and declares that ...within a zone of 100 kilometers
from the border or 50 kilometers from the coast, a foreigner
cannot acquire the direct ownership of the land.
These areas are known as Restricted or Prohibited
Zones. However, the latest Mexican Foreign Investment
Law, which was ratified on December 28, 1993, allows a
foreigner or foreign corporation to obtain the rights
of ownership through a fiduciary trust known as Fidelicomiso,
the equivalent of a US beneficiary trust.
Alternatively the purchase of non-residential property
can be achieved through a Mexican corporation which, under
certain conditions, can be 100% foreign-owned. An agreement
is signed that says the corporation is subject to Mexican
law and the owners will not invoke the laws of their parent
country. Also, the real estate must be registered with
the Foreign Affairs Ministry and be used for non-residential
activities. In other words under the above conditions
foreigners can directly acquire properties for tourist,
commercial and industrial use.
Fideicomiso or Bank Trust
Any foreigner or Mexican National can constitute
(the equivalent to an American beneficial trust) through
a Mexican bank in order to purchase real estate anywhere
in Mexico, including the Restricted Zone. To do so, the
buyer requests a Mexican bank of his/her choice to act
as a trustee on his/her behalf.
The bank obtains the permit from the Ministry of Foreign
Affairs to acquire the chosen property in trust. The Fideicomiso
can be established for a maximum term of 50 years and
can be automatically renewed for another 50 year period.
During these periods the registered owner has the right
to transfer the title to any other party, including their
The bank becomes the legal owner of the property for
the exclusive use of the buyer/beneficiary who has all
the benefits of a direct owner, including the possibility
of leasing or transferring his/her property rights to
a third party or to a pre-appointed heir. During this
period, the foreigner is considered to be a Mexican National.
The trustee is responsible to the buyer/beneficiary to
ensure precise fulfillment of the trust, according to
Mexican Law. It assums full technical, legal and administrative
supervision in order to protect the interests of the buyer/beneficiary.
Fideicomisos are not held by the trustee as an asset of
For practical purposes, even in unrestricted zones, many
foreigners and even Mexican Nationals prefer to place
their property under a Fideicomiso.
How It's Done
Most real estate transactions are opened
after a written purchase offer is accepted by the seller
and when a purchase-sale agreement (promissory contract)
is signed by both parties. In most cases, a deposit is
required by the broker in order to transmit the offer
to the seller. If the transaction is being conducted directly
with the seller, it is highly recommended that a real
estate broker or a lawyer be consulted before signing
any papers or exchanging any money.
In some areas it is common practice to deliver to the
seller, as an advance payment, the equivalent of 20-50%
(including the initial deposit) of the total price upon
signing the purchase-sale agreement, which should contain
a penalty clause in case there is a breach of contract
by any of the parties.
Normally, when signing the escritura or official
deed, which needs to be certified by a Notario Publico
(notary public), the balance is paid and the property
is delivered. This should not take more than 45 days.
In certain resort areas, the custom of using "escrows"
is being implemented.
The Notario Publico is a government appointed
lawyer who processes and certifies all real estate transactions,
including the drawing up and review of all real estate
closing documents, thereby insuring their proper transfer.
All powers of attorney, formation of corporations, wills,
official witnessing, etc. are also handled and duly registered
through the office of the Notario
Publico, who is also responsible to the government
for the collection of all taxes involved.
Regarding real estate transactions, the Notario Publico,
upon request, receives the following official documents,
which by law are required for any transfer:
- A nonlien certificate from the Public Property Registry
based on a complete title search.
- A statement from the Treasury or Municipality regarding
property assessments, water bills, and other pertinent
taxes that might be due.
- An appraisal of the property for tax purposes.
More Links about
Based on a present tariff, the bank charges the
person requesting a Fideicomiso
an initial fee (approximately $500 US) for the drawing
up the agreement and the trust, plus a percentage depending
on the value of the property. In addition the bank charges
an annual fee (again, depending on the value of the property)
to cover its services as a trustee.
There are different types of Title Insurance. There is
Title Insurance available on the land (US Style) and Title
Insurance available on just the Fideicomiso (Bank Trust).
A title insurance policy is a contract of indemnity that
promises to pay for a loss up to the face amount of the
policy if the state of the title is different than it
is set out in the policy and the insured suffers a loss
as a result of the difference.
A title insurance policy will cover both claims arising
out of title problems that could have been discovered
in the public records, and those so called non-record
defects that could not be discovered in the public records
even with the most complete title search.
A title insurance policy will not only protect the insured
for as long as they have an interest in the property,
but it will also protect their heirs and devisees for
as long as they hold title to the property.
A title policy insures against loss by reason of matters
specifically stated or covered in the policy. Purchasers
of real estate run the risk of serious financial loss
in connection with the title to the property purchased.
The seller may lack title to the property because of a
problem in the chain of title or may not own all of the
interest in the property he purports to convey.
Due to the many rights, claims, interests, and encumbrances
that the law recognizes in real property, it is essential
for the buyer to have a title search and examination performed
before the purchase is consummated in order to identify
precisely the nature of the title the seller can legally
convey and the rights and interests of all other parties
in the particular piece of property. Title policies offer
the only protection available against latent defects of
title which do not appear of record such as forgery, impersonation,
capacity of the parties, faulty acknowledgments, and inchoate
mechanic’s and materialmen’s liens.
Currently, American title insurance is available only
for foreign investors. The benefit of American title insurance
for your Mexican real property is that your rights are
enforceable in the U.S. against a U.S. company. Before
acquiring any title insurance, it is recommended that
you read the policy and determine the exact coverage's
The insurance runs about $4 to $7 for every $1,000 of
Title Insurance is offered in Mexico by the following
Title Insurance Company
National Financial (FNF)
American Title Insurance
Foreigners wanting to own property in Mexico
should consider the following :
- Understand that Mexico is a foreign country with
a unique set of laws that must be adhered to in order
to acquire recognizable rights in real property. Do
not expect paperwork, procedure or costs to be the same
as in Arizona.
- If you are purchasing in the restricted zone, you
must buy through a Mexican Bank Trust (fideicomiso).
Don't use a corporation to acquire residential property.
A trust is not a lease. To be sure that you are getting
good title, purchase US title insurance.
- Real estate agents are not licensed in Mexico and
escrow as we know it does not exist. It is imperative
to use qualified professionals including a trustworthy
Mexican agent or attorney, possibly in cooperation with
a knowledgeable U.S. attorney since the Mexican professionals
do not carry liability insurance.
- Insist on U.S.-style protections that are available
in Mexico, including but not limited to inspections,
U.S. title insurance, U.S. appraisal, and U.S. financing.
You can ask to have your earnest money held by a Mexican
bank in a conditional deposit subject to the satisfaction
of any contingencies that you negotiate in your offer
to purchase, including issuance of a bank trust if applicable.
Get an estimate of closing costs before you make an
- When purchasing in a new home community or subdivision
make sure that the improvements are in or that there
has been a bond posted for the completion of the improvements.
If you see an advertisement for a Mexican subdivision
in Arizona, ask for a copy of the Arizona Public Report
issued by the Arizona Department of Real Estate. Ask
for Title Insurance and a Mexican Bank Trust.
- Be patient, transactions in Mexico may take longer
than you anticipate. If someone suggests that you should
purchase before your trust has been issued or without
a Mexican Notary Public, beware! Mexican Notaries are
official government lawyers who are uniquely empowered
to formalize and record real property transactions.
Your purchase of Mexican real estate should be an investment,
not a gamble. Many foreigners have paid money or built
improvements on property that they cannot obtain legal
rights to under Mexican law. The Mexican government in
many cases has taken action to help the foreigner acquire
recognizable rights because of widespread fraud or ignorance.
At some point the Mexican government may draw a line and
refuse to regularize such transactions. Foreigners are
more educated now and they may be held responsible for
acting in accordance with the law.