Mexican Real Estate Law

For non-residents are there any restriction for acquiring a home?

A foreigner can buy property in Mexico as any Mexican can. However, for political reasons, the Mexican Law Constitution includes some limitations in the sense that foreigners cannot directly acquire property for residential purposes, only in the case where this property in found within an area of 100 km from the border and in a strip of 50 km along the coast of Mexico. This area is known as a “Restricted Zone”. Today this anachronistic obstacle is overcome by foreigners, who want to acquire property in Mexico in this area, through two provisions: Either the constitution of a mercantile society whose social capital can be 100% foreign; or through a trust, a legal provision that has been used by a great majority of foreigners who want to buy property in Mexico (and not only in this restricted zone) for more than four decades.

For Canadians, US Citizens and buyers from Europe and beyond this step-by-step guide will assist you to understand your purchase of your property with complete peace of mind.

Restricted Zone

In the interior of Mexico, you can buy property "fee simple" in your own name, just as you would in the United States or Canada. But Mexican law has special exceptions governing property within 31 miles of the coast and within 62 miles of the border, an area known as the Restricted Zone . Most of the properties shown on this site are located within this zone.

Fideicomiso

After 1970, the Mexican government passed laws to permit foreigners, as private individuals, to buy property in the Restricted Zone through a bank trust or fideicomiso .

This trust, initially established for a 50 year term and renewable for an additional 50, grants you, the beneficiary, every right of ownership. You may use, modify, rent or sell the property. In the event of your death, the property passes to the beneficiary you have named without the necessity for probate. The current cost of establishing a trust is about $3,000 USD, and the annual maintenance fee charged after the second year is currently about $500 USD. The inital charge of $3,000 dollars covers the government fideicomiso fee, bank set-up fee and TWO YEAR'S management fee. Your next fideicomiso payment will be due two years from your closing date. Charges vary from bank to bank, and the annual maintenance fee depends on the value of the property.

Mexican Corporations and Visas

If you intend to use the property for business, it is easy to form a Mexican Corporation, and in most cases is not necessary to have a Mexican partner. The property may be purchased by the corporation and 100% owned. Costs of forming a corporation vary from $1,800 to $3,000 USD. The Mexican government currently requires monthly tax filings, so plan to pay a Mexican accountant about $50 to $100 USD a month. It is also important that the principal officers of the corporation apply for and obtain FM3 Visas from the Department of Immigration. This process is not difficult - you can do it yourself, or we can recommend legal assistance.

Financing

Traditionally in Mexico, properties have been paid for in cash. In the past year, however, banks and other lenders from the United States have begun investing in Mexico and mortgages are now available in Yucatan for both American and Mexican citizens (and soon for Canadians). These lenders use the house you buy in Mexico as collateral for the loan. If you think you may want to buy your house in the Cancun using a mortgage, we suggest you obtain pre-approval before you go house-hunting. You may find you can afford a larger or more expensive home than you thought! We recommend contacting First Mexico Mortgage a few weeks before your visit here so you can start the pre-approval process. It remains very difficult to obtain financing in most areas. Many sellers also refuse to accept a transaction involving financing, both because of the delay and uncertainty involved, and for tax reasons.

Inspections and Repairs

In Mexico, properties are sold "As is, where is". Sellers will generally not agree to make repairs.

There are no inspection companies in Mexico as there are elsewhere, nor are there any required disclosures on the part of the Seller.

Closing

In Mexico, normal practice is for a real estate attorney to prepare a contract (Promesa de Venta) which is signed by thew buyer and the seller, detailing the specifics of the transaction. This is done AFTER the title search, and after verifying that there are no existing liens or other title problems making the property unsaleable.

The final sales agreement will be executed by a Notario Publico , a respected attorney with special government recognition to act in real estate transactions. It is the Notario's responsibility to review the deeds and title to the property, ensure that there are no existing liens, assist the bank in the creation of your Trust, and then to formalize the final contract of sale, draft the new deed, collect and pay appropriate taxes and record the transfer as required by law.

It is customary in Mexico for most of the closing costs to be paid by the Buyer.

For more information on buying a property within a luxury resort in Mexico contact IPD for the report.