Mexico’s economy is growing steadily despite its political uncertainties. In particular, the already huge tourism sector keeps growing, thanks to Mexico’s attractive mix of white sand beaches, indigenous heritage, iconic cities and much more. As such, there are many ways to take advantage of this opportunity, especially through investments in property like in restaurants, hotels or by buying your own house to live and retire in Mexico. But buying property in Mexico comes with certain restrictions and special requirements. Therefore, we want to give you an insight on how to go through the process without any problems.

Property at the coast

Thanks to the fideicomiso trust, foreigners can also buy property in the ‘Restricted Zone’.

The History of Buying Property in Mexico

Buying property as a foreigner in Mexico hasn’t always been simple and in the Mexican Constitution of 1917, it was made law that only Mexicans were allowed to be landowners. In fact, buying property in Mexico for foreigners has only been possible since the Foreign Investment Law that was passed in 1973. The law permits foreigners to acquire property in Mexico, as long as it is located outside of the so-called ‘Restricted Zones’, which include any land within 100 kilometres of foreign borders or within 50 kilometres of the sea, as an attempt to prevent foreign invasion. As a consequence, this law largely prevented development in those zones and, subsequently, was modified in 1993 by the Mexican government. Foreigners are now allowed to buy property in the restricted areas but only indirectly through a ‘Fideicomiso’ or trust agreement between the buyer and a Mexican Trust Bank. 

How Does the Fideicomiso Trust Work when Buying Property in Mexico? 

Mexican trust banks are authorised by the Mexican Government to carry out the acquisition of properties located in the restricted zone. The respective bank owns the land and acts on behalf of the foreign buyer. Nevertheless, the purchaser holds all rights and responsibilities of selling, leasing, mortgaging and entrusting the property. Furthermore, it is possible to transfer the trust to another foreign buyer. The bank is the holder of the trust deed and is responsible to check if the property is free of liens or any claims to the property. This trust remains valid for 50 years and can be renewed at any time for another 50 years. In the case that the purchaser should miss out on renewing the trust, they have a further period of 10 years to do it.

On the contrary, Mexican corporations which are 100% foreign-owned can own properties in restricted areas without a trust. But if the property is intended to be used for commercial purposes, there are more requirements and restrictions that come into play, such as higher rates for water, electricity and more, making it less advantageous than buying it through a Fideicomiso Trust.

Real Estate Contract

When purchasing property in Mexico, all relevant documents should be verified by your lawyer or notary.

Making an Offer to Buy Property in Mexico

Most real estate transactions start with the seller accepting an offer from the buyer in the form of an ‘Offer to Purchase’. This is a type of contract that sets out all the terms for the purchase including the details for a money deposit, a deadline for the seller to accept the offer, price, and payment plans. After the seller accepts the offer, both parties can sign a buying/selling agreement that obliges the buyer to make a deposit of 5-10% of the property’s value. Additionally, it binds either party to pay a penalty fee if they pull out of the deal. At this point, we recommend consulting a lawyer before transferring any money or signing any contracts. In general, your attorney will spare you difficulties which may occur during the process and they can advise you on how to save money on fees and taxes involved in buying property in Mexico. The attorney should be experienced in drafting a variety of different legal documents.

Setting up The Fideicomiso Trust

At this stage, your notary should initiate the process of obtaining the trust by checking the property’s legal status. The notary shall inspect the property for unpaid taxes or other encumbrances by carrying out checks and gathering the required documentation such as the property deed. They also need to verify if the seller has the right to transfer the property by checking recent tax receipts and proof of the payment of public utility bills. As a final part, they need to check the terms and conditions of the contract. The buyer, in turn, only needs to provide a copy of their identification, a bill showing their current address and, if applicable their visa or a document that validates their legal status to the notary. Together with the bank, the notary will finalise the for the trust needed documents.

The Final Steps to Buying Property in Mexico

Before the final payment transaction is made, the seller must pay tax on the purchase and the property deed has to be signed over to the buyer at the notary’s office. The buyer then can pay the seller and the notary fees. When the entire process is completed, the notary will send a copy of the deed to the Public Registry of Property. As the acquisition of a property is of public interest, it is registered at the Public Registry of Property to avoid any fraud or illegal possession of the property in the future. Once the final payment has been made and the deed closed, the title will be officially handed over to the new owner or the bank trust.

Where Can You Find Help on Buying Property in Mexico?

As recommended, you will find that hiring a local lawyer will significantly facilitate the process of purchasing property and will give you peace of mind throughout the process. Adopting this solution means you don’t even need to be in the country for every step of the process considering that a qualified attorney can handle the buying process up to the signing of most contracts on your behalf through a notarised power of attorney. With our team of specialised accountants and lawyers, at the Biz Latin Hub Group, we can support and guide you safely through the process of buying a property. Get in contact with our country manager Alex at [email protected] if you would like to find more about our services and how we can help you.

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