Border and Coastal Zone Regulations
The Mexican Constitution established that direct real estate ownership for foreigners within 100 kilometers (62 miles) of Mexico’s borders and within 50 kilometers (31 miles) of the coastline is not available for direct foreign ownership. So what’s the alternative? You can obtain all the rights to buy, sell, occupy, rent, develop, use, improve real estate by purchasing a bank trust know as “Fideicomiso”. This trust can be made with a Mexican bank of your choice. The bank becomes the legal owner of the property for the exclusive use of the buyer/beneficiary (you). The property does not become part of the assets of the bank and cannot be encumbered by the bank.
Bank Trust Ownership
The bank trustee arrangement is very similar to the way a trust works in the U.S.A. and Canada. The trust exists strictly for the benefit of the beneficiary, who is for all practical purposes, the owner of the underlying property. The Title is transferable to any other party at any given time. The Fideicomiso (trust) can be established for a maximum term of 50 years and can be either automatically-renewed for another 50-year period or transferred to a new buyer. Title insurance is available for properties held in a bank trust.
Direct Ownership of property in the restricted zone may be had by a foreign-owned Mexican corporation for commercial purposes.
Notario Publico (Notary Public)
All real estate closings in Mexico must take place under the auspices of a Notario Publico. The Notario Publico is a government appointed attorney who processes and certifies all real estate transactions, including the drawing and review of all real estate closing documents, thus ensuring their proper transfer.
The Notario Publico is also responsible to the government in the collection of all taxes involved in the transaction, powers of attorney, information of corporations, wills, official witnessing etc.
By law the following documents are required for any transfer upon request:
• A certification of no liens from the public property registry
• A statement from the treasury or municipality regarding property assessments, water bills, and other pertinent taxes that may be due
• A property appraisal for tax purposes
Deeds in Mexico can be researched at the local Public Registry of Property which is open to all. Any town or city in Mexico of a significant size will have a Public Registry of Property office. The purpose of this governmental office is to register documents so third parties may research the ownership of land Titles and liens on such Titles. The Public Instrument will identify the property and list the parties involved in the transaction including the seller, the buyer, the notary, and the trustee bank. The Public Instrument is considered closed when it is signed by the notary, the seller, the buyer, the bank as trustee, and when the funds change hands.
Escrow, Taxes, Insurance + Financing
The Notario Publico is the one who acts as a holding agent for the involved parties, which is why there are few escrow companies in Mexico. In Mexico, there is no general use of Title Insurance.
Setting Up the Bank Trust (Fideicomiso)
To set up a Bank Trust, one must first obtain a permit from the Secretary of Foreign Relations in Mexico. The fee for this service is approx. $1,000 USD.
The bank charges an initial set-up fee of approximately $550.00 US to the person requesting a Bank Trust. The bank then charges an annual fee, currently about $550 USD per year, to manage and maintain the trust.
The buyer pays the transfer or acquisition tax as well as other closing costs, like Notario fees and expenses. The seller pays his capital gains tax and the broker’s commission. Transfer tax in this area is about 2% of the transfer cost and 0.9% of the registration fee. The remaining closing costs may vary from approximately 3-5 % of the appraised tax value or actual sales value.
Some American companies such as First American and Stewart Title are providing coverage in this area of the country.
Property taxes in Mexico are known as “predial” and are very low in Mexico. A $500,000 USD home may have property taxes of $350.00 USD per year.
Various types of insurance are readily available in Mexico at reasonable rates.
Most real estate purchases in Mexico are cash transactions, with limited cases of owner-financing available. Home mortgages are now becoming more common in Mexico.
In Mexico, the acquisition of Titled real estate is very straightforward. BUT, to have a reputable and knowledgeable real estate agent in Mexico is your best protection when buying property. Your realtor of choice may recommend you hire the services of a licensed attorney regarding legal and tax issues.
Ejido Properties are lands in Mexico that have NOT been Regularized and have no private Title. The Ejido were originally communal land groups springing out of the cry of the Mexican revolution for “land and liberty”. A member of an Ejido or agrarian land group is issued the rights of possession of a parcel of the communal land. These rights of possession may change hands with other members of the communal group, with the permission of the Ejido. All parties must be Mexican Nationals. The Agrarian Law (February 26, 1992) foresees, in its article 8 , the ability of the “Ejido” to decide not to continue as an “Ejido” by choosing a dis-incorporation process known as a “PROCEDE” that allows for the Titling of former Ejido lands. This process was completed in San Pancho, Sayulita, and Lo de Marcos in December of 2001.