Foreigners Purchasing Mexican Property

What happens after I sign an offer to purchase?

As you are bound by contract, the promises on it must be complied with. This means that the seller must transfer the property into your corporation or the Trustee Bank. It also means that you must pay the balance due on the total price of the purchase.

What alternatives do I have?

One method offered to foreigners purchasing Mexican property via a bank trust or fideicomiso. This is the only legal alternative available to individuals who wish to purchase property within 100 kms (60 miles)from the border or 50 kms (30 miles) from the seashore. There are other restrictions on using a Fideicomiso as well.

Foreigners who form a legal Mexican corporation can purchase property in restricted Zone or anywhere else they choose. Corporations have their own set of requirements however and are always the best choice.

We offer expert guidance in determining the optimum method for each individual transction.

Is there a conflict of interest to represent the seller and the buyer?

In Mexico, representing both parties in a closing is NOT prohibited. The selling agent can be relied upon to represent the seller's interests. Any conflict of interest will invariably be decided in the seller's favor by that agent.

You should provide your own representative. Having legal representation will assure your individual rights for any transaction.

Do I have to attend on the closing for my property?

You do not need to attend the closing if you don't want to. In fact, if you would like to save the cost of the return visit, you may close in absentia. The closing can be handled via FedEx by Ballote and Associates.

You may, just as in the U.S., authorize your attorney to execute the final documents for you to close in absentia. This is a common practice and a high percentage of our clients chose to close this way.

Can the Mexican Government seize my property?

No. There are real estate laws, protecting the rights of property owners whether they are foreign or domestic.

Our Legal Services

Can Ballote and Associates ascertain clear title?

Yes. All properties represented by Ballote and Associates have been surveyed, legally registered and are guaranteed to have clear title. We recommend our clients to request that we perform a thorough Title Search and as the case may be, we recommend that we perform a Due Diligence on the property.

Are real estate taxes high?

Annual real estate taxes in Mexico depend on the area. This is why an inquiry to the local municipality is recommended to get a balance due on your property taxes account.

How can I pay the real estate taxes?

Real Estate tax notices are not regularly sent out in Mexico. At your request, Ballote and Associates can arrange to pick up your annual tax notice and advise you of the amount. We can also arrange to make the payment on your behalf.

The Fideicomiso

What is a Fideicomiso?

FIDEICOMISO: REAL ESTATE TRUST ON THE MEXICAN RESTRICTED AREA.

Fideicomiso? (Form Latin: Fedei Commisum. Fedei= Fait=Trust). Fideicomiso is one of the alternatives on which a foreigner in México can acquire and hold rights to a property on the restricted Area, according to the article 277 of the Constitution and what is provided by the Mexican Foreign Investment Law.

The strip of land of 100 kms from the border with another country or 50 kms from the seashore is what we call restricted area.

Foreigners Individuals only can acquire properties that are in the restricted Area through a bank trust with an authorized Financial Institution for a period of 50 years same that can be renewed.

A bank Trust will allow a foreigner to establish a will in favor of his/her loved ones in regard to the property at no extra cost.

What is required for a Fideicomiso?

A Fideicomiso (or Trust) Requires:

The authorization from the Secretary of Foreign Affairs that is provided by article 11 of the Mexican Foreign Investment Law.
A trustee bank.
A deed attested and certified by a Mexican Notary, who is obligated to assure the authenticity and lawfulness of the transaction.

The parties in a Trust are:

Trustor / Grantor: Individual or legal entity which transfers one or more Real-Estate Properties through the trust ownership.
Beneficiary: Individual or legal entity with the appropriate capacity to receive the benefit granted by the trust deed, being able to appoint several beneficiaries to receive the benefits simultaneously or successively.
Trustee / Institution: Financial Institution, with appropriate capacity to act in México, who receives the property of the trust fund for the benefit of the Beneficiary and who must carry out specific duties with regard to the property.

SUBJECT-MATTER OF THE TRUST:

The subject-Matter of the trust is constituted by Real-Estate property transferred by the trustor to the trustee (institution), as well as the constructions, buildings and improvements, if appropriate, made by and on account of the beneficiary.

How much land can I purchase with a Fideicomiso?

According to article 14 of the Foreign Investment Law, the Ministry of Foreign Affairs shall determine on the permits for setting up a Bank Trust on a piece of land over 2000 square meters according to the economic and social benefit of that trust to the Nation. In other words, they require a commitment letter from the beneficiary of the trust to invest certain amount of money on the property in order to grant the permit for the Fideicomiso. (Again, this is for pieces of Land over 2000 sq meters.)

Incorporation

What is a corporation?

Like in many of the countries worldwide, a corporation is a legal entity for commerce purposes, and has legal life apart from their individuals (shareholders). In Mexico there aren’t one single individual owned corporations. To form a corporation in Mexico, there is need at least of two stockholders (or shareholders), the type of the corporation depends on the type of business.

Is the Mexican Corporation a 99-year lease?

No, it is not. Mexican corporations are recognized by the state and federal governments as a legal entity with similar rights to individuals, one of these is to legally own property in Mexico. Every 99 years the corporation's charter will need to be renewed. You may not be around in 99 years, but your heirs can still enjoy your legacy.

The 99 year term CAN be extended.

Can I incorporate without a partner?

Foreign corporations can be shareholders in Mexican Corporation, some countries allow to incorporate with a sole shareholder, thus, your one owner corporation can be your partner.

Ejido Lands

What are ejido lands?

Ejido Lands is land which use was granted from the Mexican Government to a cooperative of Mexican families. However, the process of converting the ejido land from government to private ownership has begun in many areas. As a foreigner in Mexico, ejido lands are not something you can own or want to get involved with. Be aware that the so-called owners do not own any of the land. They simply have rights to use the land. As a foreigner in Mexico, you have NO RIGHTS to use ejido lands, even if ejido members say that you can.

This is a prime reason for a title search before purchasing.

Building and Renovating

Do I have to build within a certain time period?

If you acquire by means of a trust, yes.

If you decide to incorporate, No.

Unlike many places where you are required to build within a certain period of time, in Mexico, you may hold your undeveloped land for generations if you wish.

What documents should I receive from a builder?

They should have a written contract with specifications of the quality of the building materials and type of construction, as well as the time frame for the work.

Should an owner collect receipts on every wire transfer to a builder?

It is highly advisable to have someone supervising the progress of any construction work and release funds in payment accordingly.

Ballote and Associates can provide such a service if requested.

What documents do I need to write off my construction costs when it comes time to sell?

You need facturas (official receipts) for materials, work, and government fees. You contractor should provide these on request. The documents must be issued in the name of your corporation, and contain its legal address and tax ID number.

Is the owner responsible for Social Security taxes?

The price of the construction, as stated in the contract, should include the price for the Social Security.

Selling Mexican property

Do foreigners have capital gains tax when they sell?

Yes, They do.

But there are some tax exemptions when the property is used for residential purposes and purchased by means of a Fideicomiso.

Do Mexicans have capital gains tax when they sell?

Yes, They do.

Special Categories of Property

Can I as a foreigner own oceanfront property in Mexico?

Yes, you can!

To own a property in the Restricted Zone a trust or 'Fideicomiso' can be set up, with the foreigner as the beneficiary.

Another way to own a property in the restricted Zone is by creating a Mexican Corporation.

What is the Federal Zone?

The federal zone is an area on the beach which is owned by the federal government. No private ownership is recognized in this zone. Since it is owned by the federal government, you may not build your house within this area.

The Federal Zone extends 66 feet (20 meters) back from the high tide mark of an ocean or sea.

On inland bodies of water, such as lakes and rivers, the federal zone extends 33 feet (10 meters) from the high water mark.

The federal zone is uniform throughout all 32 states in Mexico.

What is a beach concession?

The beach concession is a government-granted permit. This permit enables an owner of property adjacent to the federal zone to use that zone. For example, the owner may construct a boat dock, patio, deck, or gazebo.

It does not permit the property owner to construct any part of his house within the federal zone. To keep a beach concession, an annual fee must be paid.