Questions & Answers
Can I really own property in Mexico?
Yes, absolutely. Furthermore, not only are foreigners allowed to buy property in Mexico, the Mexican government has endeavored to make the owning property in Mexico simple, 100% legal and safe. At Baja Investments, we are at your service to guide you through the entire process.
What is the process?
You can purchase property through a Fideicomiso (a trust) that is held either by a bank or through a Mexican corporation.
What is a Fideicomiso?
It is a Mexican real estate trust which is maintained under your name in a Mexican bank (Scotiabank, HSBC, Banamex, Santander, Banorte, etc). The bank acts as trustee while you and all appointees are the beneficiaries of the trust. You, as the beneficiary of the trust, absolutely and irrevocably keep full control of the property, including the use, maintenance and control over all decisions of the property such as leasing it, making improvements, selling, donating or bequeathing it.
A Fideicomiso is not a lease. It is equivalent to a trust in the United States. Basically, you are the owner of your property, which is held under a trust to be administered by a Mexican bank in your name.
Why is it necessary to obtain a Fideicomiso?
The purpose is to authorize foreigners to purchase real estate in Mexico within the “restricted” area and ensure a secure transaction. The restricted area encompasses any property within 31 miles (50 km) of the coast and 62 miles (100 km) of the border. When the Mexican Constitution was written, it was designed to prevent further huge losses of land that had occurred throughout history. To avoid the necessity of amending the Mexican Constitution and to address the aim of promoting international investment in Mexico, particularly in the high demand coastal areas, the legal Fideicomiso system was created. Residential properties outside the restricted area may be purchased by foreigners without a trust, however, some buyers still choose to use a Fideicomiso for additional protection on their real estate investment in Mexico.
Is the Fideicomiso owned by the bank?
No. Your Fideicomiso is not owned by the bank; they are simply managers. You and those you name are the legitimate and uncontested beneficiaries and your property is not owned by the bank.
What is the duration of a Fideicomiso?
Originally, the Fideicomiso is established for a period of 50 years and may be renewed at any time for a minimal cost and with simple documentation. The Fideicomiso is maintained in increments of 50 years and guaranteed forever. The cost is approximately $525 USD.
Can the government take control of my property?
Sometimes, foreigners are concerned that their property can be taken by the Mexican government; however, the North American Free Trade Agreement (NAFTA) established that Mexico cannot, directly or indirectly, expropriate property in trust. The only exception to this rule would be the possible circumstance that government needed the land for public works, for example, road construction. Only through a legal finding would this be possible and in the case that it may be necessary to expropriate land, the government will pay the current market price to the owner. This is known as Eminent Domain (in the USA), Compulsory Purchase (in the UK) or Expropriation (Canada).
Can I buy through a corporation?
Many investors choose to buy property through a corporation if the intention of the property is for work and transacting business. This would be the case in situations like buying and selling land, renting their property or owning more than one property.
What are the types of Mexican corporations?
There are different types of Mexican corporations, but the most common are limited liability corporations (LLC) and a limited liability partnership (LLP). If you decide to make your purchase through a corporation, it is important to determine which taxes must be paid in the United States and in Mexico. You need to talk to lawyers or accountants in your country and in Mexico to understand the benefits and costs of each. Getting good council from the start will help you make the best decision, ultimately saving you time and money.
How can I buy through a corporation?
Owning a property in Mexico is possible through the creation of a Mexican corporation. Since 1995, foreigners can buy, operate and manage Mexican corporations. A corporation in Mexico requires two or more investors, who together, control 100% of the corporation. None of the investors can be Mexicans. Once the corporation has been formed, you have the legal capacity to acquire property anywhere in Mexico, including the “restricted” areas. Through a corporation, foreign owners acquire the right of ownership and, in turn, are able to possess property and be the beneficiaries with the same rights as afforded to Mexican citizens. There are no restrictions on foreign corporations to buy and develop real estate in Mexico.
Who represents and protects my interests?
There are three groups involved in a real estate transaction made in the restricted areas of Mexico, all of which are useful in their respective areas, each with a specific purpose to help in purchasing Mexican real estate.
Real Estate Company
Inevitably, the process of buying real estate in Mexico will have some differences compared to that of which foreign buyers are accustomed. That’s why you should have people on your side who have extensive knowledge on the subject. A group of real estate agents who are experienced and knowledgeable can guide you, step by step, through the entire process, ensuring a wise and safe purchase. Baja Investments is proudly dedicated to providing personalized and attentive service to all our customers.
Bank (Buyer with a Trust)
The trustee bank is authorized by the government of Mexico to act as the administrator. The bank holding the Fideicomiso must be a Mexican financial institution which is registered as a trust office. As a buyer, you have the option of choosing any bank (Scotiabank, HSBC, Banamex, Santander, Banorte, etc.). The bank says the closure is legal and appropriate and a Fideicomiso for the exclusive use of the property will be issued. The Trust Bank is legally prevented from transferring ownership of the property, changing the rights of the beneficiaries or to take any action with respect to your property without your written instructions. Having a large bank safeguarding your interests is another layer of protection for you, as the buyer.
Banks in Mexico are under bankruptcy protection from the government, therefore, the Fideicomiso is indirectly guaranteed by the government. No property in trust is considered owned by the bank. In the event that a bank in Mexico becomes troubled economically, the property will be transferred to another Trust Bank and that new bank would handle the Fideicomiso going forward. These laws were created by the federal government to protect real estate investors.
A Mexican notario (notary) is state certified and licensed by the federal government and acts as an officer and representative of the Mexican government without prejudice. A Mexican notary public is similar to a Canadian notary and has much more responsibility than an American notary. The notary public must pass very strict tests as required by the government of Mexico and is a government official. They provide strong security in the development of records and documents and validate documents by registering them with the Public Registry of Property. The role of a notary is taken seriously in Mexico and a notary public who does not act according to the law will be liable to civil and criminal charges.
The notary is responsible for a number of responsibilities that include the legalization of documents, tax calculation and is responsible for ratifying all real estate transactions in Mexico. Any real estate transaction that is not ratified and duly filed with the Public Registry of Property is considered invalid. In a real estate transaction, the notary is also responsible for both the buyer and the seller. His job is to ensure the legality of transfer of title, calculate and withhold the tax on behalf of the Mexican government, calculate purchase taxes and submit payment to the tax authorities concerned. The notary will also coordinate the issuance documents certifying there are no liens, debts or encumbrances and collect all permits. After closing, the notary public must register the transaction with the Public Registry of Property and Land Office. In Mexico, the notary public is legally entitled to carry out these transactions.
What is the total cost of closing?
The total closing costs include: taxes, notary fees, the establishment of an escrow account, appraisal fees, sources and uses, establishment of a Fideicomiso (Trust) and obtaining permission from the SRE.