Mexican land purchases have long suffered a reputation of being riddled with fraud. The Mexican Constitution regulates the ownership of land in the country by non-citizens. Specifically, ownership of land that is within 50 km of a coastline or 100 km of a national border is restricted. In 1993, however, the Federal government eased the restrictions somewhat through the passage of the Mexican Foreign Investment Law, which permits non-Mexicans to enjoy the benefits of owning land in Mexico under a trust system.
The trust system, known as Fideicomiso, enables foreign ownership of land by non-Mexican citizens. The title for a property in a restricted or prohibited zone is held in trust by a bank, and the foreign owner is the trust’s sole beneficiary. The Fideicomiso is the easiest, most straightforward way to own residential property in Mexico.
In addition, since the institution of the Fideicomiso system, no foreign trust beneficiary has lost ownership rights to any trust property. When establishing the Fideicomiso, the beneficiary selects the bank of his or her choice. The bank becomes the trustee and acts on behalf of the beneficiary.
After both the buyer and seller sign a purchase agreement, the bank acquires the property at the direction of the beneficiary. The bank is the listed owner of the property, but is bound to act in the sole interest of the trustee.
The use of an escrow account, which is a common mechanism to exchange money for land sales in the US and Europe, is very new to Mexico, and many land sales are executed without an escrow account. Buyers typically deliver a partial payment up front, and the sales contract contains penalties if the contract is not fully executed. Full payment is made when the sale is concluded. The transaction is recorded by a Notario Publico, who receives official documents regarding the land, the results of the title search, tax payment information, assessments, and other taxes that may be due on the sale of the property.
The Fideicomiso can be established for a 50-year term, which can be renewed automatically for another 50 years. While the Fideicomiso is active, the beneficiary can transfer the trust title to any other person. This ability to transfer title means that family members can inherit land ownership interests as long as the trust is set up to permit that.
If you would like more information about owning land in Mexico, please contact a Select Mexico Properties sales representative today!
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