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Ownership In Mexico


LAND OWNERSHIP BY FOREIGNERS IN MEXICO

It is a common misconception that foreigners cannot own real estate in Mexico, or that doing so is not safe. Neither statement is true. Following is the history that informs these beliefs and the current reality that you can count on.

Land ownership by foreigners is subject to special rules along the borders (including coastlines). This “Restricted or Prohibited Zone"1 was established by the Mexican government at the request of the United States2. In the past, this legal quirk was subverted by having Mexican Nationals act as surrogate owners. On occasion, unscrupulous individuals used this lack of legal standing as an opportunity to defraud foreign investors.

The Mexican government—recognizing the critical importance of securing investment funds3—revised its Foreign Investment Law (12/28/93) and established fideicomiso. These are beneficiary trusts, administered by banks4, that offer investment benefits5 attractive to Mexican nationals, as well as foreigners. Fideicomisos also allow foreigners (and foreign corporations) to obtain all rights of ownership anywhere in Mexico.

The bank becomes the legal owner of the property for the exclusive use of the buyer/beneficiary, who has all the benefits of a direct owner, including the possibility of leasing or transferring his or her rights to a third party or pre-appointed heir. Fideicomisos are not held as bank assets and therefore are not subject to confiscation (for example, if a bank became insolvent or nationalized). The bank, as trustee, is legally responsible to protect the interests of the buyer/beneficiary by ensuring the precise fulfillment of the trust. This includes full legal and administrative supervision.

The fideicomiso can be established for a maximum term of 50 years, automatically renewable for another 50-year period. You have the right to transfer title to any other party, including a member of your family. This initiates a fresh 50-year period. Fees to establish a fideicomiso are typically USD $2600 in Puerto Vallarta with an annual maintenance fee of USD $500.

Property can also be purchased through a Mexican corporation, which can be 100% foreign-owned6. Under these conditions, foreigners can directly acquire properties for tourist, commercial, and industrial use. However, property owned in this manner may not be used for personal use.


[1] The Mexican Constitution establishes that “… in a zone of 100 kilometers along the border or 50 kilometers along the coast, a foreigner cannot acquire the direct ownership of the land.” Outside this “Restricted Zone,” a foreigner or foreign corporation can directly acquire any type of real estate.
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[2] During World War I, the US government was concerned that foreign nationals would purchase land in Mexico as a base for invading the United States. Other historians dispute this account and suggest that border land ownership restrictions were in response to Mexican concerns that foreigners settling in these areas might once again provide a pretext for US territorial expansion, as happened in Texas.
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[3] Tourism is the third largest sector in the Mexican economy. Tourism, which accounts for about 10% of Mexican employment and 10% of Mexican gross national product, is largely driven by foreign investment. According to Banco de Mexico (the central bank), during the first quarter of 2005, tourism posted a USD $1.72 billion surplus.
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[4] To establish a fideicomiso, the buyer requests a Mexican bank of his or her choice to act as a trustee. The bank, as a matter of normal course, obtains a permit from the Ministry of Foreign Affairs to acquire the chosen property in trust. The bank is legally required to act strictly in the interest of the trust holder.
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[5] Fideicomisos and Master fideicomisos are commonly used to administer development projects to ensure that all parties perform according to a pre-established operating agreement. These trusts can also provide tax benefits to Mexican nationals.
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[6] The real estate must be registered with the Foreign Affairs Ministry, and is subject to the provision that foreign owners accept being subject to Mexican law and agree not to invoke the laws of their own country.
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