Foreign Ownership of Real Estate in Mexico
While Foreigners own property fee simple in the interior of Mexico, including valuable sites in such tourist Meccas as Guadalajara and Cuernavaca and the capitol of Mexico City itself, they are technically prohibited from holding title to properties in the so- called “Prohibited Zone” along the Nations coasts and borders.
A land lease for more than 10 years is not legal and never has been
This restricted area, which was established under the Mexican Constitution, extends 100 kilometers (about 62 miles) deep along the coast. This means that virtually all of Baja California is included in the “Prohibited Zone”
Three Ways to Hold Property in Mexico
- Mexican Bank Trust(Fideicomiso)
- Mexican Land Lease
- “Federal Zone Concession”
The Mexican Bank Trust
Was created in 1971 to promote tourist and retirement investments along popular coastlines by Mexican President Echeverria, which authorized the 30 year Bank Trust program. This is the most secure method to hold real estate in Mexico.
Your Bank Trust must be established at an authorized Mexican Bank. When you buy property from a Mexican land owner, he will convey title to the Bank which then acts as the Trustees for the foreigner. The Bank Trust is in your name and includes your beneficiary.
The property is yours to improve, enjoy, and sell when you are ready to sell with all the proceeds going to your as the Seller. The property does not have to “revert back to a Mexican National” If you sell the property to another foreigner, he simply “assumes the balance of your Bank Trust term” and the legal documents are made to place the Bank Trust in your buyer’s name with his or her beneficiary.
Some condos and subdivisions have “Master Bank Trust”. Please do not “assume” projects have their “Master Bank Trust” Ask the right questions! Ask to see their trust documents. They should have a certified copy available for you and/or your Mexican attorney to review.
Obtaining a Master Trust is a long legal process for the developer, but it is the absolute best way to purchase. It is possible to get an Individual Bank Trust, even if your property is in a Master Bank Trust, but is more expensive than assuming the balance of the term under the Master Trust, If you sell you property back to a Mexican, he can cancel the Trust and take free simple title as a Mexican National.
If you purchase a “piece of land” and create a Bank Trust for the property so you can build a home, that is possible and the cost to do this is approximately $3,000. You must commit to the Mexican Government that you will build a property of at least $200,000 market value (including land cost) within a specific period if time, which is a couple of years. They are no longer granting Bank Trust for land that you that you “put a trailer” on. The Government wants to “clean up the coast”. Any existing Bank Trusts that currently have a “trailer on them” are grandfathered in and those Trusts will remain.
The Mexican Land Lease
Nearly day, I hear from buyers. “Do you still have to get a 99-years lease?” A land lease for more that 10 years is not legal and never has been. Not even the 10-10 and 10-year arrangement is legal. If you enter into a 10-10 and 10-years agreement with a Mexican land owner and at the end of yours first 10 year lease he decides he does not want to honor the other 10 year terms, he does not have to do so. You have no recourse in the Mexican Court system, because you entered into that agreement, which was designed to circumvent the Mexican law, thereby giving you no legal status to use the Mexican Court system.
If you lease land, the lease should be for one day less than 10 years and if you should enter into this arrangement, you absolutely must understand that in 10 years you could be asked to “walk away”. Then again, the Mexican land owner can renew your lease another 10 years. It is his option. The Mexican land owner DOES NOT HAVE to give you a 10 years lease. In fact, the property is becoming so valuable, so quickly, that a 10 –year lease and some owner will give you an annual lease and some are month to month. I do not recommended an investment of any more than $25,000 and only if you can get a 10- years lease. Using those numbers, if you used and enjoyed your place for 10 years, it would only be $2,500 per year of fun and relaxation plus the monthly amount for the lease. These leases cost anywhere from $150 to $600 per month and usually have a clause for increases during your term for “cost of living” adjustment.
Federal Zone Concession
No one, including Mexican Nationals, can own property in the “federal Zone” which applies to only beachfront property within 20 meters (about 66 feet) of the mean high tide line. This property is owned by the Mexican Federal Government under the Federal Maritime Land Zone law. It is possible for foreigners and Mexicans to obtain use of the beach land for a reasonable fee under a concession granted by the Federal Government. The concession grants temporary use and at the option of the Government, these concessions may be renewed for specific periods of time. These fees vary depending upon the “use of that portion of the property”. For instance, if you garden and landscape that part of the property, there is no charge. If you have your deck or patio in the Federal Zone, it may be something like $50 per month. If all or part of your house is in the Federal Zone, the fee is higher. I do not recommend that the entire home be in Federal Zone. In my last beachfront home, I had 1/3 in the Federal Zone, which was $170 every two months for the concession with the remaining 2/3 was under the Bank Trust. These concession give you the “right to enjoy” the land and no one can come and build a “taco stand” in front of you!
The Reason the Bank Trust was Created
The Mexican Constitution does not allow foreign ownership in the Prohibited Zone because of the old fear they could be invaded by horse or sea. Of course, invasions are not conducted in that way today. The Bank Trust was created as a vehicle to allow this ownership method without any changes to the the Mexican Constitution.