Many non-Mexicans have stayed away from purchasing or investing in the real estate of Mexico because of real or perceived risks to the stability of their investment. During recent years, the importance and the value of foreign investment to the economy of Mexico has led that country to make a number of revisions in its real estate laws.
Today, foreigners have expanded opportunities to purchase or invest in Mexican real estate. In much of the inland portion of Mexico, the purchase of real property by foreigners has the same legal basis as in the United States or Canada.
The Mexican Constitution of 1917, however, prohibited foreign ownership of residential real property within approximately 31 miles (50 kilometers) of any coastline and 62 miles (100 kilometers) of its natural borders. All of Baja California is included in this “restricted zone.”
Because most second or vacation home purchases by foreigners are likely to be within this “restricted zone,” further discussion is in order.
In 1971 (further expanded in 1989 and 1993) provisions were made for a mechanism that would allow foreigners to own property in the “restricted zone.”
Within the “restricted zone,” a foreigner purchases the beneficial interest in real property through a bank trust or “fideicomiso.” In this bank trust, the buyer of the property is designated as the “fideicomisario” or the beneficiary of the trust. While legal title is held by the bank, (specifically the trustee of the trust or the “fiduciario,”) the trustee must administer the property in accordance with the instructions of the buyer (the beneficiary of the trust). The property is not an asset of the bank and the trustee is obligated to follow every lawful instruction given by the beneficiary to perform legal actions, i.e., rent it, make improvements, sell it, etc.
The Bank Trust is also very effective for Estate Planning because, as with any other trust, the Trustor can designate who will be the beneficiary in case of death.
As the beneficiary of the trust, the buyer may have substitute beneficiaries who would assume beneficiary status upon the death of the buyer without the need of probate proceedings.
Most new trusts have a time period of 50 years. But, these trusts are almost always renewable for another 50 years.
As long as the buyer of the property adheres to laws and ordinances of Mexico and agrees not to invoke the protection of the government of his country, he may exercise the same rights as a Mexican national with regard to the use of his property.
In summary, then, virtually all property in Mexico is available for purchase by foreigners, keeping in mind that the fideicomiso, or bank trust, must be used when acquiring property within the restricted zone.
In the United States and Canada, it is common for individuals or a group of individuals to form corporations for the purchase of real estate. While the laws of Mexico allow corporations to own real property, it is not possible for a foreign owned Mexican corporation to own a vacation or a retirement home for residential purposes (as opposed to business activities).
One final observation. In exchange for the ability to invest in real estate in Mexico, you agree that only the laws of Mexico will apply to any of your real estate transactions. In the courts of Mexico you will be treated the same as if you were a citizen of Mexico. You cannot use the legal system of the United States or Canadian federal government in the event of disputes or adverse rulings.
Source: Buying Real Estate in Mexico (A Consumer’s Guide). A publication by the Arizona Department of Real Estate.