Owning Property in Mexico


 

About Mexico

Officially United Mexican States, republic (1995 est. pop. 93,986,000), 753,665 sq mi (1,952,500 sq km), S North America. It borders on the United States in the north, on the Gulf of Mexico (including its arm, the Bay of Campeche) and the Caribbean Sea in the east, on Belize and Guatemala in the southeast, and on the Pacific Ocean in the south and west. Mexico is divided into 31 states and the Federal District, which includes most of the country's capital and largest city, Mexico City.

Land

Most of Mexico is highland or mountainous and less than 15% of the land is arable; about 25% of the country is forested. Most of the Yucatán peninsula and the Isthmus of Tehuantepec in the southeast is lowland, and there are low-lying strips of land along the Gulf of Mexico, the Pacific Ocean, and the Gulf of California

 In the south the deserts yield to the broad, shallow lakes of a region, comprising the Valley of Mexico, known as the Anáhuac and famous for its rich cultural heritage. South of the Anáhuac, which includes Mexico City, is a chain of extinct volcanoes, including Citlaltépetl , or Orizaba (18,700 ft/5,700 m, the highest point in Mexico), Popocatépetl , and Iztaccihuatl . To the south are jumbled masses of mountains and the Sierra Madre del Sur.

People

The great majority of the population are of mixed Spanish and indigenous descent and speak Spanish, the official language, as their first language. Various Mayan dialects are also spoken. Since 1920 the population of Mexico has had a very high rate of growth, almost entirely the result of natural increase; from 1940 to 1990 the population grew from 19.6 million to 81.1 million.

*Columbia Encyclopedia, Sixth Edition, Copyright (c) 2003.


CAN FOREIGNERS REALLY OWN PROPERTY IN MEXICO?
Yes, Americans and other foreigners may obtain direct ownership of property in the interior of Mexico. However, under Mexican law, foreigners cannot own property outright within the restricted zone. Instead, a real estate trust must be set up to hold title for the foreigner. Since foreigners are not able to enter into contracts in buy real estate, they must have a bank act on their behalf, much as a trust is use to hold property for minors because they also can not contract. The following is a brief outline of the law regarding such trust, known as "fideicomisos", but potential buyers should always get advice and have all real estate transactions overview by a licensed Mexican attorney.

 

WHO'S INVOLVED IN REAL ESTATE TRANSACTIONS IN MEXICO?
Normally, there are three to four players involved in any real estate transaction in the restricted zone:
  • A real estate company
  • The buyer's lawyer
  • A bank
  • A public notary
All four are helpful in their respective areas in assisting with real estate transactions. Transactions outside of the restricted zone do not involve a bank since it is not necessary to establish a real estate trust in those areas. Otherwise the transactions are much the same.

Because of the similarities of real estate transactions in general, it is easy to assume that the basic terms and principles which are familiar in the United States also hold true in Mexico. This assumption becomes easier to make when United States real estate terminology is adopted for transactions in Mexico. Much of the paperwork is similar, if not exactly the same, as that used in the US. Although, there are many aspects of Mexican real estate transactions that are identical to procedures carried out in the United States, there are many aspects that are completely different. As a rule, a foreigner should assume nothing.

Mexican real estate transactions are not carried out in the same manner as United States real estate transactions. The buyer must retain professionals to assist in the transaction. Mexico has yet to regulate real estate transactions. Real estate agents and brokers are not legally licensed in Mexico.

Currently there is nothing similar to a Real Estate Commissioner or a Department of Real Estate in Mexico. Some states are beginning to look at some kind of real estate legislation, but it might be some time before this is a reality. The American Embassy and the American consulates in Mexico are good places to start when trying to determine if a real estate company is reputable. Some of the real estate companies have established quite a reputation for themselves at some of the Consulates.

A Mexican attorney should be involved to draw up contracts and to review the conditions and terms of sale. Additionally, an attorney can do a title search and point out any problems or alternatives a buyer may have. The buyer should always have his or her own attorney rather than using the attorney of the seller or some attorney used by a real estate company free of charge. A

American attorneys are not licensed to practice law in Mexico and should not give advice on Mexican Law. I should clarify, here, that I am referring to individuals who are licensed to practice law in the United States, and not merely individuals who are citizens of that country. There are currently very few Americans who are licensed to practice law in Mexico. The fact that a person is licensed to practice law in the United States in no way allows him or her to practice law in Mexico: Mexican or United States law.

Besides formalizing your real estate transaction, an attorney can be very helpful in saving you money. This is because attorneys are involved in many different transactions and have contacts with banks, notaries, and the Mexican government on a regular basis. Because of this they are aware of the most competitive cost and fees involved in a transaction and can make sure that the buyer is given the best possible prices. An attorney can also inform the buyer regarding his or her legal options and by doing so can make sure that no opportunities are missed: tax planning considerations, closing costs which should be paid by the seller, and ways of taking title to the trust rights which make sense for the particular circumstances of a specific buyer. Very often one piece of good advice can save the buyer thousands of dollars in tax savings or other savings when the buyer eventually sells the property.

When looking for an attorney it is important to remember that any Mexican attorney can normally handle a real estate transaction. The buyer is not limited to only the local attorneys where the property is located. All real estate transactions involving a trust are governed by federal law. This means that all such transactions are carried out the same way regardless if the property is in Cancun or Los Cabos.

THE RESTRICTED ZONE AND "FIDEICOMISOS"
The law declares that the Mexican nation has original ownership to all land and water in Mexico, as well as minerals, salts, ore deposits, natural gas and oil; but that such ownership may be assigned to individuals.

The Mexican Constitution prohibits direct ownership of real estate by foreigners in what has come to be known as the "restricted zone." The restricted zone encompasses all land located within 100 kilometers (about 62 miles) of any Mexican border, and within 50 kilometers (about 31 miles) of any Mexican coastline. However, in order to permit foreign investment in these areas, the Mexican government created the "fideicomiso," (FEE-DAY-E-CO-ME-SO) which is, roughly translated, a real estate trust. Essentially, this type of trust is similar to trusts set up in the United States, but a Mexican bank must be designated as the trustee and, as such, has title to the property and is the owner of record. The Mexican Government created the "fideicomiso" to reconcile the problems involved in developing the restricted zone and to attract foreign capital. This enabled foreigners, as beneficiaries of the trusts, to enjoy unrestricted use of land located in the restricted zone without violating the law.

A "fideicomiso" is a trust agreement created for the benefit of a foreign buyer, executed between a Mexican bank and the seller of property in the restricted zone. Foreign buyers cannot own real estate in the restricted zone due to Constitutional restrictions. The bank acts on behalf of the foreign buyer, taking title to real property. The bank, as trustee, buys the property for the foreigner, then has a fiduciary obligation to follow instructions given by the foreigner who is the trust beneficiary. The trust beneficiary retains and enjoys all the rights of ownership while the bank holds title to the property. The foreigner is entitled to use, enjoy, and even sell the property that is held in trust at its market value to any eligible buyer.

In order to allow foreigners to enter into the agreement contained in the Calvo Clause, Mexico requires all foreigners to apply for and obtain a permit from the Ministry of Foreign Affairs prior to contracting to acquire real estate in Mexico. This is currently done by the trustee/bank at the time a real estate trust is set-up.

Given the changes made for 1997 in the foreign investment Law, and the fact that a buyer can now apply for and obtain a trust permit in a matter of days, it is always better to secure the trust permit from the Ministry of Foreign Affairs before entering into any contract.

The bank, as trustee, must get a permit from the Ministry of Foreign Affairs to establish a real estate trust and acquire rights on real property located within the restricted zone. The purpose of the trust is to allow the trust's beneficiary the use and exploitation of the property without constituting real property rights. The beneficiaries of the trust (fideicomisarios) may be:
  • Mexican corporations with foreign investment
  • Foreign individuals or legal entities
The law defines "use" and "exploitation" as the right to use or possess the property, including its fruits, products, or any revenue that results from its operation and exploitation by third parties or from the bank/trustee.

The law does not clarify how trust permits will be issued. Article 14 of the law states that the Ministry shall decide on issuing the permits "...considering the economic and social benefit, which the realization of such operations imply for the nation." The basic criteria used to determine such benefits are likely to change somewhat with the publication of the new foreign investment regulations. However, it is reasonable to anticipate that some of the unwritten rules used by the Mexican government in the area of real estate trusts will be included in the new foreign investment regulations. It is also possible that some of the confusing elements will be eliminated. It is important to understand the application of the current regulations, even if they are going to be replaced, as well as some of the unwritten policies the government has used in the past, to better understand what criteria will be used by the Ministry in the future.

The Ministry of Foreign Affairs must grant any petition for a trust permit that complies with the stipulated requirements within 5 working days following the date of its presentation to the Ministry's central office in Mexico City. It must be granted in 30 days if the application is submitted to one of the Ministry's state offices. The Ministry of Foreign Affairs must confirm the registration of any property acquired by foreign-owned Mexican corporations a maximum period of 15 days following the filing of the petition. In both cases, if the maximum period passes with no action by the Ministry, the trust permit or registration are considered authorized.

There is a common misconception among foreigners investing in Mexico that once the trust expires, the beneficiary loses all rights and benefits of the sale of the property held in trust. This is not the case. On the contrary, the beneficiary has a contractual right under the trust agreement with the Mexican bank to all benefits that may result from the use or sale of that property, even though he does not hold title to the property. Under Mexican Law, the bank, as trustee, has a fiduciary obligation to respect the rights of the beneficiary.

A real estate trust is not a lease. The beneficiary can instruct the bank to sell or lease the property at any time. The beneficiary can develop and use the property to his liking and benefit, within the provisions of the law. Generally, the law allows most activities engaged in by foreigners.

Why Is This A Good Time To Buy Real Estate In Mexico

Why Is This A Good Time To Buy Real Estate In Mexico
In these tough times, a good investment that will give you piece of mind is a tangible asset in a stable market, Baja real estate is an opportunity to keep your money out of the uncertainty of the banks and stock market and place it where you can see it, and see the ocean while you’re at it.   

Mexico has won the #1 rank for retirement destinations for 2007-2008 given by International Living; the reasons for the #1 rank were: first rate health care, affordable beach front property, low cost of goods and services, and availability of cell phone, cable, and high speed internet. Mexico is growing as a residence destination for Americans, estimates place the number of Americans currently living in Mexico to approximately 1 million, not just retirees but people of all ages.

Many people have already made the choice of purchasing a home in Baja, and not because of the stock or real estate market but because of what Baja has to offer,  a warm climate that is comparable to the warmth of its people, a culture rich in history and tradition, year round events to keep you busy.

Written by Alejandra Esquivel 

Mexico - Still the World’s Best Retirement Haven

by the staff of International Living

For the second year running, Mexico wins our annual Global Retirement.

Mexico Is Still the World's Best Retirement HeavenWith rapidly rising fuel, health care, food, and travel costs, it’s nice to know there are still places where you can live well without burning through your retirement nest-egg. And Mexico is one of those special places. In Mexico, you can still enjoy a lifestyle that’s probably all but unaffordable for most people in the U.S. and Canada.

Iinternational Living’s top 5 retirement havens in 2008
  1. Mexico
  2. Ecuador
  3. Panama
  4. Uruguay
  5. Italy
Mexico offers the perfect mix of centuries-old traditions and contemporary lifestyles. It’s easy to get a residence visa. And the services, amenities, and discounts offered to retirees here are just as bountiful as in Panama, with its famous pensionado program—as are the overall cost savings. Plus, Mexico is closer to home.

Moving to Mexico means you can still have all the comforts you are used to north of the border: cable TV, high-speed Internet, and modern home appliances. And if you prefer, when you move to Mexico you can even bring all your favorite things with you without paying import taxes.

Goods and services cost less, so you can afford the kinds of luxuries only the wealthy enjoy up north: a maid, a cook, and a gardener, for example. Whether your vision of the ideal retirement involves shopping, fishing, sunbathing, diving, biking, mountain climbing, parasailing, collecting crafts, visiting archeological sites, partying, going to concerts, attending the theater, or fine dining, in Mexico you can engage in all these activities, and many more.

Live well in Mexico on $2,135 a month

 Housing (rental of a two-bedroom home)  $800
 Utilities (electricity, gas, water)  $125
 Household HELP (housekeeper and gardener three days a week)  $150
 Groceries  $300
 Maintenance and fuel for one car  $150
 Entertainment (dining out and other activities)  $250
 Health care (two people at $280 per year for IMSS Insurance, plus $63 per month for private-care incidentals)  $110
 Incidentals (clothes, household items, etc.)  $100
 Communication: phone, internet, cable TV  $150
 Monthly total: $2,135

This country is so diverse that everybody can find exactly what they want: beautiful, warm oceans, crystal-clear tropical lakes, fertile farmlands, temperate-but-majestic mountains, starkly gorgeous deserts, small towns or sophisticated cities.

And because of its geographic diversity, you can also choose your favorite climate: from warm and dry to warm and sultry to spring-like temperatures all year in the Colonial Highlands.

And if you’re looking for the home of your dreams, you can find it in Mexico—for much less than it would cost you most anywhere in the US or Canada. The Real Estate market offers endless possibilities for your retirement.

 

What do I need to sign legal documents in Mexico?

Buyers need an FMT (tourist visa)Essential Info.

USA Passport or Original Birth Certificate is all you need for FMT and Buyers may sign legal documents with FMT or FM3 in front of the Notary.

Sellers must have a valid FM3 to sign legal documents when selling your property. An FMT WILL NOT WORK for a SELLER. A “seasoned electric bill) and a current electric bill along with the seller’s FMT3  will be the documentation you need as a Seller to qualify for a zero capital gains tax designation with the Notary.

How do I get and why do I need an FMT & FM3

A foreign person needs this document in order to sign legal documents before the Notary who requires a copy for his file as part of the Bank Trust Deed and he requires that he see the original & compare the original to the copy. You will need this AT Closing!!

FMT: When you enter Mexican Border, get in the far right lane and go under the canopy and park. You will see a small office that says “Migracion” (Spanish for migration). You will fill out a simple form, go to the bank teller next door to Migración , pay $20.00 to the Bank , go back to Migración and they will stamp the FMT and your passport . You’re finished with the FMT now. They are open 24/7 & it takes about 5 minutes (unless you get caught behind a passenger bus!).

Ask for a 180 day tourist visa. You will need this document to apply for your FM3 which is renewed annually which is your legal status in Mexico. To apply for your FM3 you will need the following:


  • Clear Copy of your Passport (color if possible)
  • Clear Copy of your Driver’s License
  • Copy of US or Mexican Bank statement (to show you are capable to support yourself)
  • Copy of Utility Bill from USA
  • Original of FMT

You may apply for this at your local Mexican Consulate. If you obtain the FM3 at the Consulate, then you MUST STOP at Tijuana or Otay Mesa Border Crossing and have your new FM3 stamped by the Immigration Office in Mexico. It is NOT VALID if it is not stamped.
Upon renewal in 12 months, if you used the Consulate, then you need to complete the same process in Rosarito or Ensenada Immigration office and take all the above documents to open your “local file”. It is easier to open your file locally the FIRST TIME, but it is your choice.

Who needs a residency FM3?

  • Foreigners that reside in Mexico for more then six months   
  • Foreigners that own Mexico property throughout a Mexican Bank Trust
  • Foreigners that want to be protected in case of legal issues, while in Mexico
  • Foreigners that want to have a Mexican driver license
  • Foreigners that want to have a  U.S. Vehicle in Mexico
  • Foreigners that want to change from FM3 to FM2 status
  • Foreigners that want to have a Mexican Bank account
  • Foreigners that want to bring their household in to Mexico duty free
  • Foreigners that want to sell or Lease their property in Mexico