BUYING IN MEXICO
The real estate industry in Mexico is very similar when compared to that of the United States, which is most probably the most advanced in the world. It is clearly quickly taking advantage of today’s technology.
The biggest National Association of Realtors that regulates the Real Estate standards in Meico is the “Association Mexicana de Profesionales Inmobiliarios” or AMPI (Mexican Association of Real Estate Professionals” with 24 chapters in 38 cities. This organization is somewhat similar to the National Association of Realtors (NAR) in the United States.
- Can I own property in Mexico?
Yes, Mexican foreigners may obtain direct ownership of property in the interior of Mexico and they can also own property along the ocean front. By Mexican law, properties within 31 miles (50 km) of any ocean front and 62 miles (100 km) of any country boarder are acquired via a bank trust or via establishment of a Mexican Corporation. Many Americans, Canadians and Europeans are buying villas and luxury properties with beachfront so foreigners can feel confident about this.
- What’s new for the real-estate industry in Quintana Roo in 2014?
In a historic move, the lower house of the Mexican Congress voted in April 2013 to loosen restrictions on foreigners buying property in coastal zones. The proposal change Article 27 of the constitution, which restrics foreigners from owning direct property within 31 miles from the coast and 62 miles from the country’s borders. The law forces foreign buyers to use real-estate Mexican bank trusts known as fideicomiso to purchase and handle the property. This positive change will only apply with residential property ownership and will reduce time process, costs and steps to buy in Quintana Roo.
- What is a FIDEICOMISO? (Mexican Bank Trust)?
This is a legal structure which allows non-Mexicans to purchase real estate property located in the “Restricted Zone”. This zone encompasses the areas along the coasts and borders of Mexico. Essentially, it is a recorded contractual arrangement where a property is held in “Trust” by a bank for a specific purchaser, or beneficiary. In all material respects it is similar to the type of Trusts commonly used in the United States and Canada to hold property for estate planning purposes.
In order to establish a Trust a permit is required from the Secretary of Foreign Relations. Such a permit is usually issued for a term of fifty years renewable for an additional term of fifty years. A Mexican Bank Trust (FIDEICOMISO) is not a lease. It is a form of ownership in which real property is transferred into a Trust for the sole purpose of the Beneficiary. The current cost is 500 USD set up fee, plus a percentage according to the value of the property and an annual fee to cover its services as a trustee.
- Why buy through a Corporation?
Many investors choose to purchase property though a corporation if the intent is to conduct the investment as a business. This would be the case in situations such as buying and selling land, renting their property or when owning more than one property.
- How does buying through a Corporation work?
A foreign corporation in Mexico requires two or more individual investors, who combined, control 100% of the corporation. None of the corporation’s investors can be Mexican. Once the Mexican corporation is formed, it has the legal capacity to acquire property anywhere in Mexico, including the restricted zone. Through a corporation, foreign owners acquire the right of domain, in addition to possession and benefit. The property is owned with the same rights as if it were a Mexican entity. There are no investment restrictions on foreign-owned Mexican corporations aimed at buying and developing property. Typically, an attorney will charge $1,500 USD to set up the corporation. Additionally, there is a fee of approximately $100 USD per month for accounting of the corporation.
- What is an Escritura Publica (Public Deed)?
This document attests to the transfer of property. It is formalized upon being recorded at the Property Tax Office and the Public Property Registry Office. This document can only be issued by a Mexican Notario Publico.
- Can the Mexican government confiscate my land?
Foreigners often worry about their land being expropriated by the Mexican government. Under the North American Free Trade Agreement, NAFTA, Mexico may not directly, or indirectly, expropriate property. This is the same as “Eminent Domain” in the U.S.
- How long can a foreigner reside in Mexico per year?
When you arrive to Mexico, a tourist visa is issued. The maximum amount of period on these visas is 6 months. These can be updated at the local migration offices. You also have the option to apply for a FM3, which has 12 month periods of validity. FM3s can be obtained if you are a property owner, or if your employer is a Mexican Corporation and for several other special cases.
- If I decide to sell my property, can anyone buy it?
Yes, you can sell to either a Mexican national, or Non-Mexican Foreigner. A Non- Mexican would also have to set up a Trust.
- Am I protected if something happens to the bank?
Yes. Mexican banks have government protection against bankruptcy. The trust is guaranteed indirectly by the government. Properties that are held in trust are not assets of the bank. In the rare case that the Mexican bank goes into financial difficulty, the property is transferred to another Trustee Bank. The new Trustee Bank will take care of the existing trust. These are federally imposed laws.
- What about visas or documentation to buy property in Mexico?
Anyone, even someone in Mexico on a tourist visa, may buy property. It is stated that: If you sign a contract, rent a house or condo, buy a house or condo, or lease property (i.e., campo’s), you are no longer a “tourist” and therefore, are invited to apply for a special documentation. But in order to acquire property, it is not necessary to possess any visa.
- How much will my closing costs be?
Closing costs will usually run between 5-7% of the sales price of the property. They are determined before closing by the Notary. Notaries in Mexico are more than just clerks, but state government appointed lawyers who have the power and authorization to close real estate transactions in Mexico.
It is common practice that the buyer pays the transfer or acquisition tax (ISAI) as well as all other closing costs including the Notario fees and expenses, and the seller, pays his capital gains tax (ISR) and the broker’s commission.
- What is Ejido land?
We strongly recommend not buying Land in the Ejido because it is the only land in Mexico without title. Ejido Land means communal agricultural land and was owned by the government and the “ejidatarios”, members of the “ejido”, were permitted to use and work the land. The right to use this type of land can be purchased, but always a risky deal. It is important to understand that ejido titles can only be sold, or transferred to other members of the ejido community. Individual ejido members must obtain a full title through the “Domino Pleno” process before the title can be transferred to a foreign buyer. If this is not the case this will not be your property, you will only be allowed to use it.