Ownership in Mexico
CAN FOREIGNERS OBTAIN PROPERTY RIGHTS IN THE MOST DESIRABLE AREAS OF MEXICO?
Yes! You can establish property rights in the Mexican coastal and border areas via the Fideicomiso (Real Estate Bank Trust).
WHAT IS A FIDEICOMISO AND HOW DOES IT WORK?
As a foreigner, you can acquire irrevocable and absolute ownership rights to property in Mexico through a 50 year perpetually renewable and transferable Real Estate Bank Trust called a “Fideicomiso.” This trust is the legal equivalent for deeded ownership (commonly referred to in the U.S. as fee simple) and is provided specifically for non-nationals to own property in the Restricted Zones of Mexico (border and coastal areas.) The bank trust system of ownership is the ONLY legal way for foreigners to own residential property in these areas that is sanctioned by the Mexican government, and provided for under the Mexican Constitution, thereby offering protection for your interests.
The Mexican Government issues an SRE permit to a Mexican bank of your choice. Clear, lien-free title to the property is then delivered to that Mexican bank, authorized to act as the trustee designating you as the beneficiary of the trust. The bank acts like an employee of the beneficiary (you) in all transactions involving the property. The beneficiary (you) retains the use and control of the property and makes all decisions concerning the property. You have the same “bundle of rights” as owning property with fee simple title. You have the right to use, enjoy, lease, improve, mortgage, sell, inherit and will the property.
Some people have chosen to accept title through a Mexican Corporation, thereby holding title as Mexican business entity. Technically if you are purchasing property as an investment (i.e. rental property, multiple properties, a partnership, or future development) you should purchase through a corporation. Many Foreigners have been told that through a Mexican Corporation, you can save time and money vs. a fideicomiso. What is not disclosed is that a Mexican Corporation is legally obligated to file taxes monthly, with the filing done by a certified Mexican Accountant, among other obligations. Also, property rights through a corporation significantly changes your capital gains taxes should you decide to sell the property. Please consult an accountant or attorney to discuss the best options for your tax situation.
LEASED LAND OR FIDEICOMISO, WHAT'S THE DIFFERENCE?
This is one of the most misunderstood aspects of Mexican Real Estate. Many people don't know that in Mexico, the only legal lease is for uo to a maximum 10 year period. Additionally, the Mexican Government only recognizes lease contracts that are in Spanish and Notarized by a Mexican Notario Publico. Most campos in San Felipe offer 2, 5 or 10 year leases, depending on the landowner. For example, Club de Pesca offers 2 year terms while Pete's Camp and Campo Ocotillos both offer 10 year leases. Campo Ocotillos goes the extra mile for residents by legally registering the lease agreements with a Notario Publico for your protection.
Please remember as a Foreigner you do not get title to your leased property. Should the landowner decide to sell the campo, or not renew the lease you will lose your lease rights, unless specified otherwise in your notarized contract.
Another confusing issue is Ejido properties. For a indepth explanation of Ejido land, please visit the MLS Baja website here:
UNDERSTANDING THE PROCEDURE FOR A FIDEICOMISO
Once an agreement is reached between Buyer & Seller and a Promise of Purchase Agreement is signed by both parties, the next step is the Closing Process. The Buyer applies for a Permit from the Ministry of Foreign Affairs which comes from Mexico City. Once the permit has been approved, an Official Land Survey and Certified Appraisal is ordered. At this time 2 No Liens Certificates are also ordered, ensuring the property has no encumbrances prohibiting the sale and transfer. Once the permit is approved and all the official documents are ready, the next step is to present all of the paperwork to the Notario Publico. It is the Notary's job to oversee the transaction and document the sale. When this step is completed, the transaction is recorded in the Public Registry Department. Once this step is finalized, the Buyer will receive their completed fideicomiso, which is a document about 70 pages long. The time frame for the entire procedure can be as little as 45 days up to several months, depending on the property location.
One distinguishing factor in Baja Sun Real Estate's listings is the fact that we verify the seller's ability to transfer/sell the property before we proceed in advertising a property. If we can't transfer the property, we won't list it for sale.