Buying Real Estate in Mexico’s Restricted Zone

By Tom Slemko - Email: tslemko@virtualmex.com

 

The Mexican Constitution does not allow foreigners to register deeds to land in their own names in areas of Mexico that are included in a zone 50 kilometers wide along the coast and 100 kilometers from the US border. This is called the Restricted Zone.

 

The Mexican government encourages foreign investment in Mexico. To this end, they passed in the early 70’s, a law that allows foreigners to “own” real estate in the Restricted Zone by using a “bank trust deed” or Fedeicomiso.

 

This law was amended in 1993 to make it more liberal and to comply with the provisions of the North American Free Trade Agreement (NAFTA).

 

The Fedeicomiso is basically a deed in the name of a Mexican bank and held in trust. The Foreigner/Purchaser is named as the beneficiary of the trust and has all the rights of ownership. The bank has no rights of ownership in the property. The deed does not form part of the bank’s assets. 

 

The Foreigner/Purchaser has all the rights of normal ownership including, but not restricted to selling, renting, improving, disposing or even destroying. The Foreigner/Purchaser pays all property taxes, utilities and other charges made against the property. The banks charge an annual fee for holding the deed in trust, and this varies between banks. It currently runs from $350 to $450 USD per year.

 

For any foreigner to own property in Mexico a permit must be obtained from the Secretary of State. As evidence that the government considers Fedeicomisos a form of ownership, the Foreigner/Purchaser of a Fedeicomiso must also obtain this permit.

 

The trust allows the Foreigner/Purchaser to name primary and secondary beneficiaries as well, so the property can pass to descendants without the need for a will or probate.

 

Under current law, the Fedeicomisos run for a term of 50 years and they are automatically renewable for another 50 years. It is not the intention of the government to ever acquire these properties, so this does not happen, and never has happened. When a Foreigner decides to sell his property, the new purchaser has the option of assuming the existing trust or taking out a new trust for a new 50 year term.

 

Fedeicomisos are not leases! They are simply a different kind of ownership. Leases are a different matter and must be investigated thoroughly as the Foreigner has less protection with a lease. Some leases on the Baja were involved in a lawsuit that eventually saw Americans loose their leases.

 

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