Purchasing Property in Mexico

Purchasing Property in Mexico

Q: Can foreigners own property in Mexico?
A:
 There are established regulations for non-Mexicans owning land or property within Mexico that make the process safer and easier than ever before. These rules have been put in place to both protect the purchaser’s ownership rights as well as to promote the sale of real estate to foreign investors.

Article 27 of the Mexican Constitution restricts direct ownership of land by non-Mexicans within 100 kilometers of the border and 50 kilometers (about 30 miles) of the coastline. This is a protectionist measure, put in place after foreign invasions repeatedly threatened the country’s sovereignty at the end of the 19th century.

Today, foreigners may directly own real property in the interior of Mexico subject to certain limitations. Modification of this constitutional restriction have been made, and since 1973 foreigners (non-Mexicans) have been able to purchase coastal and border properties through an established and perpetually renewable Mexican property trust called a Fideicomiso. This is a bank trust, much like an estate trust in the U.S., which gives the purchaser all of the rights of ownership.

Q: What is a Bank Trust?
A:
 Essentially, the bank acts as the “Trustee” for the trust and the purchaser is the “Beneficiary” of the trust. The trust is not an asset of the bank.  The bank merely acts as the trustee of the trust, and the trust holds the legal title to the property. All rights and privileges of ownership, including exclusive use and enjoyment, are held by the trust Beneficiary-the foreigner. The beneficiary enjoys all rights of ownership enabling him to occupy, rent,  or transfer title to the property to any legally qualified person he may designate.

The actual document is a Trust Deed and is public document registered in the local land registry.  These Trust Deeds have an initial term of 50 years, and are legally renewable in perpetuity at any time or at the end of the 50-year period for a filing fee (approximately $1,000.00 USD) for additional 50-year periods.

The property may be sold at any time, with the seller being responsible for paying his capital gains taxes on the appreciated value. This process is designed to protect the rights of foreigners, and ensure that property transfers are made in a legal manner.

Q: Taxes? What can I expect to pay in Mexico?
A: For the buyer, the subject of real estate taxes generally comes as good news, especially in the Sayulita/Bahia de Banderias area where real estate taxes tend to be low.  The  ‘Predial’, (property tax) is calculated as a percentage of the assessed value determined at the time of sale.  Property taxes have historically been low in Mexico because they have never been considered a source of governmental revenue.

Q: Are there other costs or expenses involved with purchasing property in Mexico?
A: If you are not planning on living full time in Mexico, property maintenance will need to be considered for the time you are away, and preferably a property management company (Riviera Partners Realty have a signature list available). For condominium owners, maintenance and security is handled by the Condominium Owners Association, paid for through monthly fees.