By Erin May

Buying property in Mexico is easier than you think. As with all real estate purchases, you will need to choose your location, do your research and hire the right professionals. Tens of thousands of foreigners have purchased real estate in Mexico and with the right approach; you can be one of them. It is important to understand Mexican property law which will safeguard your investment and make the purchase process easy and smooth.

The Buying Process – What to expect and who is involved

In 1972, the Mexican government initiated the legal process of entitlement which protects foreign investors. This entitlement is called a Fideicomiso, which allows the bank to hold title to the real estate anywhere in Mexico, including the restricted zone, as the ‘trustee’ for you, the ‘beneficiary’.

There are typically four parties involved in a real estate transaction in the restricted zone. All serve a purpose in assisting you with your real estate transaction. There is the realtor or broker, the buyer’s Lawyer, the bank acting as the trustee and the notary. In Mexico, a notary is a lawyer. Their positions are comparable to that of a Canadian or American judge. They have legal training, take challenging examinations and have years of apprenticeship experience. They must be appointed by a State governor in order to practice. Their responsibilities include practicing real estate law, retrieving and auditing taxes and closing real estate transactions. Notaries are a neutral party in the real estate transaction, and as a result, it is recommended that you hire a lawyer if you require representation.

The buyer will request a Mexican bank of his/her choice to act as a trustee on his/her behalf. The trustee is responsible to the buyer/beneficiary to safeguard accurate fulfillment of the trust, according to Mexican Law. It assumes full technical, legal and administrative supervision in order to protect the interests of the buyer/beneficiary.

The deed of trust is not considered part of the bank’s assets and they cannot claim ownership rights to a fedeicomiso. They are merely a steward of the trust. You and those you designate are the beneficiaries. The bank attains the permit from the Ministry of Foreign Affairs to acquire the property in trust.

The bank charges an initial fee of approximately $500 USD for drawing up the agreement and establishing the Trust plus a percentage based on the value of the property. The Fideicomiso can be established for a maximum term of 50 years. It can be renewed automatically for an additional 50 year period. During this time, the owner has the right to sell the property without restriction, transfer the rights to a third party or pass it on to any heirs.

Closing Costs

The closing costs on a property in Mexico is approximately 4-6% of the total sale price. You are required to pay a 2% acquisition tax at the time of purchase, which is a part of the 4-6% closing cost fees. In 1993 the Mexican federal government liberalized ownership provisions of all property within the ‘restricted zone’, which is all land located within 100 kilometers of the border and within 50 kilometers of any ocean. As a result, foreigners wishing to purchase homes, condominiums and timeshares have increased legal independence and ownership rights. Under Mexico’s Foreign Investment Law, a foreigner is allowed to obtain the rights of ownership through a Fideicomiso or alternatively the purchase of non-residential property can be achieved through a Mexican corporation which, under certain conditions, can be 100% foreign-owned.

Maintaining Peace of Mind

When buying property in Mexico it is extremely important to ensure the seller has legal title of the property. If they do, they need to ensure the property can be legally transferred. This is done through a title search of the property. This search must include a lien search, subdivision approvals, permitted development licenses for the land and a search for the chain of title. The lien certificate should clearly show the owner of record, surface area and property type classification. It should also show the legal description and any liens or encumbrances filed against the property. There are many companies that offer title examinations and reports. They can also provide escrow services for earnest money, which is a deposit made to a seller showing the buyer’s good faith in a transaction. It is important that buyers ask their broker or realtor if a bank trust can be obtained at the time of closing on a residential purchase.

Buying property in Mexico can be a stress free experience by following the above outlined steps and consulting professionals in the process.

Erin May is the owner/operator of Mexico Vacation Rental and a distributor for Seacret Direct. She has a passion for travel, the outdoors and all things Mexico. She spends her time traveling, living and working in Calgary, Alberta and Huatulco, Oaxaca.