Why Stay And Play In Mexico?
Mexico is one of North America’s largest destination location for travel, vacation properties and second home ownership.
AREA agrees that there are several lucrative reasons why the U.S. & Canadian market, in particular, have chosen to adopt Mexico as part of their current lifestyle and for their future standard of living whether it be retirement living, investment property or both.
AREA believes Mexico investment will continue in its popularity for the following reasons:
1) Prices of Mexico properties are affordable, making them attractive for long- term investment gains in comparison to alternate tropical destinations.
2) Mexico is the home away from home. Enjoy the benefits of a tropical paradise while maintaining the comforts of home. Major North American retailers, brands, phone and internet services are readily available in popular regions making business, pleasure & lifestyle travel a simple & quick transition.
3) Property acquisition is one of the top investments that one can make. Worldwide statistics currently show the demographic population of 70 million+ are interested in vacation, retirement and investment opportunities abroad. Based on return of investment, Mexico has reached an all time high appeal.
4) Futuristically, Mexico is becoming stronger and more prominent as a country translating to promising long-term benefits to investors.
5) With over 1 million North Americans currently living full time in Mexico, safety and viability has dramatically increased and shows further development of this trend. The current drug war is a reality, but altercations are localized to border towns near Tijuana and the U.S. border and are NOT directed at tourists or Mexican citizens.
6) Mexico is an exciting destination to experience and explore catering to everyone’s guilty pleasures. Enjoy beach life, hot climate city life, culture, fishing, golf, history or tennis, to name a few, Mexico offers it. There are endless opportunities for a stimulating, relaxing or exciting new lifestyle catered to your needs and desires.
7) Mexico will offer a wide range of investment opportunities based solely on the ever-changing international demographic staying and playing in Mexico.
8) Buyers, investors and travelers can expect a host of options ranging from condos to villas, homes, prime land locations or resorts all hosting an extensive list of benefits and amenities.
Mexico IS an attractive and enjoyable investment and opportunity for decades to come.
Foreign Ownership in Mexico
RESTRICTED ZONE AND FIDEICOMISOS
The law declares that the Mexican nation has original ownership to all land and water in Mexico, as well as minerals, salts, ore deposits, natural gas and oil; but that such ownership can be assigned to individuals.
The Mexican Constitution prohibits direct ownership of real estate by foreigners in what has come to be known as the restricted zone. The restricted zone encompasses all land located within 100kilometers (about 62 miles) of any Mexican border, and within 50 kilometers (about 31 miles) of any Mexican coastline. However, in order to permit foreign investment in these areas, the Mexican government created the "fideicomiso," (FEE-DAY-E-CO-ME-SO) which is, roughly translated, a real estate trust. Essentially, this type of trust is similar to trusts set up in the United States, but a Mexican bank must be designated as the trustee and, as such, has title to the property and is the owner of record. The Mexican Government created the "fideicomiso" to reconcile the problems involved in developing the restricted zone and to attract foreign capital. This enabled foreigners, as beneficiaries of the trusts, to enjoy unrestricted use of land located in the restricted zone without violating the law.
A fideicomiso is a trust agreement created for the benefit of a foreign buyer, executed between a Mexican bank and the seller of property in the restricted zone. Foreign buyers cannot own real estate in the restricted zone due to Constitutional restrictions. The bank acts on behalf of the foreign buyer, taking title to real property. The bank, as trustee, buys the property for you, then has a fiduciary obligation to follow instructions given by you who is the trust beneficiary. The trust beneficiary retains and enjoys all the rights of ownership while the bank holds title to the property. You are then entitled to use, enjoy, and even sell the property that is held in trust (for any amount) to any eligible buyer.
In order to allow foreigners to enter into a legal agreement, Mexico requires all foreigners to apply for land obtain a permit from the Ministry of Foreign Affairs prior to contracting to acquire real estate in Mexico. This is currently done by the trustee/bank at the time a real estate trust is set-up. Any Mexican legal representative familiar with real estate transactions can take care of all the details for you.
The Ministry of Foreign Affairs must grant any petition for a trust permit that complies with the stipulated requirements within 5 working days following the date of its presentation to the Ministry's central office in Mexico City. It must be granted in 30 days if the application is submitted to one of the Ministry's state offices. The Ministry of Foreign Affairs must confirm the registration of any property acquired by foreign-owned Mexican corporations a maximum period of 15 days following the filing of the petition. In both cases, if the maximum period passes with no action by the Ministry, the trust permit or registration are considered authorized.
There is a common misconception among foreigners investing in Mexico that once the trust expires, the beneficiary loses all rights and benefits of the sale of the property held in trust. This is not the case. On the contrary, the beneficiary has a contractual right under the trust agreement with the Mexican bank to all benefits that may result from the use or sale of that property. Under Mexican Law, the bank, as trustee, has a fiduciary obligation to respect the rights of the beneficiary.
A real estate trust is not a lease. The beneficiary can instruct the bank to sell or lease the property at any time. The beneficiary can develop and use the property to his liking and benefit, within the provisions of the law.
The following information is provided as a general and informative background to Mexico. Wherever possible you are encouraged to utilize the services of a professional.
Q: Are the permits that Article Twenty Seven requires of foreigners hard to get?
A: The foreigner applying for permission to buy land must prove his immigrant status in Mexico. Non-residents and tourists can buy land through a trust. If the foreigner resides in Mexico, he can acquire directly the property as long as it is not within thirty-one miles from seashores or sixty-two point five miles from the borders.
Q: What about condominiums or houses located in Acapulco, Puerto Vallarta, Cancun, or any of the resorts of Mexico'?
A: The Constitution forbids direct ownership by foreigners inside thirty-one miles from the sea or sixty-two point five miles from the borders. However, they have always been permitted to buy on a trust basis. In this type of purchase, a bank is the trustee, or owner, of the real estate. The beneficiary, having all the rights to use, enjoy and sell the property and any assets on the property.
Q: What happens if a foreigner decides to sell after some years?
A: He may do so, and he may profit by an increasing value.
Q: Can the foreigner rent or sublet his apartment in these condominiums or trusts?
A: Yes, he may rent to anyone he desires, keeping the rent for periods not exceeding ten years.
Q: What happens if the beneficiary dies?
A: At the time the trust is set up, a substitute beneficiary is named. This person has the same rights as the first beneficiary in case of his death.
Q: How is a trust set up?
A: The trust agreement is drawn up before a notary public. The participants in the transaction are the seller who must have clear title to property, the bank as trustee, and the buyer or beneficiary or his legal representative.
Q: How much does it cost to buy properly in a trust?
A: There are expenses for the authorization from the Ministry of Foreign Affairs, the registration in the Registry of Foreign Investments, and the fees of the notary public. The bank charges one percent of the amount of the transaction for the preliminary studies and the drawing up of the agreement.
Q: What are the responsibilities of the beneficiary?
A: He must pay the trust annual fees punctually. Also, he must pay property taxes, water, and other utility bills when due.
Q: Is it true that the new law that regulates foreign investment is against new investments?
A: Not at all. The new law is not only fair, but even positive in the sense that now everybody knows where he stands. In the long run, it is going to create a better atmosphere for mutual respect and understanding. Prospective foreign investment from now on will require permission from the Commission of Foreign Investments.
Q: Can foreign investors come to Mexico and buy an established industry?
A: As long as they acquire forty-nine percent (49%) of that corporation, there is no required permit.
Q: What should you do when buying a home?
A: After you make the decision to buy an attorney or legal professional can help you select a first-class notary public and one that has an excellent reputation. It is customary for the buyer to select the notary public. The Public Registry of Property has to be checked to ascertain if the property in question has any liens or encumbrances and if the title is in good legal standing. The notary does this and also presents the application to the Ministry of Foreign relations when a foreigner is the buyer. It is also recommended that you hire an attorney to review the contract.