Mexico is a location becoming increasingly popular with United States based buyers and those seeking something slightly different in their holiday or retirement homes. The process of buying in Mexico is incredibly different from buying in the United States. This guide aims to illustrate the issues involved with buying in the home of Tequila.

Real Estate within Mexico is either placed by the authorities into a restricted or non restricted zone. As a rule of thumb the interior is non restricted and foreigners (non Mexican citizens) can directly own property in these locations. Any land or real estate within 30 miles of Mexico’s coast or 50 miles of Mexico’s borders is considered restricted.

Within restricted zones under Mexican law foreigners are not allowed to purchase property directly. Instead it is necessary to set up a real estate trust to hold the title of the property on behalf of the purchaser. A bank will act on the foreign purchaser’s behalf when setting up the trust (or ‘fideicomisos’) necessary to purchasing property in Mexico’s restricted zones. It is advisable to seek advice in relation to any purchase and it is crucial to have the transaction examined by a licensed Mexican attorney.

All real estate transactions are completed without the framework and security of regulation. This makes an attorney’s advice extremely important. It is likely to be some years before Mexico regulates the real estate industry, establishing the reputability of the estate agents is therefore an important initial step to take. They act on the sellers behalf and might not disclose everything you need to know to make informed choices.

Use a licensed independent attorney. To ensure your chosen attorney is licensed ask to see there “cedula professional” which is an attorney’s license to practice law within Mexico. The attorney will formalise every aspect of your real estate transaction, good attorneys have strong relationships with banks, notaries and the Mexican authorities. They can ensure that each of the people and institutions involved with the purchase charge the cheapest and most accurate fees. This can save money during the transaction. Good attorneys can also help in tax advice planning and facilitating closing the deal.

The formation of a real estate trust (fideicomiso) is necessary if you are a foreign national buying within the restricted area. Foreign buyers cannot own the real estate but the title of the property can be placed within the trust and a Mexican bank named as trustee. The foreign buyer is the beneficiary of the trust even though the bank is named as the trustee. This enables the foreign buyer unrestricted use of the real estate.

The fideicomiso is executed between the bank and the seller for the benefit of the buyer. The fideicomiso beneficiary (the buyer) enjoys all of the rights of ownership while the bank holds the title. It might appear a long winded way of purchasing real estate, however it is only way to buy within a restricted area and as the bank holds the title to the real estate the transaction is often considered by some as more secure than transferring titles between two individuals.

Prior to entering into the sale contract and putting into place the fideicomiso a foreign buyer is required to obtain a permit from the Ministry of Foreign Affairs. This only takes a matter of a couple of days but is required prior to entry into a contract. The bank will also be required to obtain a permit from the same ministry to set up the fideicomiso with the foreign buyer as beneficiary. Having a good and strong relationship with a Mexican bank is very important and your attorney can help to establish this.

It is NOT the case that the trust represents a lease or that when it runs out the buyer losses all rights. The beneficiary of the trust (the buyer) has a contractual right under the fideicomiso agreement with the Mexican bank to allow all benefits occurring from future sale of that property to be received by the beneficiary. The Mexican bank as trustees has to respect the rights of the beneficiary. The beneficiary can develop, use or sell the property as he or she sees fit within the wider provisions of Mexican law.

The trust agreements required for foreign buyers of Mexican real estate within restricted areas are a necessary component of buying. A licensed solicitor is therefore necessary in the process of putting in place the trust and in informing the buyer of the exact process and the issues it raises.