BUYING A PROPERTY IN MEXICO



BUYING A PROPERTY IN MEXICO

1. Can you own a property in Mexico?

Yes, of course. In fact, foreigners are not only allowed to legally purchase property in Mexico, the Mexican government made a law to make it safe and simple. It is legal and 100% secure and GovacationMaya is here to guide you through each step.

2. How can I own?

You will own your slice of paradise in one of two ways: either through aFideicomiso which is a bank-held trust, or through a Mexican corporation.

3. What is a Fideicomiso?

A fideicomiso is a real estate trust held on your behalf by a Mexican bank of your choosing (Scotia Bank, HSBC, Banamex, Santander, etc). The bank acts as the Trustee, and you and those you designate are the Beneficiaries of the trust. As the beneficiary of the trust, you maintain complete control over it, retaining the use of the property and making all investment decisions. This is not a lease, it is equivalent to a Living Trust in the US. A fideicomiso bestows upon the Beneficiary of the Trust (you) absolute and irrevocable control over the property: to enjoy, lease, improve, mortgage, sell, inherit and will.

Simply stated, your property is placed in a trust that you own to be administered by a Mexican bank on your behalf.

4. Why is a Fideicomiso necessary?

The purpose of the fideicomiso is to allow foreigners to buy prime Mexico real estate inside the "restricted zone," and ensure a safe and secure transaction. The "restricted zone" is any land within 31miles (50 km) of the coastline and 62 miles (100 km) of the borders. The Mexican constitution, when created, was designed to protect their land and prevent the kind of massive land loss they had endured through their history. Rather than amend their constitution, Mexico created and added the fideicomiso to encourage foreign investment in the highly desirable areas, particularly along the coastline. Residential properties outside of the restricted zone can be acquired directly by foreigners without the need for a bank trust, although some buyers opt to use it.

5. Is the Fideicomiso an asset of the bank?

No. Your trust is not an asset of the bank; they are merely the stewards of the trust. You and those you designate are the beneficiaries. The trust to your Mexico real estate property is held by the bank for the beneficiary (you) and is not considered an asset of the bank therefore not exposed to any legal action that the bank might find itself in. The trust is the beneficiary's property.

6. For how long is the Fideicomiso good?

The Trust is initially established for a period of 50 years and can be renewed at any time by a very simple form and a nominal fee. The trust is set in 50-year increments guaranteed renewable for perpetuity. The current cost is about $500 USD

7. Can the Government take my Property?

Foreigners often worry about their land being expropriated by the Mexican government. Under the North American Free Trade Agreement, NAFTA,Mexico may not directly or indirectly, expropriate property except for a public purpose (i.e. building roads). And only through a legal condemnation proceeding will this be possible. In the rare case where it isnecessary to expropriate land, the government will pay swift and fair market compensation to the owner, together with accrued interest. This is the same process known as Eminent Domain in the USA, Compulsory Purchase in the UK or Expropriation in Canada.

8. Why buy through a Corporation?

Many investors choose to purchase property though a corporation if the intent is to conduct the investment as a business. This would be the case in situations such as buying and selling land, renting their property or when owning more than one property.

9. What are the Types of Mexican Corporations?

There are several different types of Mexican corporations, however the two most common are a limited liability corporation (LLC) and a limited liability partnership (LLP). Choosing which type of corporation to set up is important for tax purposes in both the US and Mexico, and you should speak with an attorney or accountant on both sides of the border to understand the benefits and costs each one entails. Making sure the choice is made correctly from the beginning will save you time and money.

10. How does buying through a Corporation work?

Ownership of property in Mexico is possible through the establishment of a Mexican corporation. As of 1995 foreigners can fully own, operate and administer Mexican corporations. A foreign corporation in Mexico requires two or more individual investors, who combined, control 100% of the corporation. None of the corporation's investors can be Mexican. Once your Mexican corporation is formed, it has the legal capacity to acquire property anywhere in Mexico, including the restricted zone. Through a corporation, foreign owners acquire the right of domain, in addition to possession and benefit. The property is owned with the same rights as if it were a Mexican entity. There are no investment restrictions on foreign-owned Mexican corporations aimed at buying and developing property.

11. What is the cost to set up a Corporation?

Typically, an attorney will charge $1,500 USD to set up the corporation. Additionally, there is a fee of approximately $100 USD per month for accounting of the corporation.

12. Who represents and protects my interests?

There are 4 parties involved in a Mexico real estate transaction inside the restricted zone. All are helpful in their respective areas and each serves a purpose in assisting you with your real estate transaction: Real Estate company, Buyer’s Attorney, Bank and Notary.

13. Real Estate Company

The process of buying property in Mexico will inevitably have differences from what you may be accustomed to. That is why having the right people on your side is so important. Not only will it make all the difference in your experience, having a team of experienced, knowledgeable agents dedicated to guiding you through each step, ensures that you buy smart and buy secure. We at Investment Properties Mexico pride ourselves on the personalized dedication we love to provide our clients. More often than not, we develop great friendships with our clients as we take them through to realizing their dream.

16. Who is a Notary?

A Mexican Notary (Notario Publico) is a licensed attorney, certified by the state and Federal government to act as an official and unbiased representative of the government of Mexico. A Mexican Notary is very similar to a notary in Canada and has far greater responsibility than a notary in the US. A Mexican Notary has passed stringent exams required by the Mexican government and is a government official. They provide strict security of original records and documents and they record the documents with the Public Registry of Property. A Notary's role is taken very seriously in Mexico in that the Notary could be held liable in both civil and criminal terms.

17. What purpose does the Notary serve?

The notary performs a variety of tasks including the authentication of legal documents, the calculation of capital gains tax and is responsible for ratifying ALL real estate transactions in Mexico. Any real estate transaction not ratified before a notary and duly recorded in the Public Registry is considered invalid and not enforceable.

In a real estate transaction, the notary is equally responsible to the buyer and the seller and ultimately responsible to the Mexican government. Their job is to ensure the legality of the transfer of title, to calculate and retain the seller's capital gains tax on behalf of the government, collect the purchaser's acquisition tax and pay it to the Department of Foreign Affairs, coordinate appraisals, certificates of no liens, certificates of no debt and request all corresponding permits. After the closing, the Notary must record the transaction at the Public Registry and the Tax (Cadastral) Office. This role is taken very seriously in Mexico in that the Notary could beheld liable in both civil and criminal terms.

The Mexican notary is capable and legally authorized to carry out the transaction. However, we recommend also using an attorney to represent all your interests and protect your legal transactions.

Contact: info@govacationmaya.com

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