Law governing the purchase of property in Mexico

• Under Mexican law, a foreign person or company is allowed to own real estate in Mexico, unless it is located within the Restricted Zone.

• Within the Restricted Zone, a foreign person or company may obtain all the rights of ownership to a property, but it must be set up as a real estate bank trust called a Fideicomiso.

• Another option is to acquire non-residential property through a Mexican corporation. This corporation may, under certain conditions, be 100% foreign owned, but it must have a provision in its by-laws stating that the corporation and its foreign owners accept to be subject to Mexican laws and agree not invoke the laws of their country.

• As well, the real estate acquired must be registered with the Foreign Affairs Ministry and used for non-residential activities. In other words, under these conditions, foreigners can acquire directly properties designated for tourist, commercial, or industrial activities.

The restricted zone

• The Mexican Constitution regulates the ownership of land and establishes that foreigner cannot acquire direct ownership of any land within 100 kilometers of either border or within 50 kilometers of any coastline. These areas are known as “Restricted or Prohibited Zones.” Nevertheless, the latest Mexican Foreign Investment Law, which came into force on December 28, 1993, makes the allowances cited below. • Fideicomiso or Bank Trust: Any foreigner or Mexican National can establish a Fideicomiso (the equivalent of an American beneficial trust) through a Mexican bank to purchase real estate anywhere in Mexico, including the Restricted Zone. To do so, the buyer requests a Mexican bank of his/her choice to act as a trustee on his/her behalf. The bank obtains the permit from the Ministry of Foreign Affairs to acquire the chosen property in trust. The Fideicomiso can be established for a maximum term of 50 years and can be automatically renewed for another 50-year period and for subsequent 50-year periods thereafter. During these periods, foreigners have the right to transfer the title to any other party, including a member of their family. • The bank becomes the legal owner of the property for the exclusive use of the beneficiary, who has all the benefits of a direct owner, including the possibility of leasing or transferring their rights to the property to a third party or pre-appointed heir. During this term, the foreigner is considered as a Mexican National. The trustee is responsible to the buyer/beneficiary to ensure precise fulfillment of the trust to protect the interests of the buyer/beneficiary. • For practical reasons, even in unrestricted zones, many foreigners, and Mexican Nationals for that matter, prefer to hold their property under a Fideicomiso.