Officially, according to Mexico's constitution as established in 1917, only Mexican citizens and corporations can own properties in the country's “Restricted Zone.” Fortunately for real estate investors, Mexico's government saw the problems that this law posed for drawing international investment to the country. Instead of trying to change the constitution, the government implemented a system known as a “fideicomiso” (a Bank Trust) which allows non-Mexican citizens to hold all the rights of ownership. A second option for ownership is through a Mexican corporation. These two forms of ownership have distinct purposes. The following are details which you will want to consider when buying in the Restricted Zone; since the majority buy through a bank trust, here we will focus on the details of this option.
The Restricted Zone – DefinitionMexico's Restricted Zone is defined as 50 kms along every cost line, which includes all of Baja California, the entire area along the Pacific, a good portion of the Yucatan Peninsula, and the Gulf of Mexico area. It also includes 100 km along the borders with the United States in the north and Belize and Guatemala in the south. In this entire area, it is necessary for non-Mexican buyers to own by means of a bank trust or Mexican corporation.
If the property is located more than 100 kilometers from the border or 50 kilometers from the coast, a foreigner can acquire ownership of property directly, or “fee simple.” However, there are benefits to the trust and even in the interior are, some buyers choose to own their property in trust. See below for more details.
Real Estate ProfessionalsFor an investor who has bought in the Restricted Zone numerous times, it will be a usual, straight-forward part of the process. However for first-time buyers, it's a good idea to work closely with a qualified, reliable broker who is familiar with the process. A broker will be able to help find a property ideal for individual investment needs, and discuss whether a bank trust or Mexican corporation is more suitable. The broker will also refer buyers to other necessary professional services, such as a lawyer, who can likewise advise on which approach is more suitable and set up a corporation if necessary, and a bank which can set up the bank trust if a buyer is going that route.The Bank TrustThe Bank Trust is a trust agreement that you establish with a bank to hold title of the property with you (you and the bank are both named in the title documents), or we could say, the property is held in a trust through a Mexican bank, wherein the bank is the trustee, and the buyer is the beneficiary. The bank has a fiduciary responsibility to represent the buyer's interest in the property.Bank trusts are active for 50 years and are renewable after that. It is important to note that this is NOT a “lease,” but a way of granting full ownership rights. Originally bank trusts were effective for only 30 years and many are currently in the process of being renewed to 50 yearsThe advantages of using a Bank Trust include:
The main disadvantages of the bank trust are:
In conclusion, a bank trust is a safe, easy way to own property in Mexico's Restricted Zone or elsewhere in the country. It includes another step in the purchasing process, but this will not present any complication for those working with an experienced professional. There are fees, but they are accessible. Finally, the bank trust offers a number of real advantages in addition to simply allowing for ownership.
