Purchasing Property in Mexico: Part 2
In this edition of purchasing property in Mexico we will discuss the details by which non-Mexicans can buy property in the restricted zones, and why non-Mexicans need a bank trust or Mexican corporation to purchases in those zone.
Based on Article 27 of the Mexican Constitution, a non-Mexican citizen cannot hold a real estate title within the restricted zone. The restricted zone is 50 kilometers from the coast and 100 kilometers from the United States or Central America boarders.
With the advent of the North American Free Trade Act (NAFTA), the Mexican government recognized that it was crucial to make foreign investment in Mexico safer and easier for non-Mexicans. Because the Mexican constitution prohibits non-Mexican from purchasing with in the restricted zone, an innovative and secure method of holding the title was created. This method allows non-Mexican ownership through a property trust called a Fideicomiso or bank trust.
This trust agreement is much like an estate trust in the United States giving the purchaser all rights of ownership. Essentially, the bank acts as the trustee for the trust and the purchaser is the beneficiary of the trust. The trust is not an asset of the bank; the banks simply act as trustee to hold the trust. The beneficiary has the right to use, occupy or lease the property, including the right to improve on the property. The beneficiary may also sell the property or bequeath the property to an inheritor. The initial term of the trust is 50 years, however the trust can be renewed indefinitely for additional 50 years periods.
The other way to purchase property in the restricted zone is through a Mexican corporation. When you set up a Mexican corporation, you may obtain the title to a property without a bank trust, even if you are in a restricted zone. The Mexican corporation is used strictly for properties with commercial or business purposes and is greatly beneficial for foreign business owners. There is additional government reporting and tax payments required, making it necessary to hire an accountant to file these declarations every month. Also, commercial property carries higher water, electric and phone rates. Some buyers might consider a Mexican corporation to avoid the cost of the trust, but in the end it could costing the same and be a lot more work. You should consult with Mexican Legal counsel to determine what best suits your needs.
If you are not purchasing property in the restricted zone you do not need to acquire a bank trust. These are the two methods available for non-Mexicans to hold real estate titles within the restricted zones. It is also important to point out that owning a property through a bank trust is as safe and valid as direct ownership, including all the same rights and privileges.
Now if you have any question about how to purchase property in Mexico or about any of the TOP MEXICO REAL ESTATE properties we have listed anywhere throughout Mexico, please feel free to contact any of our Top Mexico Buyer’s Representatives and we will be glad to help you find your very own piece of paradise.
And remember, here at TOP MEXICO REAL ESTATE…
We make it happen!
We would like to thank Papaya 15 for sponsoring this blog. Papaya 15 is a new development in Downtown Playa del Carmen. To learn more about Papaya 15, please click here.