-Yes…You Can Own Land In Mexico!
-The one thing all property purchases in Mexico have in common: A notario
-Ejido Land - Just Don’t Do It
-Three ways to buy property, and four ways to ask about each
-How to safely and legally own beachfront in the “restricted zone”
-Owning property through a Mexican corporation
-Owning property through direct deed
-Mexican real estate taxes
-Two firms offering title insurance and escrow services

The one thing all property purchases in Mexico have in common: A notario
Literally translated, a notario is a notary. But in Mexico, the notario’s duties go well beyond the mere verification of signatures. A notario is an attorney who has studied for and passed two extensive exams beyond those that qualified him as an attorney (abogado). He is a public official appointed for life by a state governor.
A notario has the obligation to inform those who ask for his services as to what the proper procedures are. He is to receive, interpret, and put into legal form a client’s will and consent. And he has the authority to draw up the proper documents to make a transaction legally binding. A notario must be a Mexican citizen at least 30 years old and have a law degree as well as at least three years’ experience in a notario’s office.
When you buy property in Mexico, you’ll need a notario’s services to make the transaction legally binding. Once you’ve made an offer on a piece of property, and it has been accepted, you (as the buyer) must choose a notario who will do a title search and get the necessary paperwork in order. He will be present at the “closing” to verify your full name, civil status (name of husband or wife, indicating joint or separate ownership), domicile, occupation, immigration status (your FM-T, FM-3, or FM-2 status), and date and place of birth. And it is he who will make sure that all the necessary paperwork is filed after the purchase to register you as the proper owner. If you’re working with a real estate agent, no doubt that agent has a notario with whom he works regularly. [Back to top]

Ejido Land - Just Don’t Do It
Ejido land was established in 1917 as a result of the Mexican revolution. It is not private property…it is government land granted for use by members of local ejidals, something like Indian lands in the U.S. and Canada. This land can be converted into private property, but the process is long and complicated. It is outright illegal to own Ejido land in the restricted zones, and it’s dicey in the interior.
Prices for Ejido land are often unbelievably low…for obvious reasons. You might well purchase a parcel of ejidal land and live on it without trouble for many years. But was it sold with the consent of everyone necessary in the Ejido? Was the guy you bought it from even a member of the Ejido? Will someone in the Ejido wake up with an attitude five years from now, decide they were shortchanged, and contest the sale? Will a guy in a suit knock on your door someday with the local constable and say the government never fully approved privatization of the land and you have to get off…now?
We don’t recommend even considering the purchase of ejidal land. One of the most important aspects of title research is making sure the plot you’re interested in has never been ejidal land or, if it was, that it was successfully privatized a long time ago and never challenged. Too much can go wrong. Just don’t do it. [Back to top]

Three ways to buy property-and four questions to ask about each
You can own property in Mexico in three ways-in a bank-held trust, a Mexican corporation, or a direct deed. Talk to your attorney and/or real estate agent about each of these options before you buy. What is right for one person might not be right for you.
The kind of structure you use will depend on various factors, not the least of which are the location and size of the property and how you plan to use it. Ask your attorney-
1. What are my options given the property’s location?
2. What are the tax implications of each structure?
3. How would each structure impact my estate?
4. What are the costs associated with each structure? [Back to top]

Fideicomiso - How to safely and legally own beachfront in the “restricted zone”
An article in the Mexican Constitution of 1917 states that no foreigner can own property in Mexico’s “restricted zone” - land that is within 100 kilometers (about 62 miles) of a border and 50 kilometers (about 31 miles) of a coast. Yet Mexico has fostered billions of dollars in foreign investment along its shores. Are all those people with their condos in Cancun and their cliff-side homes in Mazatlan on the wrong side of the law? Certainly not.
In 1973 the government saw the economic wisdom of allowing foreign investment in the “restricted zones” and established the fideicomiso, or bank trust, as an instrument to allow such investment in residential real estate.
Most owners of residential property in “restricted zones” own through a fideicomiso. This sort of bank trust grants the title for a piece of property to the bank (the trustee), which in turn is obliged to follow any instructions given by the trust’s beneficiary - you, the foreign owner.
Only banking institutions authorized and regulated under Mexican banking laws can serve as fideicomiso trustees. The foreign owner (beneficiary) has the same rights of full use and economic benefit that a Mexican national with equity ownership of the real estate would have. They can treat the property as if it were owned with a direct deed title, which means they retain use and control of the trust and make all investment decision regarding the property, i.e., to sell it, rent it, build on it, or live on it.
This allows you control over your piece of property in the “restricted zone”-you can build on it, rent it out, resell it, or pass it to your heirs just as if you held direct title-and at the same time, it allows Mexico to “sell” pieces of its coast to foreign nationals without violating its own constitution.
You can use a bank-deed structure to own property outside the restricted zone as well. Many people in the colonial cities, for instance, own their property through bank trusts.
Owning property through a trust deed offers several advantages. First, you can list more than one person as beneficiary, which means, for example, that a husband and wife can be “co-owners,” essentially. You can and should structure this in such a way that if one partner should die, the other has immediate, 100% control over the property.
Second, you can list an “heir.” This means that should both co-owners die, a new beneficiary is already in place-a beneficiary who, incidentally, needn’t be related to the original co-owners. (Essentially, you write a letter of instruction to the bank naming this heir. When presented with the death certificate(s), the bank immediately and seamlessly passes title to him without his having to be in Mexico.)
For gay couples, friends who own a property jointly, or for couples in a second marriage with different children, this is a very desirable option.
All this is important because it allows the simple and easy transfer of control over the property and avoids the messiness of sorting out ownership in the Mexican courts. Plus, it allows you to avoid inheritance taxes.
Trusts are issued for renewable 50-year periods. If you are purchasing property currently held in a trust, you can either establish a new trust for the next 50-year period or be assigned the existing trust deed. Trusts are renewable at any time by simple application. Maintenance fees for this kind of trust are typically $500 to $600 per year. And it will likely cost between $5,000 to $6,000 for the initial set-up.
Ask if the bank that holds your trust will send you notice when your annual payment is due or if it’s up to you to remember to pay it. Surprisingly enough, banks don’t always send out statements. If yours does not, it’s up to you to put a note to yourself on your calendar to pay your trust fees on time or you will be assessed a penalty. [Back to top]

Owning property through a Mexican corporation
If you intend to use your property in the “restricted zone” as commercial and non-residential, then you can own it through a Mexican corporation-and your corporation can be 100% foreign owned.
Some people argue that renting out your property counts as commercial use, and so in this way it is, in fact, possible to hold an essentially residential piece of property through a Mexican corporation. The letter of the law makes a clear distinction between commercial property and residential property that is rented for income. If you buy a seaside bungalow as a commercial property, you can’t legally live in it. If you buy it through a bank trust as a residential property, you can live in it or rent if for income or both. In short, if you’re not really doing business in Mexico, what do you gain by holding your property in a corporation as opposed to in a trust? Not much.
You probably won’t save money. A Mexican corporation must either produce profit or show losses through formalized receipts. You will have to have an accountant file your corporate taxes monthly, which can become costly-you might pay $60-$100 a month or more for his services.
To form a Mexican corporation, you will need at least two shareholders but, as we’ve said, it is not necessary for either to be Mexican. It will cost you between $5,000 and $6,000 to set up a Mexican corporation. While you won’t have to pay an annual fee as you would to maintain a trust, you will, as we said, have to file your corporate taxes monthly and pay a Mexican accountant to do it for you.
There are developers out there arguing that you can own your raw beachfront lot (intended for residential use) through a Mexican corporation. They advise you to assert that your corporation is “dormant,” and say that on this “dormant” corporation you’ll be exempt from the monthly filing requirements (though there are still some filing requirements). But it’s unclear what happens when you “activate” this corporation, or what act on your part would trigger such an activation. Would the building of a house qualify, for instance? It’s unclear.
What is true is that a single Mexican corporation can own as many pieces of real estate as it wants, but individuals must establish a separate bank trust for each piece of property they purchase.
On this point, be wary. Consult an attorney about the best way to own land in the restricted zone. Make sure you understand all the implications of each method of ownership before you set up corporate ownership of what is essentially residential property. [Back to top]

Owning property through direct deed
The third and final way to own property in Mexico is through a direct deed (escritura publica en dominio directo). This structure will work for foreigners buying property outside the restricted zone-in the colonial cities, for example-but not along the borders or coast.
A direct deed shows the history of ownership for a given piece of property, and it names the current, legal owner-you. With this structure, then, you can own a piece of property outright. (Even though you’re not buying in the restricted zone, you still need to get permission to buy from the Ministry of Foreign Affairs-something the notary can take care of for you, see above.)
When you hold the direct deed to a property, you pay no yearly or administrative fee to maintain it as you would with a trust. But you will be charged a one-time fee of about $300 for each foreigner whose name appears on the deed. If you are married, make sure both your name and your spouse’s name appear.
As with a trust, you can designate a “beneficiary” on the deed so that the property will automatically transfer to that person should you die, but in this case, the beneficiary must be a blood relation-a parent or a child. Don’t leave anything to chance, though…have your attorney draw up a will for you in Mexico and in Spanish, which stipulates clearly to whom your property and possessions should be transferred upon your death. That way you make your intent and the intended legal ownership of the property perfectly clear. [Back to top]

Mexican real estate taxes
You’ll pay several taxes associated with real estate in Mexico. The first is a 2% acquisition tax, payable by the buyer, when property changes hands. And as a property owner, you’ll owe property tax.
It is very common in many communities in Mexico to use the “assessed” value of the property as the basis for these taxes, and the official assessment can be considerably lower than the market value of the home-often only 30% or 40% of the actual sale price. So on a $100,000 home that has an official “assessed” value of $40,000, you’ll pay $800 in acquisition tax and something between $50 and $150 annually for your property tax.
Realize clearly though that under Mexican law, using an assessed value less than the actual commercial value for tax purposes is technically illegal. We don’t know anyone who doesn’t do it, but there you go.
If you sell the property, you’ll owe capital gains tax. This can be figured two ways in Mexico. 1) You can pay 25 percent of the declared value of the transaction or 2) you can pay 35 percent of net value - the difference between the assessed values at the time you bought the property and when you sell it, taking into consideration the time the property was held, any improvements made, any commissions paid and other allowable expenses. (If there is a significant difference between the assessed value recorded for the property when you bought it and the value you claim when you sell it, you could be in for a big tax bite.) You should calculate your capital gains tax both ways with the help of an accountant or notario, and pay the lower one. [Back to top]

Two firms offering title insurance and escrow services
By purchasing title insurance, you make sure you hold clear title to your property and that, should anybody dispute that title, you’ll have an advocate who will defend your claim in the local courts. We highly recommend you buy title insurance-particularly for undeveloped land. And if the title insurer you’ve hired says he will not insure the property…don’t buy it.
What could go wrong? An all-too-common and potentially costly problem involves developers who do not get the proper zoning and subdivision permission to develop their land for resale. They might be marketing a project that appears to be above board. You might see survey stakes marking the lot lines and have in hand a glossy brochure with drawings of what the plans entail. But unless you can be absolutely sure you’ll get your own independent title to your lot, don’t buy. And the only way to be sure is to have a title-insurance company investigate the project for you.
Rates range from about $5 to $7 per $1,000 of coverage, depending on the value of your property and the firm you hire.
Two firms offering title insurance in Mexico are-
First American Title Insurance (Turalu Brady Murdock, Vice President/Counsel, Caribbean/Latin America Division); Sunrise, FL, office tel. (954)839-2900, ext. 188; toll-free tel. (877)641-6767; fax (954)838-9228; e-mail: tmurdock@firstam.com; website: www.firstam.com; (and David Wiesley, Vice President-Mexico Operations); Dallas, TX, office tel. (214)979-0003; fax (214)303-0935; e-mail: dwiesley@firstam.com; website: www.firstam.com
 
Stewart Title and Guarantee Company (Mitch Creekmore, Vice President & Director of Mexico Business Development); Houston, TX, office tel. (713)625-8753; toll-free tel. (800)729-1900; fax (713)629-2321; e-mail: mcreekmo@stewart.com; website: www.stewart.com
These title insurance companies offer escrow services to buyers of property in Mexico. As we explained earlier, a real estate agency will often keep your initial payment in an account for you and hold onto it until the closing, essentially acting as escrow agent. While this is likely to be safer than giving the payment to a property owner directly, there is no guarantee you’ll get that money back should something go wrong. We don’t mean to question the honesty of realtors in markets where our readers have had successful dealings over the years, but we want to remind you that not all realtors or property owners you’ll meet in Mexico (or anywhere for that matter) are to be trusted. If you’re at all uncomfortable, buy title insurance and use an escrow service. It’s a small price to pay for peace of mind-and a guarantee that your investment is safe. [Back to top]