Legal Process for Foreigners Buying Property in Mexico: A Comprehensive Guide

🇲🇽 Understanding the "Restricted Zone"

According to Article 27 of the Mexican Constitution, foreigners are prohibited from directly owning land within the "Restricted Zone," which encompasses areas within 50 kilometers (approximately 31 miles) of the coastline and 100 kilometers (approximately 62 miles) of international borders. Nonetheless, foreigners can legally acquire property in these zones through a fideicomiso (bank trust) or by establishing a Mexican corporation, depending on the property's intended use. 

🏦 Acquiring Property via Fideicomiso (Bank Trust)

A fideicomiso is a trust agreement that allows foreigners to purchase property within the Restricted Zone. In this arrangement:

• A Mexican bank holds the title to the property as the trustee.

• The foreign buyer is designated as the beneficiary, retaining all rights to use, lease, sell, or bequeath the property.

• The trust is established for a 50-year term and is renewable indefinitely.

• Annual maintenance fees typically range between $500 and $600 USD. 

This mechanism ensures compliance with Mexican law while granting foreigners the benefits of property ownership.

🏢 Alternative: Establishing a Mexican Corporation

For those intending to use the property for commercial purposes, forming a Mexican corporation is a viable alternative:

• The corporation can be 100% foreign-owned.

• It can directly own property anywhere in Mexico, including the Restricted Zone.

• This option is suitable for investors looking to engage in rental or business activities.

However, corporations are subject to more stringent regulatory and tax obligations, including monthly and annual reporting requirements.

📝 Step-by-Step Guide to Purchasing Property

1. Identify the Property: Engage a reputable real estate agent familiar with local regulations.

2. Make an Offer: Negotiate terms and sign a preliminary sales agreement.

3. Establish Fideicomiso or Corporation: Depending on the property's location and intended use, set up the appropriate legal structure.

4. Obtain SRE Permit: Apply for a permit from the Ministry of Foreign Affairs, agreeing to abide by Mexican laws concerning the property.

5. Due Diligence: Conduct thorough checks to ensure the property is free of liens and that all taxes are paid.

6. Finalize the Sale: A Notario Público (public notary) will formalize the transaction, and the property will be registered in the Public Registry.

💰 Associated Costs and Taxes

When purchasing property in Mexico, consider the following expenses:

• Acquisition Tax: Varies by state, typically between 2% and 5% of the property's value.

• Notary Fees: Generally range from 0.5% to 1% of the property's value.

• Registration Fees: Approximately 0.5% to 1% of the property's value.

• Fideicomiso Setup and Annual Fees: Initial setup costs and annual maintenance fees apply.

• Legal Fees: Hiring a lawyer for due diligence and contract review is advisable.

🛡️ Importance of Legal Representation

While a Notario Público is essential for authenticating the transaction, they do not represent the buyer's interests exclusively. Hiring an independent lawyer ensures:

• Comprehensive due diligence.

• Verification of the property's legal status.

• Clear understanding of contractual obligations.

🔑 Conclusion

At Minkoba Servicios Inmobiliarios, we understand that navigating the Mexican real estate market can be complex, especially for international buyers. Our team of experienced, English-speaking advisors is dedicated to guiding you through every step of the property acquisition process in Valle de Bravo and the State of Mexico. Whether you're seeking a lakeside retreat, a forested hideaway, or an investment opportunity, we're here to provide personalized assistance tailored to your needs. Let us help you turn your vision of owning property in Mexico into a reality.

For more information or to schedule a consultation, please contact us at +52 556 961 1297 or email us at admin@minkoba.com