How to Own in Mexico

Mexican law declares that the Mexican nation has original ownership to all land and water in Mexico, as well as minerals, salts, ore deposits, natural gas and oil; but that such ownership may be assigned to individuals.

The Mexican Constitution prohibits direct ownership of real estate by foreigners in what has come to be known as the "restricted zone." The restricted zone encompasses all land located within 100 kilometers (about 62 miles) of any Mexican border, and within 50 kilometers (about 31 miles) of any Mexican coastline.

In order to permit foreign investment in these areas, the Mexican government created the "fideicomiso," which is, roughly translated, a real estate trust. Essentially, this type of trust is similar to trusts set up in the United States, but a Mexican bank must be designated as the trustee and, as such, has title to the property and is the owner of record.

Mexico requires all foreigners to apply for and obtain a permit from the Ministry of Foreign Affairs prior to contracting to acquire real estate in Mexico. This is currently done by the trustee/bank at the time a real estate trust is set-up. Given the changes made for 1997 in the foreign investment Law, and the fact that a buyer can now apply for and obtain a trust permit in a matter of days, it is always better to secure the trust permit from the Ministry of Foreign Affairs before entering into any contract.

The bank, as trustee, must get a permit from the Ministry of Foreign Affairs to establish a real estate trust and acquire rights on real property located within the restricted zone. The purpose of the trust is to allow the trust's beneficiary the use and exploitation of the property without constituting real property rights. The beneficiaries of the trust (fideicomisarios) can be Mexican corporations with foreign investment, foreign individuals or legal entities.

The law defines "use" and "exploitation" as the right to use or possess the property, including its fruits, products, or any revenue that results from its operation and exploitation by third parties or from the bank/trustee.

A real estate trust is not a lease. The beneficiary can instruct the bank to sell or lease the property at any time. The beneficiary can develop and use the property to his liking and benefit, within the provisions of the law. Generally, the law allows most activities engaged in by foreigners.