Real Estate
(520) 204 - 5450 US
Real Estate in Mexico
Debunking Some Myths
If you go to Mexico, enjoy the beautiful sandy beaches, and experience an intense desire to have your own property there, you have a lot in common with many other Americans and Canadians. Buying property in Mexico can be a good investment, financially as well as emotionally, since Norteamericanos, as the Mexicans call us, enjoy approximately six times as much buying power in Mexico as in their home countries. Recent changes in the economy suggest that this may even be a conservative estimate.
But many foreigners are afraid to buy property in Mexico. Often their fears are based on stories they’ve heard at third hand, or confusions between past history and present practice. Here are some of the myths I hear most often, followed by an explanation of the facts of each situation.
1. Foreigners can't own real estate in Mexico.
2. An American must have a Mexican partner (who has at least
51% ownership) in order to own real estate in Mexico.
3. A bank trust is a lease agreement.
4. The Mexican government can take away foreigner's property at
any time.
1. Foreigners can’t own real estate in Mexico.
Not true. In most of Mexico, Americans, or any other foreigners, can own land outright with what’s called fee simple title, the same kind we have in the United States. Only in the restricted zone—50 km.(31.05 miles) from the ocean and 100 km. (62.1 miles) from the borders—is it true that foreigners can’t hold fee simple title. The entire Baja Peninsula is considered a "Restricted Zone".
Perhaps the main reason for establishing the restricted zone is that the Mexicans lost so
much territory to the U.S. in the 19th century - about 1/3 of their country: Texas in 1845, and in 1848, through the treaty of Guadalupe Hidalgo, which ended the Mexican War, the territory that became California, Nevada, Utah, most of Arizona, and parts of New Mexico, Colorado, and Wyoming - a huge expanse (see map)-. The U.S. paid only $ 15,000,000 for all this land. And in 1854 through the Gadsden Purchase the U.S. acquired the rest of what is now Arizona and New Mexico. It’s not surprising that Mexico was a little nervous about allowing foreigners, especially Americans, to acquire any more land.
But old wounds heal, and now the U.S. and Mexico are significant trading partners in each other’s economy. NAFTA has promoted good business relationships, but even before NAFTA, Mexicans wanted to encourage foreign investment in their country, so in 1971 they developed the bank trust (fideicomiso) as a way for foreigners to buy residential property in the restricted area. I’ll explain the bank trust more fully in Chapter II.
2. Americans can’t own real estate unless they have a Mexican partner.
Not true. It used to be that for a partnership or corporation, foreigners had to have Mexican partners who owned at least 51% interest. This is no longer the case. Under the new Foreign Investment Law of 1993, a Mexican corporation—like ours—can be owned 100% by foreigners, and the corporation can buy and own any property with fee simple title, as long as its use is non-residential.
3. A bank trust is a lease agreement.
Not true. Under a bank trust the beneficiary (buyer) has all the rights of ownership: the right to buy, sell, lease, use, bequeath, improve, transfer, and encumber. A lease grants only the right to use. If a lessee makes improvements, such as building a house, on the property, that house belongs to the landlord. Nor can the lessee sell the property or borrow money on it.
Before 1971 the Bank Trust was not available, and leasing was the only option for Americans. Apparently some of them were confused about the difference between a long-term lease and ownership; thus they built homes and made improvements on the land they were leasing. Under Mexican law, a lease must be renewed at least every 10 years. After the Bank Trust was initiated, some leases expired and the landlords declined to renew, which was their legal right. The tenants then lost the houses they had built. This frightened other Americans, who thought that their compatriots had had their ownership rights taken away, when in fact they had never possessed such rights. In many cases, however, the former lessees were able to regularize their situations by purchasing the property under a bank trust.
4. The Mexican government can take away foreigners’ property at any time.
Not true. The bank trust is established by the government and gives foreigners the same rights of ownership as Mexican citizens. The only difference is that they never receive the actual fee simple title. It is held in trust for them by a bank. When first established, the term of a bank trust was for 30 years only. In 1989 it was made renewable for another 30, and in 1993 the term was extended to 50 years, renewable for additional 50 year terms.
No matter what your Mexico real estate needs are, I can help you. Buying, selling or renting, call Julie today.
Call Today (520) 204 - 5450 US
Email Me: Julie@Juliekershner.com
