The Restricted Zone

The Mexican Constitution regulates the ownership of land and establishes that "...in a zone of 100 kilometers along the border or 50 kilometers along the coast, a foreigner cannot acquire the direct ownership of the land...". These areas are known as the "Restricted or Prohibited Zones". Nevertheless, the latest Mexican Foreign Investment Law, which became law on December 28, 1993, makes the allowances mentioned above.

Real Estate Transactions in Mexico

Most real estate transactions are “opened” after a written offer to purchase is accepted by the seller and when a purchase-sale agreement (promissory contract) is signed by both parties. In most cases, a deposit is required by the broker in order to transmit the offer to the seller. In some areas it is common practice to deliver to the seller, as an advance payment, 20-50% (including the initial deposit) of the total price upon signing the purchase-sale agreement which should contain a penalty clause applicable in case there is a breach of contract by any of the parties. The Notario Publico will certify the signing of the escritura or official deed around the time the property is delivered. The buyer can also choose to purchase American Title insurance on their properties in Mexico, through companies like Stewart Title and First American Title.

What is a Fideicomiso?

Any foreigner or Mexican National can constitute a Fideicomiso (the equivalent to an American beneficial trust) through a Mexican bank in order to purchase real estate anywhere in Mexico, including the Restricted Zone. To do so, the buyer requests a Mexican bank of his/her choice to act as a trustee on his/her behalf. The bank, as a matter of normal course, obtains the permit from the Ministry of Foreign Affairs to acquire the chosen property in trust. The Fideicomiso can be established for a maximum term of 50 years and can be automatically renewed for another 50 year period. During these periods, you have the right to transfer the title to any other party, including a member of your family.

Notario Publico or Notary Public

The Notario Publico is a government appointed lawyer who processes and certifies all real estate transactions, including the drawing and review of all real estate closing documents, thus insuring their property transfer. The closing process takes between 30 to 45 days. Closing costs are paid by the buyer and are usually about 3%-5% of the purchase price. Of this total price, there is a 2% transfer tax to the Mexican government. The remaining cost is divided between such items as title search, attorney’s fees, Notario fees and the filing of all legal documents. The seller is responsible for his/her capital gains tax and any real estate fees owed on the property at the time of sale.