Country Article / Postcards

Finally, the Truth Revealed About the Land-grabbing Mexican Government

Date: 08/01/2006

International Living Postcards-- your daily escape

Wednesday, Aug 2, 2006
San Miguel de Allende, Mexico

Before I get to the main point of today's Beachfront Fiesta! installment (how you can buy beachfront in Mexico), let me answer in advance the two main questions I'll get in reply to today's Postcard:

1. You are irresponsible to tell people to buy anything in Mexico. Don't you know the government there can take your land at any time?

2. Foreigners cannot own land in Mexico. Are you an idiot?

I receive these questions often, in many forms, and believe me, the ones above are the charming versions.

You've no doubt read articles off the news stand about foreign ownership laws in Mexico. But rather than take the time to explain the laws about foreign property ownership in Mexico, these publications (whose main beat is sport, or hotels, or anything except Mexican real estate) use whatever they can to fill space and meet a deadline. For example, one reputable outdoor sports magazine recently wrote that the only way for a foreigner to buy beachfront in Mexico was through a presta nombre--putting the title in the name of a Mexican local. That may be how it was done 30 years ago...but today, using a presta nombre is not only antiquated, it is foolish.

So, let's talk facts.

In the interior of Mexico, foreigners can own property through a direct deed title--just like in the U.S.

Beachfront and near-beach property purchases are structured a little differently. An article in the Mexican Constitution of 1917 states that no foreigner can own property in Mexico's "restricted zone," i.e. land that is within 100 kilometers (62 miles) of a border and 50 kilometers (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 Acapulco and 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--including me, my husband, our family, and our friends. 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. You have the same rights of full use and economic benefit that a Mexican national with equity ownership of the real estate would have. You can treat the property as if it were owned with a direct deed title, which means you retain use and control of the trust and make all investment decisions regarding the property, i.e. whether to sell, rent, build on, live in, or bequeath the property.

This allows you complete 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.

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 (Dan and I own our home in San Miguel de Allende this way). Today, with more and more mortgage companies moving into the Mexico market, a bank trust will be required if you finance your property purchase. And that's anywhere in the country...even in the interior. In essence, this is the way things are done in the States...whereby the mortgage company holds the deed until you have fulfilled your financial obligation.

Another advantage is that you can list more than one person as beneficiary, which means, for example, that a husband and wife can be "co-owners". 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.

Also, you can list an heir. This means that should both co-owners die, a new beneficiary is already in place--a beneficiary who needn't be related to the original co-owners, and who doesn't have 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.

Trusts are insurable through title insurance companies. They are issued for 50-year periods and are renewable in perpetuity. 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 around $500 per year. Plus another $500 for the initial set-up.

My husband and I own our home in San Miguel de Allende via direct deed. We own those two beachfront lots I told you about yesterday (see Someday...) through a fidecomiso. We are completely comfortable with both forms of ownership. We have title insurance that protects our purchase, and a Mexican will that ensures the seamless transfer of our assets to our heirs.

Buying property in Mexico is easy and you can do so with confidence.

But in case I haven't answered all your "buying beachfront in Mexico" questions, you can contact Marzena Romanowicz, our International Living Mexico Country Consultant at Mexico@InternationalLiving.com.

Suzan Haskins
The Mexico Insider, International Living

P.S. Allow me to make a shameless plug for my own Mexico Insider publication. Unlike those news stand guys I was telling you about, I don't publish anything until it's been properly researched, and if we need more space to tell you the full story about something, no problem. A Mexico Insider subscription comes free as part of this week's Beachfront Fiesta! offer.

Mexico Insider offers information about moving to and investing in Mexico. From legal issues to locations, from healthcare to housing costs, we tell you the where, what, why, when and how about Mexico. If you are serious about investigating Mexico as a second home, retirement, or investment destination, Mexico Insider is your best resource. This is not a travelogue. This is a "how-to" guide to Mexico.