Can you own Mexico “Owner-Occupied” real estate under a Corporation

Mexico has long been a top choice for North Americans buying property overseas, but there are misconceptions surrounding Mexican real estate. A report from the editors at International Living sets the record straight.

As many as 1.5 million U.S. and Canadian citizens already call Mexico home, with more joining them all the time. Thanks to Mexico’s large size, varied geography, and affordable real estate, prospective residents are spoiled for choice among silver-mining towns, fishing villages, beach retreats, and cosmopolitan cities.

“International Living frequently hear myths about buying Mexican Real Estate,” says International Living Executive Editor, Jennifer Stevens. “It’s a shame because people’s misperceptions create a wholly inaccurate picture of what’s going on there. In truth, Mexico offers great weather, beautiful scenery, and authentic Latin American culture—plus good- value real estate options for North Americans looking to retire on a modest budget. And just to be clear: It’s absolutely possible—and legal—to own property in Mexico.

Mexico

However, when it comes to buying Mexican real estate, the truth doesn’t always prevail.

Myth #1: Foreigners Can’t Buy Property in Mexico

It’s perfectly legal for foreigners to own land in Mexico. Foreigners can hold the direct deed to property with the same rights and responsibilities as Mexican nationals, as long as the property is outside the so-called restricted zones—50 kilometers (about 31 miles) from shorelines and 100 kilometers (about 62 miles) from international borders. Inside the restricted zones, foreigners can control land through fideicomisos—bank trust agreements—again with the same rights and responsibilities as Mexican nationals. This is what makes people think that you cannot buy land in Mexico. Alternatively, foreigners can hold land in these areas through a Mexican corporation. (However, if it’s a residential property that the foreigner plans to use personally, rather than as an investment, it should be held in fideicomiso.)

Main Cathedral, San Miguel

To break it down in plain English: If you’re not Mexican, the title to property within the restricted zones must be held within a bank trust or a Mexican corporation—not directly. But understand: That trust is easily transferable when an owner is ready to sell. This is a safe, legal, and extremely common vehicle for foreign ownership in Mexico. And, again, this restriction only applies close to shorelines and international borders. Outside the restricted zones, foreigners can own directly as an individual.

Myth #2: It’s Best to Hold Title in Your Own Name

An article in the Mexican Constitution of 1917 states that no foreigner can own property in Mexico’s restricted zones. In 1973, however, 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 a residential real estate.

Mazatlan

Since 1973, most foreigners who have bought residential property in restricted zones have therefore done so through a fideicomiso. 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. You retain use and control of the trust and make all investment decisions regarding the property: that is, to sell it, rent it, build on it, live on it, or pass it down to your heirs.

Owning property through a trust deed offers several advantages (listed here). These include the ability to list more than one person as beneficiaries. Or you can list an “heir”— this is a very desirable option for unmarried couples, friends who own a property jointly, or couples in a second marriage with different children.

All this is important because it allows the simple and easy transfer of control over the property and avoids the messiness of sorting out ownership in the Mexican courts. It is also a method of bypassing inheritance taxes. Trusts are issued for renewable 50-year periods. If you are buying property currently held in a trust, you can either establish a new trust for the next 50-year period or take over the existing trust deed.

Myth #3: The Mexican Government Can Seize Your Land

This is simply untrue. No property controlled by foreigners through a properly constituted fideicomisobank trust—the instrument used by foreigners to hold beachfront residential property in Mexico—has ever been repossessed by the Mexican government.

shoreline of Lake Chapala

“Yes, there have been cases—such as in Baja California a number of years ago—when the Mexican government has ‘repossessed’ property from foreigners,” says International Living Mexico Editor, Glynna Prentice. “But in these instances, the property titles these expats held didn’t hold up to scrutiny—they were essentially fraudulent. These expats were defrauded, but not by the government; the government was simply correcting the fraud, applying the law, and returning title to the rightful owners.

“But cases like these are good reminders that you need a competent, honest lawyer protecting your interests in a real estate deal…someone who can make sure a property title is legal, clear, and unencumbered. But if there is a problem, you are protected as fully under the law as a Mexican citizen would be. Mexico’s legal system does work, despite bureaucracy and the occasional corruption. There is a saying in Spanish, ‘The mills of justice grind slowly, but very, very fine.’ This pretty much sums up Mexico’s legal system.”

Legal Expert Dr. Fernando García Sais Lawyer, Doctor of Law and Notary Public 210 answers legalities of buying Mexico Real Estate

1. Can foreigners own property in Mexico?

According to the Constitution, foreigners can own real estate (real estate and any other real right: use, usufruct, dwelling, easement, pledge and mortgage, and even the surface) in the national territory and that are outside the “Restricted zone” (from a 100 km strip at the borders and 50 km from the coasts) as long as they agree with the Mexican State and are deemed as Mexican s regarding said assets and renounce the protection of their countries.

2. Is there any difference between if the property is inside the so-called restricted zone or if it is outside that zone?

According to the law, in the “restricted zone”, foreigners (natural persons) can only acquire rights derived from a trust (as trustees-beneficiaries), since the property is acquired by the fiduciary (a bank) with prior administrative authorization of the Chancellery.

According to the Foreign Investment Law, in the restricted zone, in compliance with the Constitution, there is an absolute prohibition for foreign natural persons, since they can only acquire rights derived from a trust (as trustees-beneficiaries).

Conversely, outside this area and in the rest of the country, it is possible to acquire property without a trust.

3. Is it safe for the foreigner?

The property is acquired by the fiduciary (a bank, supervised by the Federal Government) with the prior administrative authorization of the Government.

Through this arrangement, the foreigner is guaranteed the use and enjoyment of the property, with full legal protection and can also transfer the rights over it to whoever he/she decides.

4. Can there be usufructuary/beneficial owners of real estate located on the beaches?

The usufruct, is a real and temporary right to enjoy the things of others, by definition does not transfer the direct domain of ownership; only the use and enjoyment of it.

It would seem that, in consideration of the constitutional prohibition of acquiring the domain directly, foreigners could acquire the usufruct of a house on the beach. However, the Foreign Investment Law establishes that only through a trust are foreigners able to take advantage of and use said real estate.

When the potential purchaser of a property located in the known “restricted zone” (50km from the coast) is of a different nationality than Mexican ; that is, a foreigner or a Mexican company with an admission clause for foreigners; that is, with partners who are foreigners (natural or legal persons); or, they are entities with foreign legal personality (companies or trusts or any other depending on the country of origin), The only  constitutionally valid way, and therefore legal manner for said foreigner to enjoy this “property for residential purposes” , is through the holding of a trust ” Fideicomiso“.

If the property is outside the restricted area, no trust is required, and it is, therefore, possible to make a usufruct contract or any other contract that does convey ownership or use.

5. When is the real estate trust in the restricted area NOT necessary?

The property can only be acquired directly, and without a trust, when the future owner of said real estate is not a foreign natural person (without Mexican nationality) and is a legal entity with foreign investment or a foreign legal entity, and  is intended for  the realization of activities that the law defines as “non-residential”.

6. Can a Mexican Mercantile Company “Corporation, limited or Partnership” with foreign partners (foreign investment) have real estate in the restricted area?

Yes, as long as they are destined to carry out activities that the law defines as “Non Owner Occupied” meaning “Non-Residential“; that is, will carry out a business, industrial, agricultural, livestock, fishing, forestry, service provision, commercial or tourism (such as timeshare), even if simultaneously used for residential purposes; or they are used by companies for the realization of their corporate purpose (dispose of, urbanize, build, fraction and other activities included in the development of real estate projects, up until the moment of their commercialization or sale to third parties).

8. Can A foreigner married to a Mexican have rights over a property included in the conjugal partnership?

In the case of properties subject to the conjugal partnership, by order of the First Chamber of the Supreme Court of Justice of the Nation (Thesis: 1a./J. 49/2005), the foreigner must sign the Calvo Clause and, if it is  the case, constitute a trust until the notary “establishes  the protocol by which the foreigner can acquire direct ownership of the real estate, either as a result of the liquidation of the company or of the award by effect of the inheritance, ie, at the time in which the ownership transferring act must be fulfilled […] “.  

9. Can foreigners have rights as mortgage creditors on real estate located in the restricted area?

With respect to whether foreigners can have rights as mortgage creditors, although there is no unanimity in the forum, I am inclined to believe that they can, given that the ownership of the immovable property object of guarantee is not yet a part of their patrimony, which will happen once  the credit is unpaid and  executed, and until then the corresponding trust should be created, if the property is in the restricted zone.

10. Can Foreigners be ejidatarios?

Foreigners can not acquire ejidal parcels or any right over ejidal properties, given that the Agrarian Law prohibits them from being ejidatarios.

Conclusion.-

The recommendation is that the notary public should qualify if the requirements to omit the trust have been met and, in case of ambiguity, request through consultation with the Foreign Ministry to decide if the activity can be determined as “non-residential”.

If for some reason a deed of a property located in the restricted area was carried out without complying with the trust requirement “Fideicomiso”, the operation can be declared void, fined or seized and, as a consequence, the parties must return the payment or the property. Even the subsequent operations performed on the property (real rights that are constituted, condominium regimes, for example) could be subject to litigation resulting from the absolute nullification of the first transfer that violated the constitutional prohibition.

Lawyer, Doctor of Law and Notary Public 210

Dr. FERNANDO GARCÍA SAIS

I was born in Mazatlan on the first day of April 1975. I was fortunate to be born into a decent and simple family. My mother, Maria del Socorro Sais Castelló, was born in Mazatlan in the summer of 1938 (in the bosom of a conservative and Catholic family). My maternal grandparents, Ignacio Sais and Doña Carmen Castelló de la Peña, were children of important Sinaloan porfiristas. My great-grandfather José C. Castelló installed and operated one of the first banks in Sinaloa, precisely in Mazatlán. My father, José Manuel García Habif, was a Doctor of Medicine from the UNAM, specializing in cardiology and internal medicine. His father, my grandfather Don José Joaquín García Blengio, was born in Campeche and was a lawyer graduated from the National School of Jurisprudence and, in the end, a public prosecutor and judge, both functions in Mazatlán.

I have a brother and a sister, although originally we were four brothers. My older brother died unexpectedly in 2005 when he was diving with his harpoon in Baja California Sur. 

In 1996, after getting financial support, I applied to enter the prestigious ITAM. Once accepted, he began a vigorous period of transformation and personal growth. I had the best companions, the most competitive and the best teachers, with the greatest experience and capacity. In 2000 I finished my studies and in March 2001 I defended my thesis (The general declaration of unconstitutionality in the protection against laws) before an exceptional jury, presided over by who had been president of the Supreme Court of Justice of the Nation, Mr. Ulises Schmill Ordoñez and he honored me with a summa cum laude.

Just before finishing my studies, I met in Morelia, Michoacán, who is today my adored wife, María del Carmen Hernández Herrera. In 2002 we went together to live in Barcelona, ​​Spain, where I studied the Doctorate in Patrimonial Law, at Pompeu Fabra University, with the savings that I managed to combine with my two years of previous work in one of the most prestigious law firms in the country. Mexico City (Von Wobeser y Sierra, SC) and a few remnants of my internships at the Notary 74 in Mexico City and in the presentation of the magistrate Jean Claude Tron Petit in a Collegiate Circuit Court).

When I returned from doctoral studies, in June 2004, the then head of the Law Department, Roberto Del Cueto Legaspi, who had been my professor at ITAM, was interested in my “civilian” profile and told me it was a “chickpea” from a pound. ” After a successful interview, the long-awaited call was never given. Later I learned the reasons. It had nothing to do with me.

An admired Professor of Constitutional Law had a few months of having taken protest as Minister of the Supreme Court of Justice of the Nation. I looked for him to ask for some references and recommendations. He received me one day in the morning, so we had to get up early and drive from Uruapan. With a suit and tie, of course, I went to the third floor of Pino Suárez 2, the Court building. There, Dr. José Ramón Cossío Díaz, with his always generous disposition with his students and alumni, gave me a couple of recommendations, which I share with the lawyers in training when I can: write and publish academic articles on transcendental topics.

In Barcelona, ​​I worked on an investigation on cross-border insolvencies and developed what I published in 2005 with Editorial Porrúa entitled “Mexican Bankruptcy Law”, edited by Porrúa, with an exordium of Dr. Luis Manuel Camp Mejan Carrer, whom I met on the recommendation of Minister Cossío, and who at that time was general director of IFECOM (Federal Institute of Commercial Competition Specialists, of the Federal Judicial Branch).

In October 2005, thanks to the support of an ex-boss, Claus von Wobeser, I got an interview with the Federal Consumer Attorney’s Office (PROFECO) and in that month I started working as Director of Advertising and Standards, in charge of monitoring and sanctioning misleading advertising at the national level. I had the opportunity to undertake great actions for the benefit of Mexican consumers that were novel and with profound effects to mark a new trend in the protection of consumers.

In 2007 I joined as a lawyer associated with a prestigious firm (Martínez, Algaba, Estrella, De Haro and Galván-Duque, SC) from which I was dismissed in 2008, after compensation for unjustified dismissal. A few days later, a former student of the Master of Administrative Law and the Regulation of ITAM, the teacher Francisco Díaz Corzas offered me a job as an advisor to the senior official of the Ministry of Finance and Public Credit, where I returned to the public service with great enthusiasm .

In 2007 I published my second book “Right of Consumers to Information. An approach to deceptive advertising in Mexico “, edited by Porrúa and ITAM. The subject of consumers has occupied a large part of my academic reflections and to which I have dedicated several essays published in legal and economic journals, as well as in newspapers such as Reforma, Noroeste and Newsweek en Español.

In the period between 2007 and 2010, I was part of the academic group that drafted the constitutional reform on collective actions and access to justice that culminated in the addition of the fifth paragraph to constitutional article 17 in 2010. I also participated actively in the drafting of the reforms to the Federal Code of Civil Procedures to adjust it to the constitutional mandate in terms of collective access to justice, what happened with the reform of 2011. 

In 2009, I resigned from the Ministry of Finance as I was appointed by the Chief of the Tax Administration Service, Local Administrator of Services to the Taxpayer of Mazatlán and in 2010, Legal Administrator.

In 2010 I submitted my exam as a notary public. Unfortunately, a district judge granted a suspension in an amparo proceeding against the process of appointing new notaries and, once the trial was concluded, the suspension was lifted as a result of the dismissal. There was no legal interest, said the constitutional control body. 

At the end of 2012 I published “Jurisprudencia del Consumidor”, with the Tirant Lo Blanch publishing house and the ITAM. 

In 2013 I was invited to work in the Office of the Presidency of the Republic, in the new Coordination of Science, Technology and Innovation as a general counsel, assisting Dr. Francisco Bolívar Zapata.

In 2013, the collective work “Collective Actions in Mexican Law” was published with the Tirant Lo Blanch publishing house, coordinated by Dr. Xavier Ginebra Serrabou. 

In 2014 I published “State, Market and Law”, with the Tirant Lo Blanch publishing house, in the collection “The right in practice” of which I am part of the Advisory Council and headed by Minister Cossío Díaz. 

In February 2015, I received the appointment of Notary Public 210 from the Governor of the State of Sinaloa to be held in Mazatlán, Sinaloa. On April 20, 2015, after resigning from the Office of the Presidency, I began my work in this new and interesting professional challenge. 

In January 2016 my notary received the accreditation of the Better Business Bureau (BBB, Mexico), being the first public notary of all Mexico to accede to such recognition. 

The professional practice of the notary implies meeting high standards of professional quality and intellectual honesty, always putting the legality and respect for the human rights of the people and the rights of the companies, as well as the duties that as a notary I have before the law. Mexican state 

I am a free, social and independent notary.

Free in the sense that I exercise the notary based on a liberal vision of the Constitution and Law; social, to focus my practice on the greatest generation of welfare and independent to be part of a generation of notaries who by their own merits received from the State the possibility of giving public faith, for the benefit of society.

Better Business Bureau

Sierra India # 111, Fraccionamiento Lomas de Mazatlán. Mazatlan Sinaloa. CP 82110 

Telephone: 669 9135762 / 669 9135763 / 669 9130632 

E-mail: fernando@garciasais.com.mx 

www.garciasais.com.mx

Source: international living, Dr. Fernando García Sais

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