Foreigners Can Buy Real Estate in Mexico – Part 2

Editor’s Note: We continue this article on Real Estate to provide information to foreigners who are considering purchasing or renting a vacation or retirement home or condominium.  See Part 1: Foreigners Can Buy Real Estate in Mexico – Part 1

casa que ve al mar3Which is better – to own property through a Trust (“Fideicomiso”) or through a Mexican corporation? The manner in which you purchase the property – through forming a Mexican corporation or a Trust (“Fideicomiso”) – depends on its intended use.  If you are acquiring property solely for a private residence, it is easier to do this through a Fideicomiso (Trust) with a bank. If you are acquiring property for business purposes, for example, to operate vacation rentals, you may need to set-up a corporate entity to own the property and conduct the business activities.  Discuss the intended use of the property with the Notary so that he can best advise you.

What documentation is needed for the real estate transaction?  The notary public will need from the seller: 1. The deed; 2. Up-to-date tax receipts, water bills, subdivision (fraccionamiento) fees, and any other public utilities bill, paid up to the date of sale. The notary public will determine capital gains taxes through an official appraisal (Avaluo).

The capital gains tax, if any, is paid by the seller. However, through mutual agreement, it may be paid by the buyer. Make sure you know how much this will be; the Notary will inform you of the cost before the transaction, almost to the cent. Cash or money changes hands the minute the seller signs over the deed, usually in the notary public’s office. The buyer ordinarily pays notary fees incurred, which also must be paid when the title is signed over.

The process is not over yet — the Notary public must register the escritura in the Registro Público de la Propiedad (Public Registry of Properties). This should be done promptly, as the transaction is not valid until registered.  A normal time frame for this is around two weeks.

Property within Restricted Zones (50 kilometers from the beach or 100 kilometers from the border) must be held in a bank trust or you can form a Mexican corporation to own the property.  A bank Trust (“Fideicomiso”) is usually used when acquiring the property for personal use.

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How does the Trust or “Fideicomiso” (Fe-day-co-me-so) work? A “Fideicomiso” is a bank trust which permits foreigners to acquire the use and enjoyment of property that is located within Restricted Zones (50 kilometers from the beach or 100 kilometers from the border) of Mexico.  The “Fideicomiso” is a contract that must be executed in front of a Notary.

The parties to the “Fideicomiso” (Trust) are:

  • The Bank: el Fiduciario
  • The Seller: el Fideicomitente
  • The Buyer (Trustee): el Fideicomisario (foreigner)
  • The Heirs (Substitute Trustees): los Fideicomisarios Sustitutos

The characteristics of the “Fideicomiso” (Trust) are:

  • The  Bank (Fiduciario) holds title of the property for the benefit, use and enjoyment of the foreigner (Fideicomisario).
  •  The  duration of the “Fideicomiso” is 50 years, after which it can be renewed.
  • The foreign Trustee (beneficiary) may cease his rights to the “Fideicomiso” at any time upon sale of the property.   If the property is sold to a foreigner, the “Fideicomiso” can be  transferred; if the property is sold to a Mexican, the “Fideicomiso” will be terminated.

For complete notary services, visit Notary #1, Lic. Bolívar Navarrete Heredia, Álamo No. 8, Colonia El Hujal, Zihuatanejo, Guerrero. Telephone:  554-3100 or Direct Dial from USA or Canada: 011-52-755-554-3100 or E-Mail: notaria1zihuatanejo@prodigy.net.mx  or notariobolivar@notaria1zihua.com .  Please see Shops & Services | imagine-mexico.com for information and a map to the office.  Bi-lingual assistance is available.

By: Lic. Bolívar Navarrete Heredia, Public Notary #1 of Zihuatanejo and William H. Tucker, Publisher, who attended the University of Michigan Law School

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