By: Patricia Ann Talley, MBA and Editor.
Americans, Canadians and other foreign real estate investors may soon have an easier time purchasing private property in Mexico, like beachfront homes or condos. In April, Mexico’s lower house of congress voted to ease long-standing restrictions against foreigners purchasing land along the beachfront or border areas of the country. The measure, which passed 356-119 in the Chamber of Deputies, still needs approval from the Senate and a majority of the country’s 32 state legislatures to become law.
Currently, the Mexican Constitution prohibits non-Mexicans from directly owning land within 31 miles (50 kilometers) of the coast and 62 miles (100 kilometers) of the nation’s borders – called “restricted property.” Right now, if foreigners want to purchase a home or condo along the beachfront or border, they must set up a real estate trust with a bank, wherein the bank owns the property “in trust” for the purchasers; or, foreigners can set up a Mexican corporation and have that corporation own the land. Either way, it involves a lot of “middle men” – banks, attorneys, accountants, etc. – who have profited from the current constitutional ban.
If passed, the new law would eliminate the “middle men” and allow for foreigners to own property directly in their own names, rather than setting up a bank trust or Mexican corporation. The measure is intended to encourage more foreign investment, tourism and local job creation. Local governments in these former “restricted” areas would also have an easier time identifying property owners and collecting property taxes.
For historical reasons, however, there are very strong sentiments in the country against easing the restrictions on foreign real estate purchases. These restrictions were originally set up to protect the national security of Mexico. For example, back in the 1800s, Americans were allowed to purchase property in the Mexican providence of Texas, which eventually resulted in the United States invading Mexico and acquiring a significant portion of the country.
Critics of the measure say it would result in foreign colonization of the country and give free reign to foreigners to buy the best land and beachfront properties. Critics argue that easing real estate restrictions will encourage robbery and financial and real estate speculation.
Those who argue for change cite the benefits of more foreign investment if current restrictions are eased. Americans, Canadians and other foreigners are skeptic about investing in beachfront and border properties in Mexico if they cannot own the title directly. If Mexico is seeking more foreign investment, eliminating real estate bank trusts and Mexican front corporations is a way to do that.
The cost of the current “middle man” system would also be eliminated. Many lawyers, accountants and other “real estate consultants” have taken advantage of foreigners and profited greatly off of their real estate investments. Foreigners who set up bank trusts to own property would no longer have to pay thousands of dollars in trust maintenance fees.
Check back in this publication for news and updates on the progress of this new legislation.
For more information about the Ixtapa Zihuatanejo area, see: