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Buying Property in Mexico Can Be Quite a Puzzle

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View of Los Arcos in Puerto Vallarta, Mexico
Credit: Harriet Murray

Buying property in Mexico can be quite a puzzle, different from your home country not only because of the language barrier, but also because when it comes to real estate, each country has different legal concepts and regulations. Take, for example, purchasing a home or land near the beach.

Acquiring property on the Mexican coasts is a perfect example of this, particularly because in Mexico our Constitution prohibits foreigners from acquiring direct title over property located in what is called the Restricted Zone, which is 50 km (31 miles) from the coasts and 100 km (62 miles) from the borders. You may ask yourself why Mexico has this prohibition? To answer that question, let’s take a look at Mexico’s history.

Remember the Alamo?

If you are American and you paid attention during your U.S. History classes, then you might remember the U.S.-Mexico War over Texas and the Battle of the Alamo. What you probably don’t remember is the cause of that conflict. Back then, Texas was mostly deserted and it was part of Mexico, so the Mexican Government granted new settlers title over land in that area. The first new settlers were 297 American families who were granted title over property throughout Texas. With time, the number of foreign settlers increased and they soon decided to become an independent country. The rest is known to all of us: a war started, and in the end, Mexico lost the Texas territory to the U.S.

So, in order to prevent these events from happening again, a prohibition was established in the Mexican Constitution that prevents foreigners from acquiring direct title over property located within the restricted zone.

Later on, many foreigners still wanted to buy property on the Mexican coasts but still were unable to acquire title. The Mexican government then had to provide a solution without amending the Constitution. The result was a Mexican land trust, or fideicomiso.

How does this land trust allow me to own property on the Mexican Coasts?

By using a land trust, a Mexican bank has direct title over the property you acquire. This is the way to get around the legal prohibition of the restricted zone, but still provide security and legal certainty to your investment. As beneficiary of the trust, you will have the rights of ownership over the property, which include: rights to use the property, to lease it, to improve it, to transfer title, to pass on to your heirs, to use as collateral, etc.

The assets that banks have in trust legally are not part of their capital and can never be touched for the bank’s liabilities, so your investment is protected in this regard.

There have been some attempts to amend the Mexican constitution and lift the ban that prevents foreigners from acquiring land in the restricted zone, but nothing has been passed yet in Congress. The land trust is still (and probably will be for many years) the only way for you to acquire land on the Mexican coasts, so you should try to take advantage of the benefits provided by the fideicomiso.

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