Buyer
The Process
Buying a property in Mexico will undoubtedly be one of the best decisions you can make. However, it is crucial to seek guidance not only from closing agents but also from specialized closing attorneys, like those in our company. These attorneys possess expertise in real estate transactions and can offer you comprehensive legal advice throughout the process.
Our legal experts have an in-depth understanding of the laws, ensuring that you will receive reliable legal counsel related to the purchase, sale, or fideicomiso throughout the entire process.
This guidance ensures that no irregularities or encumbrances arise during the process, prevents errors due to legal misunderstandings, and culminates in the signing of a public deed before a Notary Public. This deed is then appropriately registered at the Public Registry of Property and Commerce in the jurisdiction where the property is situated, thereby affirming your status as the rightful owner or beneficiary.
Remember, as the buyer, you possess the right to select the closing attorney who will support you in the purchase process. You can choose between utilizing a Mexican corporation controlled and operated by foreign individuals (provided the corporation’s property is not intended for residential use) or opting for a fideicomiso, which is suitable for foreign individuals, LLCs, or trusts.
When is it advisable to use a fideicomiso, and when is it preferable to use a Mexican corporation? The answer is straightforward: if your purchase is not intended for residential use and involves plans to subdivide and develop land, a Mexican corporation is the optimal choice. Conversely, if your purchase is for residential purposes, a fideicomiso consistently remains the superior option.
What is a Fideicomiso?
In Mexico, a ‘fideicomiso’ is a legal mechanism designed to allow foreign individuals or entities (including trusts) to own property in restricted zones, typically located within 50 kilometers (about 31 miles) of the coast or 100 kilometers (about 62 miles) from the borders. These zones are considered part of Mexico’s national patrimony, and foreign direct ownership is restricted in order to safeguard national interests.
In a fideicomiso agreement, three parties are involved:
1. Fideicomitente (Trustor/Seller)
This refers to the Mexican individual or corporation that currently owns the property and aims to transfer it into the fideicomiso. The trustor/seller initiates the fideicomiso by establishing the trust.
2. Fiduciario (Trustee/Bank)
The role of the Mexican bank acting as the trustee is to hold legal title to the property on behalf of the foreign beneficiary. The trustee ensures compliance with the trust's terms and follows the instructions of the trustor and beneficiary.
3. Fideicomisario (Primary Beneficiary/Buyer)
The beneficiary of the fideicomiso is the foreign citizen seeking to use, enjoy, and potentially sell or transfer the property. Within the legal framework of the fideicomiso, the beneficiary has beneficial use of the property, including the ability to lease, improve, or sell it.
If a foreigner holds property in trust, an assignment of trust rights can be made to maintain the fideicomiso with the current bank, or an extinguishment of the existing fideicomiso can occur, followed by the constitution of a new one with a different bank of the beneficiary’s choice.
The fideicomiso is established through a contract and is governed by Mexican law. The beneficiary enjoys rights similar to those of a property owner, enabling them to use, enjoy, improve, and even transfer ownership of the property through sale or inheritance.
There are crucial details related to fideicomisos, which are sometimes undisclosed by closing agents. However, transparency and honesty are fundamental principles for our company.
Must Know
WHAT YOU SHOULD KNOW, BUT IS OFTEN OMITTED BY CLOSING AGENTS:
- Before establishing the fideicomiso, obtaining a permit from the Ministry of Foreign Affairs is necessary.
- While a foreigner is the true and equitable owner of the property, a Mexican bank retains legal ownership.
- If the beneficiary is dissatisfied with the bank acting as trustee, they have the right to select another trustee.
- When the fideicomiso involves undeveloped land exceeding 2,000 square meters, the Secretary of Foreign Affairs will require buyers to commit to investing a specified amount in the land within 24 months. The investment amount varies based on the property’s location and size.
- Primary beneficiaries (buyers) can change substitute beneficiaries as often as desired.
- In addition to the annuity payment to the trustee (bank) for fideicomiso administration, the purchaser must pay property tax upon acquiring the property. Both payments can be made via national or international wire transfer.
- It is important to note that each change in your fideicomiso will incur notary, trustee, and registration fees.
- In La Paz, apart from the 2% real estate acquisition tax (based on the higher value among purchase price, cadastral value, or appraisal value), an additional 1% tax of the appraisal value must be paid upon extinguishing an existing fideicomiso and establishing a new one. Hence, people often opt to stay with the same bank, though this might not always be advisable.
- And remember: Any purchase is only valid if executed through a public deed before a notary public, properly registered in the Land Registry (Catastro), and the Public Registry of Property and Commerce.
When purchasing Ejido properties, if the seller (ejidatario) lacks a title of ownership (título de propiedad), you are entirely unprotected and cannot acquire the property through a public deed. Several legal considerations must be accounted for, underscoring the importance of seeking advice from experienced closing attorneys.
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