The article explains that there is a zone in Mexico, known as the Restricted Zone, in which foreigners are prohibited from directly acquiring real estate. However, there is a means for foreigners interested in investing in real estate in this zone to do so.
What is the restricted zone?
The restricted zone is a part of the national territory that extends along 100 km (62 miles) from the border and 50 km (31 miles) from the beaches. Here, foreigners cannot buy real estate directly. However, there is a procedure for foreigners to invest in real estate in this area.
Is it feasible for foreign persons (either individuals or legal entities) to acquire real estate in the Restricted Zone?
The answer is yes, but under certain conditions.
In order to acquire real estate in this zone, the foreign person must have a permit from the Ministry of Foreign Affairs to establish a Trust.
In addition, the property must be used for residential purposes only, i.e., housing.
Finally, the foreign person may use and exploit the property, but will not have direct dominion over it or any real rights over it.
It is important to mention that the cost of the Trust for individuals is different and an advisor can be contacted for more information.
What are the requirements to create a trust?
- Passport
- Personal information, such as proof of address, proof of employment and/or income, telephone number, occupation and e-mail address.
Who is the Settlor, Trustee, the incumbent Trustee and the substitute Trustees?
Settlor: The seller of the property may be an individual or a legal entity, who provides the real estate.
The trustee (Banking institution): It has direct ownership of the property.
The Incumbent Trustee: The purchaser of the property, whether a foreign individual or legal entity, who exercises the use and enjoyment of the property, i.e., indirect ownership of the property. The Titular Trustee may be one or more persons and must appoint one or more Substitute Trustees (Beneficiaries).
The substitute Trustee (Beneficiary): Person who will take the place of the Titular Trustee in case of death, and will acquire all the rights derived from the Trust Agreement.
Can a foreigner sell or rent the property?
Yes, it is definitely possible to make the sale to a foreigner or a Mexican national, as long as the requirement to keep current with the annual trust fees and to provide written instructions to the banking institution to sign a new Public Deed allowing the assignment of the trust rights or the termination of the trust, as the case may be, is complied with. This process will require the intervention of a lawyer and a notary public.
What is the Trust contract for?
The Trust contract enables foreigners to obtain the right of use and enjoyment of a property located in the Restricted Zone, while the Trustee retains ownership of the property. According to the Contract, the Trustee is the legal owner, but the foreigner is the beneficiary of the use and enjoyment of the property. The term of the Contract is 50 years, at the end of which the permit and the corresponding Contract must be renewed.
What is the approximate cost and time for its incorporation?
The service of the banks for this procedure has an approximate cost of $2,500 USD, which may vary depending on the chosen banking institution, already includes the first annuity, whose price ranges between $800 USD and $1,000 USD per year.
Regarding the incorporation of the trust, the Ministry of Foreign Affairs takes between 5 to 10 business days to issue the corresponding permit. Once the permit is obtained, the appointed attorney and notary public must coordinate with the banking institution, the seller and the buyer to carry out the signing of the trust, a process that requires a minimum of 20 calendar days.
¿What is the right time to contract the incorporation of the Trust in the case of properties acquired in pre-sale?
If a property is acquired in pre-sale through a promise of purchase and sale, it is necessary to contract the Trust at the moment when the development has the Condominium Property Regime, or when the subdivision or lotification of the property has been carried out and the measurements and boundaries of the property are available, in addition to its Public Registry of Property and Commerce. That is to say, when the building is in the final stages of construction.
¿Are there any other costs for acquiring a property as a foreigner?
In fact, the transaction cost can vary from 5% to 8% of the value of the property, depending on its price. This amount includes all taxes, duties, legal and notary fees associated with the investment.
Where should the money come from?
Payment is made directly from the account of the person or company acquiring the right of trustee, who will become the owner of the property acquired.
Do I need to be in Mexico?
The buyer's attorney will keep you updated on the progress of the process and will inform you of the date of the signing. If the foreign buyer is unable to travel to Mexico, there is the option of having his attorney represent him through a power of attorney issued in Mexico or abroad.
What is the difference between trust, deed or title?
There is no difference, since it is the same document. The Public Deed is the trust contract in which the terms and conditions are established, and it is used by the foreigner to evidence its trust rights.
Suppose the incumbent bank goes bankrupt, what happens?
The Mexican National Banking and Securities Commission (CNBV) will take the place of the trustee bank in the event that the latter is unable to meet its obligations. However, this will not affect the ownership at all and it is important to note that in Mexico it is rare for banks to declare bankruptcy.
What happens to the trust when the foreigner dies?
The beneficiaries designated in the public deed, who may be family members or friends, must present the bank with the death certificate of the foreigner in order to obtain a new public deed. It is important to mention that the foreigner can change the beneficiary designation at any time.
No comments yet, please add your voice below!