Foreigners facing Mexico's real estate situation.

Legal systems are very complicated to understand in a practical way, especially if they are opposite as it happens with the Mexican, a civil law country, and U.S or any other country that has a common law system, in fact, our difference regarding culture and how the business-government life works are also very pronounced.

Here in Mexico, since 2011 we can celebrate a huge step forward with equity rights for foreigners, giving the legal capacity to stand before a judge, participating in commercial partnerships, or developing commercial activities, without any limitation to do so because of your nationality, opening more business fields for foreign investments and others, but subjecting, of course, your stay being legal as the main obligation. On this sense, you shall have the same liberties than any other Mexican without any limitations, but regarding acquiring properties in Mexico does not apply to the situation in the same way, as the control of certain strategic land is limited for national defense purposes as it works with the restricted zone area.

Mexico ́s Constitution in section 27 subsection 1, has limited to foreigners rights to acquire land, thus Mexico designated the restricted zone, meaning 50 km of Mexican coasts and 100 km regarding Mexican borders, where the foreigners shall not acquire properties directly, but trespassing those perimeters there is no restriction to directly acquire Mexican land to anybody.

So, how the foreigners then could legally have a nice house or condo near to the Mexican beach?, There could be several options to review on this case; the first and easy answer is to lease a house or condo, but that only gives you possession rights, anyway if you want to rent a house or condo for the cold season in your home city, then it is important to have a written lease agreement and review it by a lawyer so you can have clear conditions and know the bylaws of the condo if the case, to have everything in place, though this contract does not solve the question of how to acquire properties in the restricted zone, it is a simple and legal way to stay in a middle long term.

Other option that happens frequently but doesnt answer properly this question, and without mentioning that is very dangerous and not suggestible at all that we have seen in the practice, is that foreigners purchase the property and put it on the name of a Mexican friend, a situation that compromises your investment and represents a red flag at all sights, as it’s a simulate operation and also the Mexican owner could legally sell the land and retain the money as all rights are in his/her disposal, or if the trustful person dies then the family that inherited that property will be profiting that benefit that is legally available for them, so do not do this kind of operation at all, it does not matter how trustful the person it is, you don’t know what will happen in the future.

Another and the most suggestible way to acquire land in the restricted zone is through a Mexican trust, the title and credit operation general law provides that the trustees in Mexico have to be financial institutions constituted and admitted to operating in Mexico according to the applicable laws, then to acquire a property you will have to constitute a trust choosing the trustee of your election and they will fulfill their three main obligations that are; to withhold the property as they were the owners appearing in the public register with that quality. To notify you any legal circumstance that they could know regarding the property to alert you at any time, and also to fulfill your instructions if you in the future decide to sell and/or cancel the trust, make a trust cession, etc., as you will be the beneficiary of the trust and at any time you will be instructing the trustee what would you like to do with your trust, so you can receive the benefits of the property in trust, as you legally with this figure will have the possession, usufruct, and disposal of the property.

One last option that we could mention is buying a property directly through a Mexican corporation, where the foreign investors constitute a Mexican LLC or CO, and then purchase the estate of your election, on this case if you are planning to buy a property for commercial purposes this is the right choice, but if in reality, you desire to buy a property for housing purposes, then to avoid any risk of any administrative agency sanctions or audit, the best option is to constitute a trust as explained above.

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