Can a USA or Canadian citizen own real estate in Mexico?
Yes, by placing the property in a bank trust. (Fideicomiso)
Can I own property near or in front of the ocean?
Yes, laws passed in 1973 and 1993 have made it possible for foreigners, foreign firms, and Mexican firms with foreign participation to acquire interests in coastal real estate through a bank trust.
Who is involved in a bank trust?
Three parties. The seller of the property is the Trustor, the bank is the Trustee (Fiduciario), and the buyer is the Beneficiary (Fideicomisario.)
How much does the Bank Trust cost?
Based on the current tariff, the bank charges the person desiring the Fideicomiso an initial fee of approximately $500 USD for drawing up the agreement and establishing the Trust plus a percentage based on the value of the property.
Are there additional fees for the Bank Trust?
Yes. The bank charges an annual fee to cover its services as a Trustee. $500 to $700 dlls plus 11 % Tax
How does the trust work?
Title of the property is transferred to a trust with a Mexican bank acting as Trustee. The Trust Agreement is formalized by the issuance of a permit from the Mexican Ministry of Foreign Affairs. The lot or home buyer is designated as Beneficiary in the Trust and the beneficiary rights are recorded in the public record by a Notary Public.
What are my rights as a buyer?
The Trust is a legal substitute for fee simple ownership, but in many cases, the Trustee is the legal holder of the property. As Beneficiary, you have the right to sell your property without restriction. You may also transfer your rights to a third party or pass it on to named heirs.
Is the Trust Renewable?
Yes. According to the Foreign Investment Law passed in 1993, trusts can be renewed for an indefinite number of successive 50 year periods. In effect they run in perpetuity.
Who is involved in Real Estate transactions in Mexico?
Normally there are four players involved in a real estate transaction. These are the real estate company, the buyer, a bank, and a Public Notary.
What role does a Public Notary play?
A Public Notary is a government-appointed lawyer who processes and certifies all real estate transactions including drawing up and reviewing all official documents to ensure the proper transfer of the property.
What are these official documents?
The official documents which are required by law in order to transfer the ownership of property in Mexico include a non-lien certificate based on a complete title search from the Public Property Registry, a statement from the municipality regarding property assessments, water bills, and other pertinent taxes that might be due, and an appraisal of the property for tax purposes.
If at a later date I decide to sell my property, can anyone buy it?
Yes. If the buyer is also a foreigner, you simply assign beneficial rights. If the new buyer is a Mexican National, you can instruct the bank to endorse the title in favor of the buyer.
If the buyer is a foreigner, is his interest limited to the balance of my 50-year period?
If the Beneficiary of a trust sells his rights and obligations of said trust, to a another foreigner during the term of the trust, the new Beneficiary ( owner ) upon the sale of the trust interest may obtain a new trust permit from the Foreign Relations Ministry to establish a new fifty year term for the trust.
Thus, the new buyer will have a full fifty year term to use and enjoy the property. Whether a buyer assumes the remaining term of an existing trust or obtains a permit to establish a new fifty year term, would usually depend on the time remaining in the trust and the extent to which the buyer is willing to undertake the additional steps of establishing a new trust.
The trust Beneficiary is entitled with the rights and powers of an absolute owner, including all the rights regarding the enjoyment and transfer of the property
When buying or selling a property in Mexico, who pays the closing costs?
It is common practice that the buyer pays the transfer of acquisition tax and all other closing costs, including the Notary’s fees and expenses, while the seller pays his capital gains tax, cedular tax and the broker’s commission.
How much is the transfer tax?
The real estate transfer tax is 2% of the tax appraisal value.
How much are closing costs?
The rest of the closing costs, excluding the transfer taxes, vary from 4.8 % to 8 % of the appraised tax value. These percentages are applied to the highest value of the following: 1) the amount for which the property is sold, 2) the value of the official tax appraisal, or 3) the value designated by the property assessment.