Purchasing Rental Property in Mexico: What You Should Know

Does the Mexican government own my land if I purchase land in Mexico?

Due to recent trade agreements made between the United States, Canada, and Mexico, called the North American Free Trade Agreement (NAFTA), and bank trusts, called Fideicomiso, foreigners are allowed to purchase land in Mexico. American Title companies are also involved in the purchasing process, allowing for secure transactions.

What is the North American Free Trade Agreement?

In 1994, North American Free Trade Agreement (NAFTA) between the United, States, Canada, and Mexico was formed as the world’s largest free trade area, allowing for purchasing land safely in Mexico. The agreement allows for economic growth and rising standards of living in these three countries, while establishing a strong foundation for future growth and setting an example of the benefits of trade liberalization.

Today, nearly 1.5 million Americans own property in Mexico. As a foreigner, the buyer can obtain all the rights of ownership by setting up a bank trust, similar to a US family trust, known as a Fideicomiso.

What is a Fideicomiso?

A Fideicomiso makes a buyer the beneficiary of the purchased property, allowing the buyer to use, lease, sell, will, improve or encumber the purchased property. The Trust does not give direct ownership to the foreign beneficiary. Instead, it establishes the legal basis by which the bank holds the legal title to the property in order to act on the foreigner’s behalf.

The Foreign Investment Law, which was amended in 1993, allows the trust to be established for a term of 50 years and is renewable anytime during its existence. The beneficiary can instruct the bank to sell or lease the property at any time. The bank (trustee) holds the trust deed for the person who purchases the property (beneficiary). The property is not part of the bank’s assets and cannot be liened or attached for any other obligations.

Why was a trust system established?

The Mexican government established the trust system as a protection for foreigners interested in owning property in Mexico. By making ownership pass through the trust process, the bank is required to check ownership, insurance, and liens against the property. There would be an automatic review of the transaction, thus ensuring valid ownership and no outstanding indebtedness of the property

When is a bank trust issued?

Bank trusts are established by a Mexican Notario (Notary), following the receipt of a permit by the Minister of Foreign Affairs. This procedure is routine due to the large number of foreign property owners. The forms are standardized and the entire process is usually completed by the notary as part of the closing procedure

How does First American Title Company ensure property purchased in Mexico?

First American Title Company works to ensure that any claims will be handled in the U.S. without the buyer having to go through the Mexican court system. That means that the title agency will stand by the buyer in response to a challenge to the buyer’s title in Mexico.

First American was the first U.S. Company to issue title insurance policies on Mexican land and it is the most used agency. Its agents are experts in Mexican law, property ownership and transfer system. First American Title Company has been facilitating complex commercial, industrial and residential real estate transactions throughout the country for over twenty -five years. The agency is directly involved with property purchasing for The Pointe de las Conchas.

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