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MEXICO REALTY GROUP
Arturo R. Romero Calle Cantil 196 San Antonio Del Mar ROSARITO, BC 22710
Cell: 619-863-3656
Fax: 619-662-1268
Other: 664-609-3488
Work Phone: 661-123-4862

BUYING COASTAL PROPERTY IN MEXICO'S RESTRICTED ZONE

 

Description: Buying Coastal property in Mexico's restricted zoneMexican law prohibits foreigners from acquiring fee simple title to residential real estate in areas referred to as “restricted” zones. These restricted zones refer to any land located within 50 km (about 31 miles) of any coastline or 100 km (about 62 miles) from any of the three borders shared with other countries, namely the United States, Guatemala and Belize. Also included in this zone is the entire Baja Peninsula.

To increase trade in the real estate industry recent changes to Mexican laws now permit foreign ownership of Mexican Real Estate. There are actually several ways a foreigner can legally purchase property and the best way for you will depend on your investment interest.

The “Fideicomiso” or Mexican Bank Trust is a mechanism that enables foreign persons or companies to purchase property in Mexico. This trust mechanism was created to allow foreign investors to participate in Mexico's rapidly expanding real estate market, while exercising complete and legal control over their investments and complying with Mexico's laws.

The trust owns the property and is held by a Mexican bank. The purpose of the trust is to hold the property for the benefit of the owner of the trust. Real estate investment trusts enable foreign entities and persons to invest in Mexico's coastal and border areas, which were once restricted from foreign investment of any kind.

Only Mexican banking institutions authorized and regulated under Mexican laws can serve as trustees. The beneficiary of the trust, the foreigner, retains the use and control of the property held in trust and makes the investment decisions with respect to the property. This can include the decision to transfer such property interest to another foreigner realizing all of the economic benefits that accompany equity ownership in Mexico's attractive coastal properties.

Trusts are established for an initial 50 year period and can be renewed for additional 50 year periods indefinitely. The beneficiary may transfer or assign his beneficial interest to any person and keep the profits from the sale of the property subject to applicable tax laws and expenses for the sale. Property held under a trust can be passed on to future generations and the person to whom the bequest is made is not burdened with an inheritance tax.

Fideicomisos are an easy and safe way for you to own property in Mexico. They are government sanctioned and offer strong protection. Potential investors are encouraged to contact us for assistance in setting up your Mexican bank trust.

As the Trust Beneficiary, you will have the use and possession of the property, that is, you may live on the land, undertake any alterations and improvements. You also have the capacity to instruct the Trustee on mortgaging the real estate, renting it, selling, transferring it in to your beneficial interest to another person or corporation.

If you sell the property to another foreigner, you may assign your beneficial interest to the new purchaser. This assignment of rights must be formalized before a Mexican Notario, prior to the payment of the federal and local taxes and fees that arise from the transfer of beneficial rights. You will have the obligation to pay the duties on land, i.e.: Annual property tax, maintenance fees, water, electricity, annual Trustee fee, ETC.

As an example of the cost of a Fideicomiso here is what one bank charges:

A) $500.00 USD for the Trustee acceptance charge, payable upon the signing of the Mexican Trust Contract.

B) $500.00 USD a year for the handling and servicing of the Trust, payable in advance. This fee will be increased by the Trustee every two years, according to the U.S.A. inflation rate. Every year, on the anniversary date of the Trust, the Bank shall mail to your address the bill of the annual fee for keeping the property in Trust. All the Trustee fees have the value added tax (IVA) and are subject to change.

You must pay out the fees, taxes and expenses that arise from the purchase as well as the formalization of the Trust deed before a Mexican notary public. Also, you will pay the cost of the permit that must be obtained from the Mexican foreign affairs ministry (SRE) to acquire the property in Trust, and the recording of the Trust deed at the National Registry of Foreign Investments.

The Trust Beneficiary has the right to appoint a substitute Beneficiary who will receive all the rights and obligations that arise from the Mexican Trust contract, if the Beneficiary dies during the life of the Trust. With the designation of substitute Beneficiary, your heirs will not need to follow any probate proceeding before the Mexican courts. They would only have to give notice to the bank and show the death certificate and their identifications. Then, the bank will give instructions to a Mexican notary public as to the proper protocol of the documents and with the resulting deed registering them as the new owners (Beneficiaries) of the Trust property.

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