American development Co.

How can I, as a non-Mexican, own land in Mexico?

History of rights as a foreigner

The Mexican Constitution was drafted and passed into law in 1917. Although there have been amendments instituted since its inception, this original document is still the supreme law of the land, just like in the US.
In the Constitution, there is a provision that creates an area known as the Restricted Zone. The Zone is 100 km (62 miles) from the borders and 50 km (or 31 miles) from the coasts. In this Restricted Zone, only Mexicans could own land. After so many years of being a possession of someone else, this provision was done for their own protection, and at the time, it made sense.
However, in the 60s the Mexican Government realized that there was a lot more money outside of Mexico than inside. In 1970, in an effort to create foreign investment, a Bill was passed into law which created a legal and viable opportunity. The Bill stated that a trust, called a 'Fideicomiso' could be set up, with the foreigner as the sole and exclusive beneficiary. Since a Mexican bank must administer the trust, it satisfies the requirements to purchase land in the restricted zone. The beneficiary (foreigner) could control the land. Because of the 1970 Bill, major foreign investment flowed into Mexico. Not only Cancun, but also Cozumel, Acapulco, Puerto Vallarta, Ixtapa, and Cabo-San Lucas exploded.
In 1994 the newest Bill was passed pertaining to the Restricted Zone. This law states that a Mexican Corporation, wholly owned by foreigners, can be a legal Mexican entity. Now, you can own a corporation and hold all its assets.
In addition to the confusion that results from the different types of corporations available to form (Limited Liability Corps, S-Corps, Partnerships, to name just a few), there are specific situations in which it is beneficial to own a property through a trust and when the benefits of a corporation are better. Here at American Development Company, through our years of experience of assisting foreigners in Mexico, we can help tailor the best vehicle to your particular situation. Be weary of anyone that says there is only one way to do things (whether that be through a Trust or a Corporation). Either they do not have your best interests in mind, are misinformed, or are just plain lazy.

Isn’t the Trust just a 99 year lease?

No. This is a popular misnomer that comes for 2 sources. One is custom in Mexico dictates that within the articles of incorporation for a Mexican Corporation, a specified term of 99 years is stated. This is not law, but nearly always done.
The second source is on the West Coast of Mexico near the California boarder, which has a long history of granting land leases on beachfront parcels used by weekend vacationers. The lack of understanding by these lease holders, coupled with bad information from Mexican sources has culminated in the 99 year lease misnomer that is still perpetuated.
The government has made it very easy for foreigners to own land in Mexico. So much so, that in 1998, the revenues from the industry of foreign investment & tourism surpassed the revenues from the oil & gas industry. It should be noted that in Mexico the government owns the monopoly, PEMEX, which controls all oil & natural gas in Mexico. The revenue it collects is from the DIRECT sale to the public. However, the taxes from the industry of foreign investment and tourism exceed those of oil & natural gas. Foreign investment & tourism - is now their cash cow and the Mexican government welcomes your participation.
The Mexican Constitution, passed into law in 1917, created what is called the “Restricted Zone”. This Restricted Zone is 100 kilometers (62 miles) from the borders and 50 kilometers (31 miles) from the coasts. And in this Restricted Zone only Mexicans can own the land.

In the 1960’s the Mexican government recognized that there was a lot more money outside Mexico than inside Mexico. To attract foreign investment, a Bill passed in 1970 created a legal way for foreigners to invest in Mexico. This new law allowed the creation of a trust (“Fidecomiso” in Spanish) with a Mexican bank in which the foreigner is the sole and exclusive beneficiary. The Mexican bank holds the title and administers the trust, thereby satisfying the Constitutional requirement for Mexican ownership in the Restricted Zone. The foreigner is the beneficiary of the trust and controls the land (rents, sells, improves, whatever…). Because of this 1970 Fidecomiso Bill, major foreign investment flowed into Mexico and we witnessed the developments of Cancun, Cozumel, Acapulco, Puerto Vallarta and Ixtapa.

There are limitations to the Trust system. For each property purchased, a separate trust is required. The set up cost for each trust is normally 1% to 1.5% of the purchase price of the property. Additionally, the bank charges an annual administration fee of $800 - $1,500 dollars, for simply holding the deed on your behalf. And it is necessary to request written approval from the bank for virtually anything you may wish to do with the property, including making improvements. Usually only a formality, but still rather cumbersome.

Taking advantage of the new horizons offered by the NAFTA treaty, the Mexican government in 1994 passed a new Bill pertaining to ownership of property in the Restricted Zone. In this new law, the Mexican government allows a Mexican Corporation, wholly owned by non-Mexicans, to be the legal entity fulfilling the Constitutional requirements for Mexican ownership in the Restricted Zone. You own the Corporation. Your Corporation holds the deed to your property. So you hold the deed to your property. You don’t have to ask the bank’s permission to for anything pertaining to your property.

Additionally, with the Corporation system there are no high annual administration fees paid to the bank. Your Corporation can own more than one property. And should you sell one or more properties, you may sell your Corporation or just the property. To further simplify matters, after your Corporation completes the purchase, you may elect to make your Corporation dormant. This makes the annual paperwork much easier. Overall, there are many advantages to using the Corporation system, but the best is that you actually hold title to your property.

Which is better, the Corporation system or the Trust system?

This depends completely on the lifestyle choices, financial, and fiscal situation of the buyer. Anyone that tells you that one choice always is better wrong.

How many persons are required to form a Mexican Corporation?

Two. Both can be non-Mexican. The shares do not have to be of equal proportion.

Can the government just take my property if they choose?

No. Mexico is a land of laws, and there are very exact laws for real estate. Prior to closing, your attorney will have reviewed the title history and when you close on your property, you (your Corporation) will hold clear title to your property.

Just like in the U.S., if you don’t pay your real estate taxes the government may claim your property after due process. But they will not just take your property. In this modern day of instant worldwide communication, there would be a quick halt to foreign investment if there was a chance that the government could seize your property. And that is not what Mexico wants. Mexico is enjoying the billions of dollars that flow into the country each year from foreign investment.

Can squatters steal my property?

No. No one can steal your property. Squatters can claim your property if you totally abandon it. But it is extremely difficult. You have to totally abandon your property for TEN years, including not paying the taxes on it. At the same time, the squatters have to openly occupy and pay the taxes on your property for that same ten year period. You will know that someone is there because they are paying your taxes for you. And the government must notify you that someone is trying to claim your property. You notify the government through your attorney, the squatters are removed and you have your property safe and sound.

Ejido Lands?

Ejidos are a complicated part of Mexican history. An ejido is land which Mexicans are given the right to use for living and working (usually farming). The land cannot be sold, leased or transferred to anyone not an ejidatario. The permission to use the land can be transferred to other Mexicans, but not to non-Mexicans.

When ejidos were originally granted, they were placed in non-prime locations at the time, usually in places where the towns weren’t. Nowdays, you can find ejidos situated on beautiful and highly desirable beach locations. Non-Mexicans see these beautiful beach front properties being used by a few Mexican peasants and offers are made to purchase the property. Money changes hands and often homes are built by the non-Mexicans. Tough luck for these non-Mexicans who didn’t consult with a qualified and dependable Mexican real estate attorney about a title search and what is ejido land and who is eligible to own it.

All non-Mexicans who occupy ejido land are illegal trespassers on that land, because only Mexicans are allowed to use the ejido land. Before buying property in Mexico, make certain you are buying property which you can legally own.

Living in Mexico – is it safe?

Ask any of the “ex-pats” living here and you will get the same answer: “Mexico is a great place to live.” It is not the dangerous place sometimes portrayed on US television.

Most of us who now make Mexico our permanent home agree that quality of life here (specifically speaking the Mayan Riviera) surpasses our quality of life in the US.

Do I need to be here to close?

No you can close in absencia. This is done through an Apostile.

An Apostile is a notarization from the secretary of state’s office (there is one in each state in the US) of the seal of your local Notary Public.

A signature, notarized by your local neighborhood Notary Public, is not recognized by the Mexican government as an official seal or signature. However, with the Hauge Convention the Apostile system was created to offer member countries of the UN a way to conduct international business a bit easier.
You can, just as in the US, authorize your attorney to sign the final documents in order to close in absencia. All other documents you are signing via the Apostile system. This is a common practice.



FAQs Frequently Asked Question How can I, as a non-Mexican, own land in Mexico? *History of rights as a foreigner* The Mexican Constitution was drafted and passed into law in 1917. Although there have been amendments instituted since its inception, this original document is still the supreme law of the land, just like in the US. In the Constitution, there is a provision that creates an area known as the Restricted Zone. The Zone is 100 km (62 miles) from the borders and 50 km (or 31 miles) from the coasts. In this Restricted Zone, only Mexicans could own land. After so many years of being a possession of someone else, this provision was done for their own protection, and at the time, it made sense. However, in the 60s the Mexican Government realized that there was a lot more money outside of Mexico than inside. In 1970, in an effort to create foreign investment, a Bill was passed into law which created a legal and viable opportunity. The Bill stated that a trust, called a 'Fideicomiso' could be set up, with the foreigner as the sole and exclusive beneficiary. Since a Mexican bank must administer the trust, it satisfies the requirements to purchase land in the restricted zone. The beneficiary (foreigner) could control the land. Because of the 1970 Bill, major foreign investment flowed into Mexico. Not only Cancun, but also Cozumel, Acapulco, Puerto Vallarta, Ixtapa, and Cabo-San Lucas exploded. In 1994 the newest Bill was passed pertaining to the Restricted Zone. This law states that a Mexican Corporation, wholly owned by foreigners, can be a legal Mexican entity. Now, you can own a corporation and hold all its assets. In addition to the confusion that results from the different types of corporations available to form (Limited Liability Corps, S-Corps, Partnerships, to name just a few), there are specific situations in which it is beneficial to own a property through a trust and when the benefits of a corporation are better. Here at American Development Company, through our years of experience of assisting foreigners in Mexico, we can help tailor the best vehicle to your particular situation. Be weary of anyone that says there is only one way to do things (whether that be through a Trust or a Corporation). Either they do not have your best interests in mind, are misinformed, or are just plain lazy. Isn’t the Trust just a 99 year lease? No. This is a popular misnomer that comes for 2 sources. One is custom in Mexico dictates that within the articles of incorporation for a Mexican Corporation, a specified term of 99 years is stated. This is not law, but nearly always done. The second source is on the West Coast of Mexico near the California boarder, which has a long history of granting land leases on beachfront parcels used by weekend vacationers. The lack of understanding by these lease holders, coupled with bad information from Mexican sources has culminated in the 99 year lease misnomer that is still perpetuated. The government has made it very easy for foreigners to own land in Mexico. So much so, that in 1998, the revenues from the industry of foreign investment & tourism surpassed the revenues from the oil & gas industry. It should be noted that in Mexico the government owns the monopoly, PEMEX, which controls all oil & natural gas in Mexico. The revenue it collects is from the DIRECT sale to the public. However, the taxes from the industry of foreign investment and tourism exceed those of oil & natural gas. Foreign investment & tourism - is now their cash cow and the Mexican government welcomes your participation. The Mexican Constitution, passed into law in 1917, created what is called the “Restricted Zone”. This Restricted Zone is 100 kilometers (62 miles) from the borders and 50 kilometers (31 miles) from the coasts. And in this Restricted Zone only Mexicans can own the land. In the 1960’s the Mexican government recognized that there was a lot more money outside Mexico than inside Mexico. To attract foreign investment, a Bill passed in 1970 created a legal way for foreigners to invest in Mexico. This new law allowed the creation of a trust (“Fidecomiso” in Spanish) with a Mexican bank in which the foreigner is the sole and exclusive beneficiary. The Mexican bank holds the title and administers the trust, thereby satisfying the Constitutional requirement for Mexican ownership in the Restricted Zone. The foreigner is the beneficiary of the trust and controls the land (rents, sells, improves, whatever…). Because of this 1970 Fidecomiso Bill, major foreign investment flowed into Mexico and we witnessed the developments of Cancun, Cozumel, Acapulco, Puerto Vallarta and Ixtapa. There are limitations to the Trust system. For each property purchased, a separate trust is required. The set up cost for each trust is normally 1% to 1.5% of the purchase price of the property. Additionally, the bank charges an annual administration fee of $800 - $1,500 dollars, for simply holding the deed on your behalf. And it is necessary to request written approval from the bank for virtually anything you may wish to do with the property, including making improvements. Usually only a formality, but still rather cumbersome. Taking advantage of the new horizons offered by the NAFTA treaty, the Mexican government in 1994 passed a new Bill pertaining to ownership of property in the Restricted Zone. In this new law, the Mexican government allows a Mexican Corporation, wholly owned by non-Mexicans, to be the legal entity fulfilling the Constitutional requirements for Mexican ownership in the Restricted Zone. You own the Corporation. Your Corporation holds the deed to your property. So you hold the deed to your property. You don’t have to ask the bank’s permission to for anything pertaining to your property. Additionally, with the Corporation system there are no high annual administration fees paid to the bank. Your Corporation can own more than one property. And should you sell one or more properties, you may sell your Corporation or just the property. To further simplify matters, after your Corporation completes the purchase, you may elect to make your Corporation dormant. This makes the annual paperwork much easier. Overall, there are many advantages to using the Corporation system, but the best is that you actually hold title to your property. Which is better, the Corporation system or the Trust system? This depends completely on the lifestyle choices, financial, and fiscal situation of the buyer. Anyone that tells you that one choice always is better wrong. How many persons are required to form a Mexican Corporation? Two. Both can be non-Mexican. The shares do not have to be of equal proportion. Can the government just take my property if they choose? No. Mexico is a land of laws, and there are very exact laws for real estate. Prior to closing, your attorney will have reviewed the title history and when you close on your property, you (your Corporation) will hold clear title to your property. Just like in the U.S., if you don’t pay your real estate taxes the government may claim your property after due process. But they will not just take your property. In this modern day of instant worldwide communication, there would be a quick halt to foreign investment if there was a chance that the government could seize your property. And that is not what Mexico wants. Mexico is enjoying the billions of dollars that flow into the country each year from foreign investment. Can squatters steal my property? No. No one can steal your property. Squatters can claim your property if you totally abandon it. But it is extremely difficult. You have to totally abandon your property for TEN years, including not paying the taxes on it. At the same time, the squatters have to openly occupy and pay the taxes on your property for that same ten year period. You will know that someone is there because they are paying your taxes for you. And the government must notify you that someone is trying to claim your property. You notify the government through your attorney, the squatters are removed and you have your property safe and sound. Ejido Lands? Ejidos are a complicated part of Mexican history. An ejido is land which Mexicans are given the right to use for living and working (usually farming). The land cannot be sold, leased or transferred to anyone not an ejidatario. The permission to use the land can be transferred to other Mexicans, but not to non-Mexicans. When ejidos were originally granted, they were placed in non-prime locations at the time, usually in places where the towns weren’t. Nowdays, you can find ejidos situated on beautiful and highly desirable beach locations. Non-Mexicans see these beautiful beach front properties being used by a few Mexican peasants and offers are made to purchase the property. Money changes hands and often homes are built by the non-Mexicans. Tough luck for these non-Mexicans who didn’t consult with a qualified and dependable Mexican real estate attorney about a title search and what is ejido land and who is eligible to own it. All non-Mexicans who occupy ejido land are illegal trespassers on that land, because only Mexicans are allowed to use the ejido land. Before buying property in Mexico, make certain you are buying property which you can legally own. Living in Mexico – is it safe? Ask any of the “ex-pats” living here and you will get the same answer: “Mexico is a great place to live.” It is not the dangerous place sometimes portrayed on US television. Most of us who now make Mexico our permanent home agree that quality of life here (specifically speaking the Mayan Riviera) surpasses our quality of life in the US. Do I need to be here to close? No you can close in absencia. This is done through an Apostile. An Apostile is a notarization from the secretary of state’s office (there is one in each state in the US) of the seal of your local Notary Public. A signature, notarized by your local neighborhood Notary Public, is not recognized by the Mexican government as an official seal or signature. However, with the Hauge Convention the Apostile system was created to offer member countries of the UN a way to conduct international business a bit easier. You can, just as in the US, authorize your attorney to sign the final documents in order to close in absencia. All other documents you are signing via the Apostile system. This is a common practice.