Owning Property in Mexico
Owning real estate in Puerto Vallarta is like a dream come true. However, there are some important statutes in place foreign citizens must be aware of before they can move into their new home in Vallarta area.
Land ownership has a long history in Mexico dating all the way back to the 1500s. Understanding the history of Mexican land will go a long way in comprehending the country's current regulations on foreign ownership of its valuable real estate.
Today, foreign citizens cannot technically "own" land in certain regions of Mexico. These regions are any property within 60 miles from any Mexican border or within 30 miles of any Mexican coastline-which includes Puerto Vallarta. However, there are procedures in place that allow citizens from all over the world to essentially own real estate in Mexico. It is highly recommended that each foreign citizen consults with a real estate agent that is experienced with buying property for foreign citizens.
Below is an explanation of the basis of Mexican property ownership by foreign citizens: "Fideicomiso."
Mexican Property Trusts (Fideicomiso)
Foreign citizens who wish to buy property within designated regions of Mexico are required to obtain a "Fideicomiso," which functions as a Mexican Property Trust.
In 1994, amendments to the Constitution permitted foreigners to purchase and own real estate in Mexico located within the "restricted zone" which is all land within 60 miles of a national border and within 30 miles of the Mexican Coast. This Law permitted ownership through a land trust or "Fideicomiso".
A "Fideicomiso" is a Mexican Trust. The way it works is the Mexican Government issues a permit to a Mexican Bank of your choice, allowing the bank to act as purchaser for the property. The bank acts as the "Trustee" for the Trust and you are the "Beneficiary" of the Trust. The "Beneficiary" rights are very similar to Living Wills or Estate Trusts in the U.S.
The law authorizes Mexican banking institutions to act as trustees. A trustee takes instructions only from the beneficiary of the trust (the foreign purchaser). The beneficiary has the right to use, occupy and possess the property, including the right to build on it or otherwise improve it. The beneficiary may also sell the rights and instruct the trustee to transfer title to a qualified owner.
Many people refer to the trust arrangement in Mexico as a lease agreement... this is not true. The home or property that you buy will be put into a trust with you named as the beneficiary of the trust - you are not a lessee. You have all the rights that an owner of property in the U.S. or Canada has, including the right to enjoy the property, sell the property, rent the property, improve the property, etc.
The initial term of the trust is 50 years. An investor can renew the trust for an additional period of 50 years within the last year of each 50-year period, and this process can be continued indefinitely, providing for long term control of the asset.
