Can a Foreigner legally own Property in the Riviera Maya?
The simple answer is YES! The Riviera Maya region has a vast amount of foreigners whether individual or foreign entities that have acquired property in this area and continues to do so. As a foreigner buying land in Mexico within 50km (32 miles) from the coastline and 100km (64 miles) from the international border, you will have to do so by means of a bank trust (fideicomiso) or you may buy property by establishing a Mexican corporation. Our legal team can guide you on an individual basis on what is the best course for you to take.
Can a foreigner obtain a Mortgage to acquire a Property in Mexico?
Unfortunately local banks are not offering mortgages for foreigners. There are some private lenders, however, who are willing to offer you a loan at higher interest rates or will help you qualify with a local bank following their guidelines. It is important to mention that this process is time consuming and it is best not to rely on this option if you are looking to snatch up a bargain. It is advisable to secure funding in your home country via your home equity for example.
Who will be involved in the Real estate acquisition?
You will be dealing with a real estate company, attorney, bank (if buying via a Fideicomiso) and a Notary. We will help you throughout the whole process and we will represent your interests in the best possible way as your real estate company. We will also recommend a trusted and bi-lingual attorney and a notary.
What is Ejido Land?
The ejido is a Mexican concept not well understood by foreigners. What is an ejido, exactly? The word, pronounced “ay-hee-do”, is thought to be derived from the Latin “exitus”, meaning "the way out." Presumably ejidos got their name from being located at the outskirts of towns and cities, and they were, and some still are, small Mexican villages. The ejido is defined as a community that has joint ownership of a piece of land, lives on the land, and practices joint agriculture on it. While this was the original intention, and was once an accurate description of ejido activity, more and more ejidos today exist as land where no one lives and no agriculture takes place. And so, yes, the ejido is a way of owning property in Mexico, but this statement must be read with a realization that "ownership" may not mean the same thing to an ejidatario as it does to the foreigner. To an American, ownership means having what is known in real estate circles as "the bundle of rights": possession, enjoyment, control, exclusion, and disposition. When we own a property, we can possess it, enjoy it, control it, exclude anyone we don't want from it, and dispose of it by selling it, giving it, exchanging it, or willing it to our heirs. To a Mexican, ownership appears to be largely a matter of possession. This difference in cultural background and assumptions often causes misunderstanding when a foreign investor finds a choice piece of property that is ejido land and wants to buy it. The ejidatarios may tell the investor that they have ownership of the property, and of course they do, but not the same kind of ownership the investor is assuming. Trying to buy ejidal property can be a risky investment if the investor is uninformed as to the legal pitfalls or unwilling to follow the prescribed procedure. There is a way to get legal title to ejido property. In 1992 the Mexican government established a policy for regularizing ejido land called PROCEDE (Programa para Cesión de Derechos Ejidales) (Program for cession of ejidal rights). Through this program, ejidatarios can convert their property to private property, which can then be sold. There are three types of ejidal property: lands for community development, lands for common use, and individual parcels. The lands for community development cannot be sold or privatized. Lands for common use can be converted into what are called solares (individually owned parcels), which can be privatized and then sold. The individual parcels can also be privatized and sold. This procedure requires a vote of the entire ejido. There must be a vote of 2/3 of those present to pass the resolution to privatize the land. Investors should be aware of the complexities and avoid common pitfalls by using due diligence.
Should I buy or build?
This question gets asked a lot and it is wise to think about it. If you would live in an area where land availability is scares the decision is obvious. This is not the case in the Riviera Maya as there is a surplus of Land available to acquire. Because of that I highly recommend you choose to build – for the obvious reason of saving around 30% vs. buying – which in turn will allow you to build based on your needs and budget. Our experience and professional team will help your realize your dream worry free. Feel free to ask us how you can do so.
Why buy through a Corporation?
Many investors choose to purchase property though a corporation if the intent is to conduct the investment as a business. This would be the case in situations such as buying and selling land, renting their property or when owning more than one property. There are several different types of Mexican corporations, however the two most common are a limited liability corporation (LLC) and a limited liability partnership (LLP). Choosing which type of corporation to set up is important for tax purposes in both the US and Mexico, and you should speak with an attorney or accountant on both sides of the border to understand the benefits and costs each one entails. Making sure the choice is made correctly from the beginning will save you time and money. Ownership of property in Mexico is possible through the establishment of a Mexican corporation. As of 1995 foreigners can fully own, operate and administer Mexican corporations. A foreign corporation in Mexico requires two or more individual investors, who combined, control 100% of the corporation. None of the corporation's investors can be Mexican. Once your Mexican corporation is formed, it has the legal capacity to acquire property anywhere in Mexico, including the restricted zone. Through a corporation, foreign owners acquire the right of domain, in addition to possession and benefit. The property is owned with the same rights as if it were a Mexican entity. There are no investment restrictions on foreign-owned Mexican corporations aimed at buying and developing property. Typically the cost to set up a corporation will be around $2,000 USD, as well as the monthly fee paid to the accountant for the legally required monthly or yearly filing to the SAT (local Tax Authority).
What is a Fideicomiso (Land Trust)?
A Fideicomiso is a real estate trust where the bank (trustee) holds the trust deed for the purchaser (beneficiary). You can choose your bank (Scotiabank, Banco del Bajio, Banamex, among some). The bank acts as the Trustee, and you are the Full Beneficiary of the trust. You maintain complete control over the trust, and may sell, lease, mortgage, and pass the property on to your heirs. The Fideicomiso also acts as Will, therefore, when setting up the trust you will choose your substitute beneficiaries in case of your passing and they will inherit without legal trouble. The Fideicomiso is valid for 50 years and is renewable for another 50 year period. A Fideicomiso is equivalent to a Living Trust in the US. This is definitely the favorite and simplest option used when buying a residential property. We would be glad to recommend you one based on our closing experience on which one to go with. In the end the difference between one trustee and the other will be cost and the service provided to you.
Should I use an attorney to represent me in an acquisition of a property?
It can be burdensome to purchase a property overseas. Although you are not required to we always recommend using an attorney because we believe it is in your best interest. An attorney will represent YOU and protect YOU in all your legal transactions. The attorney will draw up contracts and review the terms and conditions of the sale as well as make sure the property deeds are all in order. Foreign attorneys are not licensed to practice law in Mexico and should not give advice on Mexican law. We will gladly recommend you one or two that we have worked with over the years. Unfortunately there are some attorneys that will not work hard for their money. We don’t want that to happen to you!
Who is a Notary?
A Mexican Notary (Notario Publico) is a licensed attorney, certified by the state and Federal government to act as an official and unbiased representative of the government of Mexico. A Mexican Notary has far greater responsibility than a notary in the US or Canada. A Mexican Notary has passed stringent exams required by the Mexican government and is a government official. They provide strict security of original records and documents and they record the documents with the Public Registry of Property office. A Notary's role is taken very seriously in Mexico in that the Notary could be held liable in both civil and criminal terms. The notary performs a variety of tasks including the authentication of legal documents, the calculation of capital gains tax and is responsible for ratifying ALL real estate transactions in Mexico. Any real estate transaction not ratified before a notary and duly recorded in the Public Registry is considered invalid and not enforceable. In a real estate transaction, the notary is equally responsible to the buyer and the seller and ultimately responsible to the Mexican government. Their job is to ensure the legality of the transfer of title, to calculate and retain the seller's capital gains tax on behalf of the government, collect the purchaser's acquisition tax and pay it to the Department of Foreign Affairs, coordinate appraisals, certificates of no liens, certificates of no debt and request all corresponding permits. After the closing, the Notary must record the transaction at the Public Registry and the Tax (Catastral) Office. The Mexican notary is capable and legally authorized to carry out the transaction. However, we recommend also using an attorney to represent all your interests and protect your legal transactions. This is so because the notary is paid to perform the above mentioned but not necessarily to represent you personally but rather for the transaction to be performed according to the laws of the state.
Can the Government take my property away?
Foreigners often worry about their land being expropriated by the Mexican government. Under the North American Free Trade Agreement, NAFTA, Mexico may not directly, or indirectly, expropriate property except for a public purpose. This is the same as "Eminent Domain" in the U.S. Where it is necessary to expropriate land, swift and fair market compensation must be paid, together with accrued interest.
Why invest in this area?
Besides the obvious benefits of buying in this area because of the incredible beaches, especially Tulum beaches, there are other reasons that help you decide. There is no better time to invest in real estate in Mexico and in the Riviera Maya in particular. The market has a lack of supply of properties, especially in Tulum and for that reason it makes it a great place to invest and/or build. Tulum is unstoppable and will keep growing, although, we personally believe it will be a slower process than with other cities on the Riviera Maya. We believe Tulum is unique and will be more boutique style. It is a prime time to invest in this area and we can help you decide where to park your money for a while, diversify your international real estate investment, or simply to retire.
How does buying through a Corporation work?
Ownership of property in Mexico is possible through the establishment of a Mexican corporation. As of 1995 foreigners can fully own, operate and administer Mexican corporations. A foreign corporation in Mexico requires two or more individual investors, who combined, control 100% of the corporation. None of the corporation's investors can be Mexican. Once your Mexican corporation is formed, it has the legal capacity to acquire property anywhere in Mexico, including the restricted zone. Through a corporation, foreign owners acquire the right of domain, in addition to possession and benefit. The property is owned with the same rights as if it were a Mexican entity. There are no investment restrictions on foreign-owned Mexican corporations aimed at buying and developing property.
If I decide to sell my property, can anyone buy it?
Yes, you can sell to either a Mexican national, or Non-Mexican Foreigner. A Non- Mexican would also be required to set up a bank trust.
How long can a foreigner reside in Mexico per year?
When you arrive to Mexico, a tourist visa is issued. The maximum amount of period on this visa is 6 months. These can be updated at the local migration offices. You also have the option to apply for a FM3, which has 12 month periods of validity. FM3s can be obtained if you are a property owner, or if your employer is a Mexican Corporation and for several other special cases. Of course the best course of action to choose can be discussed with a lawyer depending on your future goals.