How to own property in Yucatan

As an expatriate interested in buying property in Yucatán, it is easy to find yourself in a position where you don’t know what you don’t know. Mexico’s rules about foreign possession of real estate have their roots in the Mexican Revolution, but have been updated to accommodate the modern investor and modern-day Mexico. The Mexican government considers the issue of foreigners owning Mexican land a matter of security. They have created two legal structures regarding foreign property ownership: The “Restricted Zone” and The “Non- Restricted Zone”. The Restricted Zone comprises properties located within 50 kilometers (31 miles) of the coast or 100 kilometers from any border with another country (Mexico borders the United States, Guatemala and Belize). In this zone, a foreigner (anyone without a Mexican passport) is not allowed to own land or property according to Mexican Law. The Non-Restricted Zone is anywhere outside the Restricted Zone. Foreigners can legally own property in this area, but still must meet some requirements. The buyer is required to prove that they are legally in Mexico and must inform the Ministry of Foreign Affairs (Secretaria de Relaciones Exteriores, known as SRE) that they have completed the purchase. In order to encourage foreign investment in accordance with the North American Free Trade Agreement (NAFTA), the Mexican Congress modified investment laws creating a new structure that allows foreigners to invest in Mexican real estate: The fideicomiso (pronounced FEE-day-coh-MEE-soh, which is Spanish for “bank trust”). Of course, the Yucatán coast and most of Merida are in the Restricted Zone, and the fideicomiso is the only way to purchase and enjoy a property in these areas. In Mexico, only financial institutions can act as trustees, and this is how the structure works: There are basically three parties involved: Fideicomitente is the seller. They grant the real estate involved and relinquish the rights that go along with the property. Fiduciario is the trustee. A Mexican bank serves as the trustee, working in good faith for the buyer and his/her/their interests. The bank purchases and owns the property on behalf of the beneficiario. Beneficiario or beneficiary is you or any foreigner who enters into the fideicomiso to purchase real estate. Because a foreign buyer is not legally entitled to own property outright within the restricted zone, the trustee (bank) buys and creates a trust to hold title to the property. The bank holds the title, but by law it can only act under instructions of the beneficiary of the trust. The beneficiary has the same rights to lease, sell, improve and mortgage the land or otherwise uses the property as he/she wants, just like any Mexican property owner. The bank charges a fee for establishing and maintaining the trust, which varies from one institution to another. The charge is usually in pesos and usually costs somewhere between $400-600 USD, paid yearly. The charge to administer the trust can be changed annually, but in our experience, it has not changed more than a few dollars either way in the last few years. The trust retains ownership of the property up to a maximum of 50 years. After 50 years, the trust may be extended for another 50 years. This process can repeat indefinitely if the property is used for residential purposes, but the fideicomiso must be rewritten for each 50 year period. The trust may be terminated by transferring the rights to another foreigner. This transfer is legally considered a sale, and therefore is subject to Mexican tax laws. To sell a property that is held in a fideicomiso to a Mexican citizen, the trust may be terminated and the citizen can purchase the property “fee simple” (property is held directly by the citizen). Understanding the details of this process can be difficult if you are experiencing it for the first time, or if your Spanish is limited or if you have any complications. YES can help you by managing the paperwork , introducing you to the proper people at the local banks, working with you to shepherd the process through the banks, and/or working with you to expedite the documentation and bureaucratic process. Feel free to contact YES if you have any questions about fideicomisos and buying property in Mexico. For more detailed information about fideicomisos, corporations, taxes and more, go to this page on the Mexico International website.