Like anywhere in the world, Mexico has its own administrative processes for buying real estate. This process is neither difficult nor is it simple, but is a process where you need to be sure that you are being informed and advised impartially by a professional Real Estate Agent in Mexico.
Our Century 21 professional agents are available for any questions or clarification on the process of buying or selling real estate and specifically in the Mexican Caribbean.
- What is the Restricted Zone and where is it ?
Here, properties on the Coast of Playa Del Carmen, Cancun and basically all Riviera Maya and the South of the State of Quintana Roo belong to the Restrictive Zone. The restrictive zone is land within 50 kilometers (30.5 miles) of Mexico’s coast or within 100 kilometers (61 miles) of Mexico’s land borders with other countries.
Following the History of Invasions, wars and losses of Territory, Articles 27 of The Mexican Constitution was created in 1917 to protect Mexico from foreign intervention and invasión. Its aim was to stop foreign interests from purchasing strategic coastal and border areas of the country. While today the risk of a foreign attack is low, this last remains a founding chapter in the Mexican Constitution.
Today, the restrictive zone is merely a legacy of Mexican culture and history and not a tool to stop foreigners from investing in Mexico. To enforce this message, Mexico’s foreign Investment law ( enacted on 28th December 1993) was created to protect the rights of foreigners in the restrictive zones and ensure the safe and legal purchase / acquisition of real estate.
All along the Mexican Caribbean, foreigners can buy Real Estate but Mexico’s Foreign Investment Law requires to be done thru a bank trust = fideicomiso.
- Can Non- Mexicans ( foreigners ) buy Real Estate in Mexico ?
Yes, a person of any nationality is able to legally buy Real Estate in Mexico. People are often misled or believe otherwise due to the existence of a Mexican designation for certain areas called the “restrictive zone”( formerly known as the “prohibited zone”).
There are a number of methods for acquiring property in Mexico.
First, outside of the restricted zone foreign ownership of any type of real estate is legal on a fee-simple basis.
Second for non-residential property, foreigners can acquire real estate via a Mexican Corporation ( and under certain conditions these corporations can be 100 % foreign-owned). The main 2 conditions are the agreement of the foreigner(s) to subject themselves to Mexican law, and for the property to be registered for non-residential use with the Ministry of Foreign Affairs.
Third, within the restricted zone, for residential Real Estate , acquisition must be made through a bank trust ( fideicomiso).
- What is a Fideicomiso (bank trust)?
If you are familiar with bank trusts in the United States then you will find Bank trust in Mexico to be very similar ( a bank trust is called fideicomiso in spanish.)
In short words ... the deed is recorded in the public record and it is stipulated that the bank created the trust and the foreign buyer is the beneficiary (landlord). The trustee is the Mexican Bank and the beneficiary of the trust ( and therefore, the property) can be you as an individual, a partnership, a company or corporation, Mexican or foreign. For practical reasons, many foreigners outside of the restricted zone, and even Mexican nationals, prefer to use a fideicomiso. The trust agreement is formalized through the issuance of a permit from the Ministry of Foreign Affairs. The foreign buyer is designated as a beneficiary in the trust and the rights of the beneficiaries are registered on the public record by a Notary Public.
The beneficiary has all rights without restriction as any property owner: He can use, possess, rent it, live on the property, make changes, he also has the ability to instruct the bank to mortgage the property, sell, transfer benefits to another person and any other act within the law, arising from owning property.
If the foreigner sells the property to another foreigner, he can assign his interests to the new buyer. This assignment of rights must be formalized before a Mexican Public Notary, prior to the payment of federal and local taxes arising from the transfer of the rights of the beneficiary.The foreign owner is obliged to pay land rights, for example, the annual payment of property taxes ( predial) , maintenance fees of the condominium, water, electricity, annual fee of Trust, etc.
- Can I bequeath my real estate in Mexico to my friends or family?
The beneficiary is entitled to appoint substitute(s) beneficiary(s) who will receive all the rights and obligations arising out of the trust agreement, if the beneficiary dies during the term of the Trust.
With this designation of substitute beneficiaries, your heirs will not need to follow any probate proceeding before the Mexican courts that could take time and legal fees. They will only have to give notice to the bank on the deceased person, showing the death certificate and official identifications. Then the bank will instruct the public notary to notarize the documents with the consequent action to register the new owners (beneficiaries) of the trust property.
- How long does the fideicomiso last?
Usually, a fideicomiso is set-up for 50 years and is then renewable for another 50 years. Fideicomisos can in fact be renewed at any time just by application. Another mistaken belief and concern is that after 50 years bank-trust properties pass to the authorities, this is not true.
- How secure are the Mexican Banks ? Can I trust fideicomisos ?
Yes, the Mexican Bank Trust has a fiduciary responsibility to act in the trustees best interest..under penalty of law. The bank will simply hold the deed to the Real Estate for you ( or your beneficiaries). You as a beneficiary hold all the right of ownership to the property, you can sell, lease , rent, build o or do anything else as a legal owner of property in Mexico can do ( obvisously you must comply with building and zoning regulations). Many large and respected American and International Banks such as GE Capital, Scotiabank, Banamex (City bank) and Santander Serfin among others have been and remain big players in fideicomisos in Mexico.
- What is a “Notario”? We've heard that we will need to use one ?
The Notario Publico ( Public Notary) has an important role in the purchase of Real Estate, much more that in most countries. He/she is appointed by the State Governor as responsable for carrying out a number of Key aspects of the transaction such as the authentication of legal documents, titles and deed searches ( for liens or other legal/ financial issues ), tax collecting, construction permit checks ( if relevant) capital tax calculation..etc
The Notary is essentially responsable for ratifying all real estate transactions, hence if a property transaction is performed without a notary and not recorded in the public registry, it is invalid, placing the purchaser in a position where he/she could lose the property with no legal recourse.
- What is the typical purchase process in Mexico ?
Generally speaking the Real Estate transaction process is “closed” once a written purchase offer has been accepted by the seller and when a purchase-sale agreement contract has been signed by both the seller and the purchaser.
With Century 21 presenting an offer becomes very safe as the deposit which never exceed 5% of the offered Price is hold by the Real Estate Office or his Bank Account like an Escrow Account.
Usually after presenting the offer and a deposit, a payment is required between a 10% to 30% upon signing the promissory contract of purchase and sale. Typically, the developments and presales applying a deposit of 30% or more, while re-sales for the deposit will be lower. The remainder is usually paid to sign the deeds before Notary.
If you are dealing directly with the seller, it s strongly advised to seek guidance from a lawyer or real estate agent before signing any contracts or exchanging money (especially since the contracts are legally binding in Mexico in Spanish).
- How do I calculate closing costs and who pays for them?
Closing costs are determined by the price of the property. The value becomes the basis of all taxes and fees. Generally, the buyer is responsible for the transfer tax and the cost of establishing the Trust (if not already in existence), notary fees, registration fees, tax fees and assessment fees of the Trust permission.
The average total closing cost for the buyer is about 5% of the purchase price.
In Mexico the commission for brokerage services, capital gains and outstanding bills are paid by the seller, so we highly recommend you to always deal with a local expert!
- What is the best way to find a property in Playa Del Carmen or Riviera Maya?
Playa Del Carmen is full of real estate agents, brokers, builders, developers, billboards, flyers, reviews and magazines; all of them trying to sell a property and stating that his company is the best.
As for any significant purchase, it is important to feel comfortable with the people you are dealing with and that you feel confident that they are working for your best interests and not rushing you.
In C21 Caribbean Paradise, we have a team of experts in Local Real Estate, an internal legal representative, close working relationships with notaries, banks and insurance companies for local title. We are a team of professionals who know perfectly the local market with a large inventory of properties for both rent or sale. And we are ready to serve you to make your property search and purchase a pleasant and effective experience.
If you are interested in Real Estate in Playa del Carmen, Cancun, Cozumel, Tulum or anywhere in the Mexican Caribbean, we also have the network of Century 21 Riviera Maya Alliance.
Century 21 "Riviera Maya Alliance” is comprised of our networked affiliated offices in Cancun, Playa Del Carmen, Cozumel and Tulum. As an alliance, we represent your best option for any real estate need along the coast; whether you are looking to buy, invest, retire, relocate or sell your Mayan Riviera property -- we have you covered! With one office in each city staffed with trained teams of real estate professionals who are fluent in several languages and come from various countries.