Editor’s Note: Many foreigners have ventured into real estate offices found south of the border here in Mexico, drawn in by the allure of affordable coastal living options for vacation properties and full-time retirement living. It can however, be a somewhat scary experience for many as Mexican real estate law is truly quite different in some important aspects from the US, Canada and other countries. Here at BajaMLS we believe it is important for potential buyers to be represented by a bilingual attorney who is experienced in real estate law and comes highly recommended before signing any documents or taking out your checkbook. With that in mind, we asked our good friend and local attorney Rafael Solorzano to share some information on the topic.
Mexico, Real Estate and Foreigners…
by Rafael Solorzano
As you may know, Foreigners cannot directly own property in Mexico except when they enter an agreement with the federal government to abide by the rules of the country with regards to the land they acquire, thus they may form a Mexican owned company or set up a real estate trust.
You may also know that Border and Coastal areas and the whole peninsula of Baja California are constitutionally restricted and known as zona prohibida (forbidden zone) and that foreigners can set up a fideicomiso (real estate trusts) or may form a foreign owned company to acquire property.
Prohibition to foreigners to acquire real Estate in Mexico
The Mexican Constitution establishes the following:
Article 27. Ownership of the lands and waters within the boundaries of the national territory is vested originally in the Nation, which has had, and has, the right to transmit title thereof to private persons, thereby constituting private property.
Legal capacity to acquire ownership of lands and waters of the Nation shall be governed by the following provisions:
I. Only Mexicans by birth or naturalization and Mexican companies have the right to acquire ownership of lands, waters, and their appurtenances, or to obtain concessions for the exploitation of mines or of waters. The State may grant the same right to foreigners, provided they agree before the Ministry of Foreign Relations to consider themselves as nationals in respect to such property, and bind themselves not to invoke the protection of their governments in matters relating thereto; under penalty, in case of noncompliance with this agreement, of forfeiture of the property acquired to the Nation. Under no circumstances may foreigners acquire direct ownership of lands or waters within a zone of one hundred kilometers along the frontiers and of fifty kilometers along the shores of the country.
So how can foreigners acquire property in Mexico? If the property is located inland, that is, away from the border and coastal areas, by formalizing the purchase before a notary public where the buyers will enter an agreement to abide by the rules of the country with regards to the property they purchase. This agreement is known as the Calvo Clause.
This is a conceptual waiver that the Mexican government uses in general terms regarding foreigners that acquire rights in Mexico (like real estate) or that do business in Mexico. It basically states that the foreigners will consider themselves as Mexican nationals regarding the rights and obligations they acquire in Mexico and will not request that their foreign government intervene upon their behalf in such matters.
But, of course we must also note what was discussed above, the Constitution specifies: “Under no circumstances may foreigners acquire direct ownership of lands or waters within a zone of one hundred kilometers along the frontiers and of fifty kilometers along the shores of the country.” This my friends are what we know as “zona prohibida”, so, how is it that in spite of that prohibition foreigners can acquire land within borders and coastal areas in Mexico? Thanks to the Foreign Investment Law published in 1973.
Foreign Investment Law
The federal government published the Foreign Investment Law (1973) allowing foreign investment in a number of activities previously reserved to Mexicans but also authorized the acquisition of real estate. The first fideicomisos were allowed for a term of 30 years and were renewed prior to 2003, thus the Law was eformed to allow the renewal of fideicomisos this time for upt to 50 years, yes, renewable.
Article 10. Pursuant to section I of article 27 of the Mexican constitution, Mexican companies with a foreign exclusion clause or which have executed the agreement (Clausula Calvo) therein referred, may acquire title to real estate in Mexico.
Companies whose bylaws include the agreement discussed above may acquire title to real estate located in the restricted zone, also, foreign individuals may acquire rights to real state within the referred zone for residential purposes by establishing a real estate trust with a banking institution.
So, you may acquire land in Mexico through a real estate trust or by creating your foreign owned Mexican company.
Do you have questions? I am available for private consultation.
Rafael Solorzano is an attorney at law licensed in Mexico with 36 years of experience in real estate, corporate law and business development. He has deep, comprehensive cross-border and cross sector experience in various complex areas of service in Mexico including extensive knowledge of Maquila Operations and Bi-National / US-MEX Legal Regulations, business start-ups and cross border transactions. He served as a Trust Executive for Banco Nacional de México from 1988 To 1991 and was Director of Economic Development for the City of Tijuana, Baja California from 2010 to 2013. Rafael is fully bilingual and provides legal consultation services in negotiating the legal “ins and outs” of purchase contracts, property titles, bank trusts and related topics. He has assisted countless members of Talk Baja and his own Baja Legal Advice group on facebook in recent years to safely buy property in Mexico. Rafael has been recognized by the US Embassy in Mexico and is included on their attorney list for the Consular District of Baja California.
The Law Offices of Rafael Solorzano
Within Mexico: 664-188-7001