FAQs

1. Can foreigners own land in Mexico?  How?
   
2. Which should I choose, the corporation system or the Fideicomiso system?
   
3. How do I know the property I want to purchase has good title?
   
4. How do I know the title I am getting is really for the land I saw?
5. Do I have to place a deposit on the property I want to buy?
6. How does the final transfer of funds take place?
7. What is a Notario?
8. Do I have to come back to Mexico to attend the closing?
9. Is financing available?
10. What if the Mexican government decides to take my land?
11. What are squatter’s rights like in Mexico?
12. How much are property taxes?
13. How much does it cost to build?
14. How much are closing costs?
15. What about airport access to this part of Mexico?
16. What is the Federal Zone and a Federal Zone concession?
17. Do you have references?

• Can foreigners own land in Mexico?  How?

The short answer is YES.  Here is the long answer:  in 1917, the Mexican Constitution was drafted and passed into law.  In the Constitution, there was a provision that created what is called the Restricted Zone (RZ).  The RZ is 100 km (62 miles) from the borders and 50 km (31 miles) from the coasts.  Within the RZ, only Mexicans could own the land.  Such laws were common around the world as nations were being created; newly founded countries saw such restrictions as a way of protecting their borders.

Around 1970 the Mexican government realized the country was missing out on billions of dollars in foreign investment because of the restrictions on foreign ownership within the RZ.  Therefore, a law was passed in order to bypass these limitations.  This law states that a trust (called a Fideicomiso... "Fee-day-com-ee-so") can be established with a foreigner as the sole and exclusive beneficiary.  A Mexican bank of your choosing holds the deed to the land and administers the Fideicomiso.  You control the land and can improve it, rent it, sell it, etc.  Due to the passing of this law, major foreign investment flowed into Mexico and we saw world-class destinations such as Cancun, Cozumel, Acapulco, Puerto Vallarta, Ixtapa, etc. take off.

In 1994 the newest law pertaining to foreign ownership in the RZ, often referred to as “the corporation law”, was passed.  This law stipulates that a Mexican Corporation can be 100% owned by foreigners (prior to this a Mexican Corporation had to be at least 51% Mexican owned).  The corporation law is as follows:

1. A Mexican Corporation is a legal Mexican citizen, with all the rights and privileges thereof.
2. You own 100% of the corporation and hold all the papers to it. 
3. Your Mexican Corporation holds the deed to the property or properties, meaning you get to physically possess the deed(s).   

• Which should I choose, the corporation system or the Fideicomiso system?

This is an age old debate among foreigners investing in Mexico and the answer is: it depends!  For a person who simply wants to buy a home and has no intention to buy anymore property, to make any income from their property, or to start a business, the Fideicomiso system will work just fine.  However, if later you decide to purchase more property you will need a separate Fideicomiso, which can become spendy.  In addition, the Mexican bank who grants you the Fideicomiso charges an annual "administration fee” of $1000+ USD for doing nothing more than holding the deed on your behalf.  The Fidecomiso has a life span of 99 years and is transferable.

The corporation system is more flexible as it allows you to purchase as many properties as you like and allows you to legally make income from your property (i.e. via rentals).  You may add as many properties as you like to the corporation at any time and you may improve, sell, or subdivide them as you like.  Furthermore, if you decide you would like to start a business in Mexico, by owning a Mexican Corporation you may do so anytime.  Keep in mind that if you choose the corporation system you will need to hire a Mexican accountant to do tax filings for you.  Bacalar Properties can provide you with a list of recommended local accountants.  Your Mexican Corporation is fully transferable and can be passed on to your heirs.  The life span of the Corporation is 99 years, at which point it can be renewed for another 99 years, and so on.

In our experience most foreign buyers these days are opting to use the corporation  system, but the choice is entirely up to you. 

• How do I know the property I want to purchase has good title?     

It is necessary to work with conscientious professionals who know what they are doing, know how the system works, and guarantee you a property with clear  title. 

Bacalar Properties and your Mexican real estate attorney both go through several steps to make sure the land you purchase has clear title (resulting in a comprehensive title history check) and accurate survey. 

Because of demand from foreigners wary of purchasing property in Mexico and unsure how the system here works, very recently Stewart Title and First American Title have begun to offer title insurance for Mexican properties.  

These title insurance companies do the exact same comprehensive title history check that our real estate attorneys do, reviewing the exact same documents in the exact same government archives.  We won't discourage our clients from using this service, however in our many years of experience in the region we feel this is a redundant service IF you are purchasing through a professional, established organization such as Bacalar Properties.  The founders of Bacalar Properties have personally purchased many Mexican properties and have not used these services for our personal property acquisitions.  However, the decision (and expense), is completely up to you.  

• How does the final transfer of funds take place?

One service offered by Stewart Title that we really like is their Escrow service.  For about $600 USD they will hold your funds in escrow until closing is complete.  

• What is a Notario?
  

Because of the name many foreigners mistakenly believe a Mexican Notario is the equivalent of a Notary in the US.  However, in Mexico a Notario is a government appointed “super attorney”; to be appointed Notario is the apex of an attorney’s career in Mexico.  Only the most respected and experienced attorneys are given this appointment (there are only 33 in the entire state of Quintana Roo).  The Notario witnesses and signs off on all property transactions and stamps the documents with his or her signature and seal.

• Do I have to come back to Mexico to attend the closing?
  

No. You may close “in absentia” by granting a temporary power of attorney to anyone legally residing in Mexico.  This person is legally empowered to sign the closing documents on your behalf.  Many buyers authorize either their Mexican attorney, accountant, or real estate agent for this purpose.  This temporary power of attorney is activity-specific, meaning that after the person signs the closing documents for you the power of attorney expires.  An extended power of attorney can also be granted (handy if you plan on making several property acquisitions).   Closing in absentia is a common practice and we can assist you with this.   

• Is financing available?

Yes, but the best interest rates are upwards of 10%.  Most foreign buyers find it more economical to generate the funds in their home country, for example via a home equity line, and close on their Mexican property in full.

• What if the Mexican government decides to take my land?

This is probably the most common concern we hear from our clients.  Mexico is a land of laws and there are strict, long-established private property laws. Both the Fidecomiso and the Corporation systems of ownership give you the same legal right to ownership as any Mexican citizen. Would anyone invest in Mexico if the government could confiscate your investment?  Mexico has benefited from hundreds of billions of dollars in foreign investment over the last few decades because it is among the safest and most stable countries to invest in, period.

• What are squatter’s rights like in Mexico?

It is actually easier in some US states for a squatter to steal your land than it is in Mexico.  In Mexico, in order to be granted title to land one does not own but is “squatting on”, the squatter must prove to the government that he has been residing on the property for 5 years in an obvious manner, which means he must make it known to everyone that he resides there (i.e. paying the property tax, receiving mail, having utility services placed in his name at the address of the property, etc).  He cannot simply hide out on the land for 5 years and then petition the government for the title.

If you do not notice this use of your property the squatter can, after 5 years, petition the government for your deed.  However, the government must make every attempt to notify you of this by mail, by phone, and by placing an ad in the most circulated local newspaper.  They will ask you if you consent to having your deed transferred to the squatter.  It comes as no surprise that most people say no.

The government will permit the squatter to remain on your land for up to another 5 years if you still don’t notice this use of your land.  At this time, (now we are at 10 years of obvious use of your property) the squatter can petition again for the deed to your land and again, the government must make every attempt to contact you.  If you fail to respond again, the government will authorize the transfer of your land and deed to the squatter. 

To summarize, you must be absent and unreachable for 10 years in order to be at risk of losing your land. You see, politicians and lawmakers in Mexico have historically been the elite class who also own vast quantities of land.  So it’s no surprise they’ve made squatter’s rights very difficult in order to protect their own interests.

• How much are property taxes?

Approximately $50 USD annually per $100,000 USD of property.  Real estate taxes are not used as a major source of government income as in other countries.  Your Mexican attorney or accountant can pay property taxes for you for a nominal fee.

• How much does it cost to build?

$50 to $90 USD per square foot.  $90 per square foot buys you very high-end  construction with marble floors, marble kitchens and baths, high ceilings, and a tiled roof.

• How much are closing costs?

Fees for closing usually come to between 6% and 7% of the cost of the property. The fees will cover an acquisition tax, property-registration fee, a fee for the tax certificate, the title-search fee, the Attorney’s fees, and any miscellaneous clerical fees, as well as a value-added tax on anyone whose services were engaged in facilitating the transaction.

• What about airport access to this part of Mexico?

There are two options when arriving by air.  Many people find great buys on international flights into Cancun and will spend a day or two up on the Mayan Riviera (the Cancun-Playa del Carmen-Tulum corridor) before driving down to Bacalar or the Costa Maya, which are both about a 4 hour drive on very good roads from the Cancun airport.  Many people opt to store a vehicle at their home in Bacalar or Costa Maya and take a bus from the airport.  First class busses here are frequent, very comfortable, and safe.

Another option which I use whenever possible are the flights out of Chetumal, especially handy for people in Bacalar as the airport is only 30 minutes away.  Chetumal is a small airport but flight options have expanded over the last few years and will continue to do so in the future.  There are currently no direct flights into Chetumal from North America or Europe but there are four daily flights connecting Chetumal with Mexico City (two flights leaving and two arriving).  From Mexico City there are direct flights to most major North American and some European cities.  One thing I love about the Chetumal airport is that there is almost no wait to check in and go through security; I’ve showed up 15 minutes before a flight and got on (ok, cutting it that close is not recommended!).

The option also exists of taking a 30 minute connecting flight from Cancun to Chetumal, and this will soon also be an option from Cancun to the Costa Maya airport.

• What is the Federal Zone and a Federal Zone concession?

As in the US, all Mexican beaches are Federal property.  The Federal Zone is 20 meters (66 feet) from high tide on the coasts, and 10m (33ft) for lakefront.  This is the closest you can build your home to the water.  The Federal Zone is not owned by you but may be enjoyed by you.  You can build a gazebo, a wooden pier, a dock, etc, but concrete structures are no longer allowed in the Federal Zone.  To put a wooden structure in the Federal Zone you need to have a federal zone “concession”, which your Mexican attorney can obtain for you.    

• Do you have references?

Yes, we will be happy to provide you with a list of our clients you may contact to inquire about their experience with us.

Any unanswered questions?  Visit the Contact Us section of our website, we’ll be happy to help.