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LOS CABOS REAL ESTATE
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FOREIGN
INVESTMENT IN REAL ESTATE
Article 27 of the
Mexican constitution grants to the nation, ownership of the
land and water comprising national territory and then provides
for the power of the nation to transfer ownership rights of
such properties to private individuals, thereby creating private
property. This right is not full and absolute; rather it is
subordinated to a number of laws, and it may also be limited
in the public interest. Section 1 of the aforementioned article
27 grants the right to acquire dominion of land only to Mexicans
and grants the state the discretionary power to allow foreigners
to make such an acquisition, subject to the condition of considering
themselves as Mexicans with respect to the property acquired,
and not to invoke the protection of their home governments.
If said covenant is breached, all rights to the property shall
revert to the nation. Moreover, said section prohibits foreigners
from acquiring direct ownership over land and water within the
"Restricted Zone".
The "Restricted
Zone" is the strip of Mexican territory 100Kms. in depth
from the borders and 50 Kms. from the coast lines. In which
foreigners may not acquire direct ownership of real estate.
This prohibition does not exclude the possibility that foreigners
may use and enjoy real estate within this zone under legal titles
other than ownership, using various procedures, such as: A)
A 100% foreign owned Mexican company may directly acquire property
within this zone to perform non-residential activities: that
is, industrial, commercial and tourism activities. B) If the
real estate if for residential purposes, foreign individuals
or companies, and Mexican companies with 100% foreign capital
stock, may acquire rights to use and benefit from the real estate
through a trust, ( Fidecomiso ).
In such fidecomiso
the settler delivers to the trustee ( A Mexican Bank ) in an
irrevocable trust with transfer of title, the real estate located
in the "Restricted Zone", as consideration for an
amount (price ) received from the beneficiary of the trust (
the purchaser ). The beneficiary amount (price) received from
the beneficiary of the trust ( The purchaser ). The beneficiary
acquires the rights to use and benefit from the real estate,
including the rights to manage, operate, lease, inhabit and
encumber the same, as well as the right to obtain the fruits,
products and other benefits deriving from the utilization or
exploitation of the real estate, through third parties or the
trustee: and even transfer the rights to other acquirers, receiving
the proceeds from such sale. Duration of the trust shall be
for 50 years. Renewable for equal periods.
When foreigners intend
to purchase real property located in Mexico, they should conduct
a series of searches and inquiries to determine if the seller
has good title to the property. If there are any liens or encumbrances
on the property, and if claims and other possible contingencies
could affect ownership at a later stage. The following is a
suggested list of these searches and inquiries, including documents
needed.
TITLE DEEDS: Prior
history of ownership: copy of the registration folio at the
Public Registry of Property: acquisition of certificate of absence
of liens and of good standing from said Registry: search for
property conflicts and claims ( if applicable ) ; search for
the type of land and authorized usage and zoning compliance,
outstanding mortgages or other encumbrances on the property
or structures thereon: review of the payment of real estate
taxes and water contributions: physical identifications of the
boundaries and surface: existence of railroad spurs: lease agreements,
(if applicable): employee claims on the property: easements
and other property rights: verification for compliance of environmental
regulations.
If there are structures
it is important to verify the following: Construction permits
and licenses: authorization for the plans drafted: health license,
including Social Security payments: contracts for the construction
of buildings, installations and equipment: permits and licenses
for electric and gas installations and for wells, hydraulic
and pumping equipment: trust deed on the property: and operation
licenses, permits and approvals.
We
strongly suggest that any foreigner interested in purchasing
real property for any purpose in Mexico, contact competent legal
advice to assist in such an acquisition.
