This introductory guide assumes that you are considering the purchase of land or property in Mexico. Much of the information below will be taken care of by your lawyer but it is good to go into a purchase with all the knowledge possible.

Mexico's land costs can be lower, building and maintenance is cheaper, cost of ownership (taxes, utilities) is very low, and although there are 'horror stories' associated with buying property here (as in every country in the world?), the overwhelming majority of all real estate deals go through legally and smoothly.Buying property in Mexico, whether it's land, a serviced apartment or a house, can offer good value for money in comparison to prices in the US, Canada and Europe, although prices in some areas have risen dramatically in recent years and care should be taken in assessing a property's true value.

The reasons to buy property in Mexico come down to a personal choice, and depend on your individual circumstances. Perhaps you will be living in Mexico for some years and you see long term rental as 'wasted' money, or perhaps you're looking for an overseas property investment that will surrender a rental income, while providing you with a place to stay on holiday when you visit...

If you're considering the purchase of property in Mexico, you will need to undertake extensive research, choose your location and property very carefully, and ensure that you hire the right professionals and that the letter of the law is followed. Tens of thousands of foreigners have successfully purchased land and property in Mexico. With the right approach and by choosing the right people to guide you through the process, you will be very happy with your purchase in paradise.

Financing Mexican Real Estate

It's important to think carefully beforehand about how you are going to finance your property in Mexico.

We have great options from Banks and from Developers or Sellers. With rates as low as 4.2% financing has become a great option in Mexico.

Mexican Law: Property Ownership

Mexican Law provides for private ownership of land by foreigners, and its law is very specific about the way in which land rights should be transferred from seller to buyer, and also what type of lands are not eligible for public ownership. A Notary Public (see below) will guide you through the details of these, but generally:

• Property may be purchased and owned outright for residential use by foreign nationals outside of the 100km restricted land border zone, or outside of the 50km coastal zone;
• Inside of the restricted border/coastal zones, foreign nationals may own land through a fidecomiso (a trust) which is set up through a bank and provides for ownership of the land and property in all but name.

The Mexican Constitution previously banned foreign nationals from owning property that was within the restricted border zones. This old law was intended to protect Mexican soil from foreign invasion.

Fideicomiso: Land Trusts

Because the Constitution cannot be altered in this respect, the Government introduced a system of land trusts, so that foreign nationals could invest in property inside of the 'restricted' zones.

So now, if you as a foreigner, want to buy a dream home with a Caribbean view, you now can, except that it will be by means of a trust, set up through one of the main banks in Mexico.

The trust holds the deeds to the property, and you and/or other named persons which you specify are sole beneficiaries to the trust (and therefore the property). You have full rights to do whatever you like with your property: it can be developed (in accordance with local planning regulations), rented, leased, sold, or given away. In other words, you own the property in all but name.

The trust enables you to name a beneficiary upon your death, and you do not need to have a Mexican Will in order for your wishes in regard to the trust to be executed.

You do not have to be resident in Mexico to own property there, so there is no need to qualify for resident status under immigration laws in order to have a property investment in Mexico.

Mexican Law on property ownership is comprehensive and provides protection for the seller and the buyer in all property transactions, provided that the law is followed, and you ensure that all necessary documentation is present and that the procedures are adhered to. Your Notary Public (see below) is an important person in this process, and he/she will guide you.

Title Insurance in Mexico

When you buy real estate in Mexico, you would do well to consider taking out Title Insurance on the property.

Rates for Title Insurance depend on the property's value; pay-able once only at the point of purchase.Title Insurance covers you should the property you buy subsequently turn out to have liens associated with it.

This especially relevant if the property you are buying has been privatized, having previously been classified as being "ejido" lands (see next section), but even if this is not the case, Title Insurance will protect you if any other previously unforeseen lien or charge is brought against the property before you took possession of the Title Deed.

Consult with us in regard to matters relating to Title Insurance and price quotes.

Ejido (Agricultural) Lands in Mexico

Ejido (Agricultural) Lands lands have a long history in how they came into being. Essentially, they are similar to "commons land": after the revolution, communities and peasants were handed strips of land, in the main, to grow crops on, and they are called "ejidos". The ejidos are usually owned by a community of local people and the land is passed down from generation to generation within the communities which own the parcels. 

You CAN buy ejido land, but the sale requires the agreement of the whole community that 'owns' it. The process takes time and particular expertise in the field, and there are firms which specialize in this area of property law and have a good track record of transferring land from "commons" into private ownership. For example, many of the big resorts once on ejido lands are now in private ownership, although smaller parcels of land, too, may be successfully and legally transferred into provate hands provided the correct legal procedures and conditions are fulfilled.

Some big property developers may negotiate to buy a big plot of ejido land, with a view to "fractionalizing" it (usually introducing mains water, sewerage and electric to the land as well), to develop property and/or to sell off the individual plots to small property investors. Under these schemes, the land is often re-classified and made available for private ownership. The process is usually undertaken by professionals who understand Mexican property law intimately and the procedures can go on from a year to several years.

There was a time when ejido lands were best avoided by private investors, but times have changed. There now exist law firms who can assist small, private, investors to secure ejido land for private purchase. If you choose to purchase ejido land, you will need to factor the addtional legal and consulting fees, as well as adjust your time-scale expectations, as the negotiations and procedures to secure ejido land are longer and more complex than passing the title of land already in private onwership.

We recommend that you seek appropriate legal cousel when considering the purchase of land that is (or might be) ejido land -- whether or not a physical building exists presently on the land.

Part of a Notary Public's duty is to check for proper title of the land and, if it was ejido land, the Notary Public should ensure that the correct procedures have been followed so that private title ownership is assured. If the Notary Public tells you that the land is (or was) ejido land, then you may also wish to seek professional legal counsel to establish the legal position of the property, independently of the Notario.

The Role of the Notary Public in Mexico

The Notary Public is the most important person you will deal with when you make a property investment in Mexico. Do not confuse the role of the Notary Public in the US or UK with its counterpart in Mexico: they are quite different. In the UK for example, almost anyone can become a Notary Public. Not so in Mexico, where the role is appointed directly by the State Governor (the highest seat in State Public Office).

The Notary Public has the power to witness and certify important business documents which require absolute authenticity. The appointment also holds responsibility for the management and secure storage of original records. Notary Publics must be Mexicans of at least 35 year in age, they must have a degree in Law, have 3 year's work experience at a Notary Public office and they must pass a stringent exam. Those who pass, in time, are appointed as Notary Public by the State Governor.

Under Mexican Law, the deed to the property must be prepared by a Notary Public. As a buyer, it is your right to choose the Notary Public, and it should be your first port of call - or second after your lawyer.

The Notary Public will ensure that all documentation and permits are in order so that the transaction can proceed.

Important! Everything official to do with your transaction should be done via the Notary Public: Do not take anyone's word about documentation (like property deeds) being valid - take copies to the Notary Public for official verification. A good lawyer will be able to advise you on such matters.

Common Checks that should be made

*These are all things that you should know but will be taken care of by the lawyer and Notary Public*

The Notary Public and/or your lawyer will do a series of checks on the property and ensure that the property has a 'clean' history, and that there are no liens on the land (e.g. an old unpaid mortgage). Under Mexican Law, liens are passed on with title of the land - BEWARE!

Your Notary Public should also check that all land taxes have been paid during the last five years (if applicable) and that utilities (electric, gas, water and phone) have also been paid during the last two years. By Law, you are not liable to debts after these times.

Other items to be checked include: Checking all buildings are on tax registers and have the required building permits, utilities were legally installed and payments are up-to-date, the property is not jointly owned, or if it is, that both (or all) owners agree to the sale, and that the seller/s has/have the right to sell.

The Notary Public is legally responsible to ensure that all documents are in order and that all legal procedures have been adhered to. He will do a thorough check and will not destroy his reputation by hiding any problems, or potential problems from you.

Read the Outline Process below for more information about the role of Notary Public.

Outline of Property Purchase Procedure in Mexico

If you have hired a lawyer (which is recommended but not compulsory) then he/she will likely act as an intermediary between you and the Notary Public / Seller.

The exact process will vary in each case, but  your lawyer will follow a process that goes along these lines:

• Find a property you like; agree a price verbally;
• An agreement to sell/buy, with detailed costs, inclusions and exclusions, as well as deadlines, is set out in an initial "Convenio de Compra/Venta" (sale agreement), at which point a deposit (5-10%) is paid by the buyer and cancellation penalties are set (usually equal to the deposit) if either party pulls-out;
• If the property is inside the 50/100km coastal/border zone, you will need to set up a trust;
• Next, you seek permission from the Foreign Secretary's office (a formality) to buy land. You will be asked to sign the "Calvo Clause", which states that you will not seek foreign jurisdiction in dealings with your property transaction;
• If you are buying from a developer (e.g. a Real Estate Development) advise the Notary Public who will ensure the developer's permits are in order;
• Get a copy of the Land / Property Deeds from the seller. The Notary Public will check these out. Ask the Notary Public to check that the land is not Ejido land, as discussed earlier in this guide;
• An official appraisal of the Land (Avaluo) needs to be carried out; your Public Notary can arrange this.
• Your Notary Public (or lawyer) will ask for official documents that can include (but are not limited to): Photo ID (passport), Birth Certificates, Marriage Certificates (if appropriate), and your visa (could be a Tourist Permit) to prove that your stay in Mexico is legal;
• The seller will need to present to the Notary Public documents including (but not limited to): original property deed, up-to-date tax receipts for the property, public utilities bills (shown as paid), plus up-to-date details of land-service fees (shown as paid);
• Capital Gains Tax is paid by the seller, unless you have agreed to pay CGT as part of the buying agreement. The Notary Public will state how much this is;
• Payment is made (see note below) at the time when the deed is signed over to you, and this is done at the Notary Public's office;
• The Notary Public's and Solicitors (if applicable) fees are paid at this time as well, as well as other taxes associated with land purchase (see Taxes, below).

Payment: Whether you are paying with cash or via some kind of financing you (or your lawyer representing you) will need to have the agreed funds available for hand-over at the Notary Public's office on the date the deeds are signed across to you.

Money Transfer Declaration: Cash or monetary instruments (of any kind) with a value of or exceeding USD$10,000 MUST be declared when you enter Mexico (and the enter/exit the USA - even if you are in transit to Mexico from elsewhere via the US). There are no limits on how much you can transfer in or out of either country - but sums over the US$10K limit must be declared on a special form.

The Catastro

The Catastro value will vary depending on the area in which you intend to buy, and can be a fraction of the commercial value of the property. This Catastro is used by the Notary Public to assess the value of the annual equivalent of the "Local Property Tax", known in Mexico as the Predial. Although the Catastro is an essential number for working out tax liabilities, in practice it serves of no use in assessing the commercial value of a property.

The Predial

The Predial is payable annually, on January 1st or soon after. In some areas, bilols are dispatched to house owners; in some other areas you don't get a bill; you just know you have to pay it in January, and you show up at the Municipal building in town to do so each year.

You will find the Predial is very low (and could border on insignificant) when compared to say, property taxes (even at the lowest rates) in the US, Canada and in Europe, Council Tax in the UK.

This is one of the reasons why cost of property ownership is low in Mexico.

Costs and Taxes: Buying

These are all included in the closing costs and will be handled by your lawyer. But for a better understanding:

Acquisition Tax: This Tax is paid on the sale value of the property and is equivalent to about 2% depending on the State in which you buy. This tax is paid whether the property is sold, transferred, donated, placed into trust, split off or merged.

VAT (Sales Tax): No Value Added Tax (Sales Tax) is payable on residential property. Commercial Property transactions are liable to VAT at the current rate in addition to the Acquisitions Tax.

Appraisal Tax: The Tax Authority may choose to perform a commercial appraisal of the property after you purchase it. If the appraisal value is more greater than 10% of the price you paid for it, you will be asked to pay 20% tax on the difference between the two amounts. This sum is due within 15 days of the date of the appraisal report.

Registry Fee: In order to have the Public Records updated, a 1.3% fee (based on the value of the transaction) is paid by the buyer.

Public Notary Fees: You will be required to pay fees for services provided by the Notary Public. These are about 1.5% of the transaction value, plus the cost of the official appraisal (as described in Valuation section, for tax purposes).

Bank Trust: If you purchase property within the 50/100km restricted zones, you will need a bank to set up and manage a trust for you. Shop around, as prices vary from Bank to Bank. Set-up fees can cost around US$1000, with annual service charges between US$1000-$2000. The annual service fee will cover legal obligations (e.g. the filing of necessary documents annually) by the bank on your behalf.

Lawyer / Attorney Fees: If you hire a lawyer / attorney, you will also need to pay him/her with fees for services they undertake on your behalf. These should be negotiated in advance but will be about $2,000 usd for most condo or home sales.

Foreign Office Permit: Your permit from the Mexican foreign office will cost around US$150.

Service Fees: If you are buying a house in a gated community, or an apartment, be sure to check on the annual service fees, and have these put in writing. Service fees can range from US$100 a year to US$1000+ a year, depending on location, number of houses or apartments in the enclosure and amenities offered.

Title Insurance: When you buy property in Mexico, you would do well to consider purchasing Title Insurance. Rates are based on the sale value of the property and are charged at around US$5-US$5.50 per US$1,000 of the value.

Costs and Taxes: Selling

When you sell a property in Mexico, you will be subject to the fees of any professional services you contract, plus the following taxes and fees:

Income Tax on Property Gains: If the home has not been your main residence for at least the last two years, will be required to pay income tax on the property. You may either pay 20% on the gross amount of the transaction, or elect to pay 40% tax on the net profit obtained from the property. This law prevents short-term speculation on the property market. Commercial property is taxed at above rates, regardless.

Agent Fees: If you employ an agent, expect charges of around 7-8% of the value of the sale as a fee. You will also need to pay IVA (Sales Tax) on agent fees