Owning Property

Are there restrictions to purchasing property in Mexico?
Non-Mexican citizens are able to purchase property in Mexico, with only properties that are located so many miles from the coast and borders owned through a trust deed established with a Mexican bank. Foreigners may directly own rural or urban land in the interior of Mexico, with certain limitations on specific agricultural tracts.

Financing
Real estate transactions for foreigners in Mexico are generally cash transactions, with limited cases of owner financing available. The high cost of money (interest rates) has made financing properties unattractive to most. Until recently, there has been an absence of mortgage company services in the Republic. There are now foreign companies making medium term loans available for foreign residents with temporary and permanent visas who have established credit in the country. You may wish to investigate this.

Direct Deed Ownership
The deed is the history of the property and will indicate the legal owner. The Direct Property Deed (Escritura Publica en Dominio Directo) is outright ownership of the property. The buyer is listed on the deed as the direct owner.

There is no yearly or administration fee, as there is with a bank trust. However, with a Direct Property Deed there is a process of application with the Exterior Relation Department (Departamento de Relaciones Exteriores) for each foreigner who is registered on the deed and a flat fee of $1,000 Mexico pesos per person.

A beneficiary can be designated in a Direct Property Deed. The beneficiary must be a spouse, parent or offspring. There is no “and/or” designation in a direct deed. This applies only to your first property owned. For any additional property you might purchase, ownership is established through a will. For all property owners a Mexican will is strongly recommended. A notary can help you structure your will.

Trust Deed Ownership in Mexico

Why trust deed ownership?
Trust deed ownership is used mostly by foreigners who own property in Mexico, and can be structured in any way you’d like.

It has the benefit of the bank “overseeing” the deed.
A further benefit is that co-owners can be listed on a trust deed using “and/or” (“solidaridad active”).
Upon the demise of one co-owner, the property automatically goes to the other and probate is avoided.
The importance of the designation “and/or” cannot be understated as this allows either to sell the property and does not require the agreement and signature of all parties.
Another advantage is that a beneficiary can be named, which also avoids probate. This beneficiary may be unrelated to the owner.

How does a trust deed work?
The bank (known as the trustee) holds the trust deed for the person who is purchasing the property (known as the beneficiary). This property is not part of the bank’s assets and cannot be subject to a lien or attached for bank obligations. The beneficiary has all ownership rights to the property and may sell, lease, mortgage, pass to heirs, etc., or do any other legal thing with the property.

How long does a trust deed last?
As of 1994, trusts may be granted and extended in 50-year periods. If you purchase property currently held in a trust deed, a new 50-year period can be established or the existing trust deed may be assigned. Trusts are renewable at any time by simple application. Multiple properties may be held in one single trust. It was never the intent that the properties pass back to the government at the end of the trust period, which has been a common fear of purchasers. This just does not happen.

Trustee Fees
There is an annual fee charged by the trustee bank for management of the trust. The amount charged varies. Ask your Ajijic Real Estate professional for current bank fees.

How are trust deeds established?
The “fideicomiso” or trust is established by a Notary. In Mexico, the designation of an attorney as a Notary represents a high level of legal standing, and their services are required for the transfer of real estate. Because of the large number of foreign-owned properties in Mexico, and especially in areas such as Ajijic, establishing a trust has become a routine procedure. It is not a complicated process, and standard forms are utilized. As part of the escrow process, your Ajijic Real Estate sales associate will assist you in your dealings with your notary.

Maintaining Your Property in Your Absence
For condominium owners, maintenance and security is usually handled by the Condominium Owners Association, paid for via monthly fees.

Property owners who will be away from their homes for any length of time may want to consider a property management company, which provides services at a very reasonable cost. Services typically include maintenance and repairs, pool cleaning, payment of employee salaries, utilities and taxes, mail forwarding, etc. They can also find renters for you, collect the rent, and maintain your home during the rental period. There are several such companies in town, and we suggest contracting with one which specializes only in property management.

Rental Potential
In Ajijic and the immediate surrounding community there exists a very strong rental market for both homes and condos. Good properties that are well maintained can be expected to rent quickly and easily, year-round.

Utilities
Public services – including water, gas and sanitation (if you purchase in select gated communities) – are much lower than comparable services in the United States or Canada, with electricity being similar, depending on usage.

Insurance
The various types of insurance, including automobile, property, liability, damage, and earthquake are all readily available in Mexico, at low relative costs.