Knowing and understanding the important process of purchasing real estate in Cabo San Lucas will protect and secure your home investment. Understanding the Title policies and the Third Party Escrow process in Mexico will assure your investment is safe! Every real estate transaction is overseen by a full-time, bi-lingual closing officer who ensures the integrity of your purchase – from start to finish. We understand the local regulations regarding ownership of real estate in Mexico by foreign investors so we apply this knowledge to work for you, reassuring your investment is protected and secure.
Below you will find some helpful information regarding purchasing in Cabo San Lucas:
- Can non-Mexicans own real estate in Mexico?
- What is the history of the Mexican property trust / fideicomiso?
- What is the function of the trustee bank?
- What rights do I hold as a purchaser of Mexican real estate?
- How long does it take to establish a trust?
- When do I pay for my property?
- Is Title Insurance necessary?
- How do I ensure ownership of the land that I am going to purchase?
Can non-Mexicans own real estate in Mexico?
Yes! Ownership of real estate in Mexico is via a Mexican land trust called a fideicomiso (fee-day-co-me-so). The trust has a term of 50 years and can be renewed in perpetuity to allow for long-term control of the asset or to will the land from generation to generation. For this purpose, there is secure U.S., Canada financing and Title Insurance on properties purchased in Mexico. For more information about purchasing in Cabo San Lucas, visit our Purchase in Cabo San Lucas Page
What is the history of the Mexican property trust / fideicomiso?
With the advent of the North American Free Trade Agreement (NAFTA), the Mexican government recognized that it was crucial to make foreign investment in Mexico safer and easier for non-Mexicans. Because the Mexican Constitution prohibits non-Mexicans from purchasing or owning real estate within 60 miles of the U.S. international border, or within 30 miles of the Mexican coast, an innovative and secure method of holding title was created. This method allows non-Mexicans ownership through a Mexican property trust called a Fideicomiso. This is a trust agreement, much like an estate trust in the U.S., which gives the Purchaser all of the rights of ownership.
In order to gain the rights of ownership, the Department of Foreign Affairs in Mexico City issues a permit to the Mexican bank of the Purchaser’s choice, allowing the bank to act as Purchaser of the property. Essentially, the bank acts as the “Trustee” for the trust and the Purchaser is the “Beneficiary” of the trust. The trust is not an asset of the bank; the banks simply act as the Trustee to hold the trust.
What is the function of the trustee bank?
Much like living wills or estate trusts in the U.S., the Mexican bank, or Trustee, takes instruction only from the Beneficiary of the trust (the Purchaser). The Beneficiary has the right to use, occupy, lease and possess the property, including the right to build on it or otherwise improve it. The Beneficiary may also sell the property by instructing the Trustee to transfer the rights to another qualified Purchaser, or bequeath the property to an Inheritor. The initial term of the trust is 50 years, however the trust can be renewed for additional periods of 50 years indefinitely, providing for long-term control of the asset.
What rights do I hold as a purchaser of Mexican real estate?
The Purchaser holds the same rights as a property owner in the U.S. or Canada, including the right to enjoy, sell, rent, improve the property, etc. This is not to be confused with a land lease. The property purchased is placed in a trust with the Purchaser named as the Beneficiary of the trust — the Purchaser is not a lessee. If the property purchased is already held in a trust, the Purchaser has the option of assuming that trust, or having the property vested in a new trust.
How long does it take to establish a trust?
You will work with Federal and State notaries for all of your closings in order to secure your trust. A Notario Publico in Mexico is much different than a Notary Public in the U.S. In Mexico, Notarios are specialized attorneys who act on behalf of the state and federal government in relation to any transaction; they are comparable to a U.S. Clerk of Courts.
On average, you can obtain your trust within 60-90 days. In some cases title has been transferred in as little as two to three weeks. We will oversee the entire process and make certain you understand each and every step involved. For your benefit, we can even provide you with a sample trust in English for your review.
Many real estate purchases in Mexico have only a simple buy/ sell agreement between the Purchaser and the Seller as evidence of ownership. This is not a safe method of ownership and is not recommended.
When do I pay for my property?
The Purchaser should only release funds when the Purchaser holds clear title. By utilizing our U.S. Third Party Escrow service, your money is held in an individually numbered escrow account until your trust is complete and the property rights have been transferred to you, the Purchaser.
Is Title Insurance necessary?
Whether you purchase real estate in the U.S., Canada or Mexico, it is always recommended to have Title Insurance for every property you purchase. We insure our cars, homes and our health — it is just as important to insure your largest investments: your home property.
Title Insurance is available for properties in Mexico purchased by U.S. and Mexican citizens.
Important Fact: Just because you have a trust does not ensure you have free and clear title. Title insurance is a necessity.
Important Fact: When we perform a property search, the property’s title is searched all the way back to the Mexican Revolution. Most trust-securing title searches only go back to one or two owners of record.
How do I ensure ownership of the land that I am going to purchase?
In the trust document the Purchaser must name the Beneficiary or foreign Owner of the property. The purchaser can be an individual, multiple partners, a foreign corporation, an estate trust, a living will, or another entity. The Trustee of the trust (the Mexican bank) will take direction from whomever you name as the Beneficiary. Note: You can name a U.S. corporation as the Beneficiary of the trust. This is perfectly legal.
Important Note about a U.S Corporation:
• If you sell the shares in the U.S. corporation, you have created a real estate transaction in Mexico and all Mexican capital gains taxes apply.
• You can own a property in a Mexican corporation and take title fee simple only if the property is for development or investment purposes.
• You cannot own property through Mexican corporation to bypass the trust process.
• It is against the law for a foreigner to own property in a Mexican corporation for residential purposes.
If you are considering a real estate purchase in Cabo San Lucas, make certain everything is done correctly. Allow CaboProperties to put our knowledge and experience to work for you. We work with only qualified brokers assuring our only interest is representing you in a safe, solid and secure real estate transaction. Contact US today with any questions or concerns regarding purchasing in Cabo San Lucas.
Until WE meet in Cabo…