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Real Estate questions and answers gives you a genera idea

1-Can foreigners really own property in Mexico?
2-Who is involved in real estate transactions in Mexico?
3-What is the restricted zone and " Fideicomiso"

4-Mexican corporations with foreign investment
5-Are the permits that Article Twenty Seven requires of foreigners hard to get?
6-What about condominiums or houses located in Acapulco, Puerto Vallarta,
Cancun, or any of the resorts of Mexico'?

7-Are time shares legal to obtain by foreigners in Mexico?
8-What happens if a foreigner decides to sell after some years?
9-Can the foreigner rent or sublet his apartment in these condominiums or trusts?
10-What happens if the beneficiary dies?
11-How is a trust set up?
12-What are the responsibilities of the beneficiary?
13-Is it true that the new law that regulates foreign investment is against new investments?
14-Can foreign investors come to Mexico and buy an established industry?
15-What activities are reserved to Mexican citizens?
16-Which are the activities where capital is welcome?
17-Are the percentages to be owned by foreigners inflexible?
18-What happens with investments already made by foreigners not linked with
foreign centers of decision?

19-What should you do when buying a home?
20-Incorporating a Business in Mexico

       
 

 

It is extremely important to retain the services of a Mexican attorney, or Mexican Notary before doing any transaction like the mentioned below.

CAN FOREIGNERS REALLY OWN PROPERTY IN MEXICO?

Yes, Americans and other foreigners may obtain direct ownership of property
in the interior of Mexico. However, under Mexican law, foreigners cannot own
property outright within the restricted zone. Instead, a real estate trust
must be set up to hold title for the foreigner. Since foreigners are not
able to enter into contracts in buy real estate, they must have a bank act
on their behalf, much as a trust is use to hold property for minors because
they also can not contract. The following is a brief outline of the law
regarding such trust, known as "fideicomisos", but potential buyers should
always get advice and have all real estate transactions overview by a
licensed Mexican attorney.

WHO'S INVOLVED IN REAL ESTATE TRANSACTIONS IN MEXICO?

Normally, there are three to four players involved in any real estate
transaction in the restricted zone:

A real estate company
The buyer's lawyer
A bank
A public notary
All four are helpful in their respective areas in assisting with real estate
transactions. Transactions outside of the restricted zone do not involve a
bank since it is not necessary to establish a real estate trust in those
areas. Otherwise the transactions are much the same. Because of the
similarities of real estate transactions in general, it is easy to assume
that the basic terms and principles which are familiar in the United States
also hold true in Mexico. This assumption becomes easier to make when United
States real estate terminology is adopted for transactions in Mexico. Much
of the paperwork is similar, if not exactly the same, as that used in the
US. Although, there are many aspects of Mexican real estate transactions
that are identical to procedures carried out in the United States, there are
many aspects that are completely different. As a rule, a foreigner should
assume nothing.
Mexican real estate transactions are not carried out in the same manner as
United States real estate transactions. The buyer must retain professionals
to assist in the transaction. Mexico has yet to regulate real estate
transactions. Real estate agents and brokers are not legally licensed in
Mexico. Consequently, a foreign buyer cannot always depend on the normal
safeguards that would be applied to real estate transactions in the United
States. The old saying "let the buyer beware" is very appropriate. Anyone
can set up a real estate company in Mexico. There are no special
requirements or brokerage licenses to obtain. A would-be real estate agent
merely has to establish a Mexican corporation, obtain a work visa, and he is
in business.

There are good reasons why the real estate industry in the United States is
highly regulated. Until the real estate industry is regulated in Mexico,
there will always be some real estate companies who prefer that buyers know
as little as possible about real estate transactions. After all, a buyer
cannot ask questions if he does not have any knowledge of the laws.

Currently there is nothing similar to a Real Estate Commissioner or a
Department of Real Estate in Mexico. Some states are beginning to look at
some kind of real estate legislation, but it might be some time before this
is a reality. The American Embassy and the American consulates in Mexico are
good places to start when trying to determine if a real estate company is
reputable. Some of the real estate companies have established quite a
reputation for themselves at some of the Consulates.

A Mexican attorney should be involved to draw up contracts and to review the
conditions and terms of sale. Additionally, an attorney can do a title
search and point out any problems or alternatives a buyer may have. The
buyer should always have his or her own attorney rather than using the
attorney of the seller or some attorney used by a real estate company free
of charge. As the old saying goes, you get what you pay for, and usually if
someone's services are offered free of charge you are probably paying for
them in some other way. Legally, only a licensed Mexican attorney should
provide advice on the law. If an attorney is licensed in Mexico he should be
able to produce a "cédula profesional." This document is a registered
license to practice law in Mexico and includes a photo of the attorney and
his signature. To be sure that an attorney is licensed in Mexico, a foreign
buyer should ask to see the attorney's license, or have the attorney's
license number included in a retainer agreement before employing any
services.

American attorneys are not licensed to practice law in Mexico and should not
give advice on Mexican Law. I should clarify, here, that I am referring to
individuals who are licensed to practice law in the United States, and not
merely individuals who are citizens of that country. There are currently
very few Americans who are licensed to practice law in Mexico. The fact that
a person is licensed to practice law in the United States in no way allows
him or her to practice law in Mexico: Mexican or United States law.

Besides formalizing your real estate transaction, an attorney can be very
helpful in saving you money. This is because attorneys are involved in many
different transactions and have contacts with banks, notaries, and the
Mexican government on a regular basis. Because of this they are aware of the
most competitive cost and fees involved in a transaction and can make sure
that the buyer is given the best possible prices. An attorney can also
inform the buyer regarding his or her legal options and by doing so can make
sure that no opportunities are missed: tax planning considerations, closing
costs which should be paid by the seller, and ways of taking title to the
trust rights which make sense for the particular circumstances of a specific
buyer. Very often one piece of good advice can save the buyer thousands of
dollars in tax savings or other savings when the buyer eventually sells the
property.

When looking for an attorney it is important to remember that any Mexican
attorney can normally handle a real estate transaction. The buyer is not
limited to only the local attorneys where the property is located. All real
estate transactions involving a trust are governed by federal law. This
means that all such transactions are carried out the same way regardless if
the property is in Cancun or Los Cabos.

THE RESTRICTED ZONE AND "FIDEICOMISOS"


The law declares that the Mexican nation has original ownership to all land
and water in Mexico, as well as minerals, salts, ore deposits, natural gas
and oil; but that such ownership may be assigned to individuals.

The Mexican Constitution prohibits direct ownership of real estate by
foreigners in what has come to be known as the "restricted zone." The
restricted zone encompasses all land located within 100 kilometers (about 62
miles) of any Mexican border, and within 50 kilometers (about 31 miles) of
any Mexican coastline. However, in order to permit foreign investment in
these areas, the Mexican government created the "fideicomiso,"
(FEE-DAY-E-CO-ME-SO) which is, roughly translated, a real estate trust.
Essentially, this type of trust is similar to trusts set up in the United
States, but a Mexican bank must be designated as the trustee and, as such,
has title to the property and is the owner of record. The Mexican Government
created the "fideicomiso" to reconcile the problems involved in developing
the restricted zone and to attract foreign capital. This enabled foreigners,
as beneficiaries of the trusts, to enjoy unrestricted use of land located in
the restricted zone without violating the law.

A "fideicomiso" is a trust agreement created for the benefit of a foreign
buyer, executed between a Mexican bank and the seller of property in the
restricted zone. Foreign buyers cannot own real estate in the restricted
zone due to Constitutional restrictions. The bank acts on behalf of the
foreign buyer, taking title to real property. The bank, as trustee, buys the
property for the foreigner, then has a fiduciary obligation to follow
instructions given by the foreigner who is the trust beneficiary. The trust
beneficiary retains and enjoys all the rights of ownership while the bank
holds title to the property. The foreigner is entitled to use, enjoy, and
even sell the property that is held in trust at its market value to any
eligible buyer.

In order to allow foreigners to enter into the agreement contained in the
Calvo Clause, Mexico requires all foreigners to apply for and obtain a
permit from the Ministry of Foreign Affairs prior to contracting to acquire
real estate in Mexico. This is currently done by the trustee/bank at the
time a real estate trust is set-up.

Given the changes made for 1997 in the foreign investment Law, and the fact
that a buyer can now apply for and obtain a trust permit in a matter of
days, it is always better to secure the trust permit from the Ministry of
Foreign Affairs before entering into any contract.

The bank, as trustee, must get a permit from the Ministry of Foreign Affairs
to establish a real estate trust and acquire rights on real property located
within the restricted zone. The purpose of the trust is to allow the trust's
beneficiary the use and exploitation of the property without constituting
real property rights. The beneficiaries of the trust (fideicomisarios) may
be:

Mexican corporations with foreign investment

Foreign individuals or legal entities
The law defines "use" and "exploitation" as the right to use or possess the
property, including its fruits, products, or any revenue that results from
its operation and exploitation by third parties or from the bank/trustee.
The law does not clarify how trust permits will be issued. Article 14 of the
law states that the Ministry shall decide on issuing the permits
"...considering the economic and social benefit, which the realization of
such operations imply for the nation." The basic criteria used to determine
such benefits are likely to change somewhat with the publication of the new
foreign investment regulations. However, it is reasonable to anticipate that
some of the unwritten rules used by the Mexican government in the area of
real estate trusts will be included in the new foreign investment
regulations. It is also possible that some of the confusing elements will be
eliminated. It is important to understand the application of the current
regulations, even if they are going to be replaced, as well as some of the
unwritten policies the government has used in the past, to better understand
what criteria will be used by the Ministry in the future.

The Ministry of Foreign Affairs must grant any petition for a trust permit
that complies with the stipulated requirements within 5 working days
following the date of its presentation to the Ministry's central office in
Mexico City. It must be granted in 30 days if the application is submitted
to one of the Ministry's state offices. The Ministry of Foreign Affairs must
confirm the registration of any property acquired by foreign-owned Mexican
corporations a maximum period of 15 days following the filing of the
petition. In both cases, if the maximum period passes with no action by the
Ministry, the trust permit or registration are considered authorized.

There is a common misconception among foreigners investing in Mexico that
once the trust expires, the beneficiary loses all rights and benefits of the
sale of the property held in trust. This is not the case. On the contrary,
the beneficiary has a contractual right under the trust agreement with the
Mexican bank to all benefits that may result from the use or sale of that
property, even though he does not hold title to the property. Under Mexican
Law, the bank, as trustee, has a fiduciary obligation to respect the rights
of the beneficiary.

A real estate trust is not a lease. The beneficiary can instruct the bank to
sell or lease the property at any time. The beneficiary can develop and use
the property to his liking and benefit, within the provisions of the law.
Generally, the law allows most activities engaged in by foreigners.

Information provided by Dennis Peyton of Peyton, Amador & Connell


Q: Are the permits that Article Twenty Seven requires of foreigners hard to get?

A: The foreigner applying for permission to buy land must prove his
immigrant status in Mexico. Non-residents and tourists can buy land through
a trust. If the foreigner resides in Mexico, he can acquire directly the
property as long as it is not within thirty-one miles from seashores or
sixty-two point five miles from the borders.

Q: What about condominiums or houses located in Acapulco, Puerto Vallarta,
Cancun, or any of the resorts of Mexico'?

A: The Constitution forbids direct ownership by foreigners inside thirty-one
miles from the sea or sixty-two point five miles from the borders. However,
they have always been permitted to buy on a trust basis. In this type of
purchase, a bank is the trustee, or owner, of the real estate. The
beneficiary, having all the rights to use, enjoy and sell, is not considered
the owner of record. This is not a violation of what the constitution
forbids. The trust is established for thirty years and can be extended for
one additional thirty year period.

Q: Are time shares legal to obtain by foreigners in Mexico?

A: It is legal for the foreigner to obtain a time share as long as he does
not reside in that time share permanently. The foreigner must obtain a copy
of the property ownership when he buys the time share and club memberships
are illegal.

Q: What happens if a foreigner decides to sell after some years?


A: He may do so, and he should profit by an increasing value.

Q: Can the foreigner rent or sublet his apartment in these condominiums or
trusts?


A: Yes, he may rent to anyone he desires, keeping the rent for periods not
exceeding ten years.

Q: What happens if the beneficiary dies?

A: At the time the trust is set up, a substitute beneficiary is named. This
person has the same rights as the first beneficiary in case of his death. No
Will need be probated in this case.

Q: How is a trust set up?

A: The trust agreement is drawn up before a notary public. The Ministry of
Foreign Affairs and the Commission on Foreign Investments must have approved
the operation, with the trustee requesting this authorization. The
participants in the transaction are the seller who must have clear title to
property, the bank as trustee, and the buyer or beneficiary of the true, or
his representative.

Q: How much does it cost to buy properly in a trust?

A: There are expenses for the authorization from the Ministry of Foreign
Affairs, the registration in the Registry of Foreign Investments, and the
fees of the notary public. The bank charges one percent of the amount of the
transaction for the preliminary studies and the drawing up of the agreement.
The total expenses for the transaction should be between 11-1/2 percent and
12-1/2 percent. In addition, there is a yearly fee of one percent of the
property value charged by the bank for its services as trustee.

Q: What are the responsibilities of the beneficiary?

A: He must pay the trust annual fees punctually. Also, he must pay property
taxes, water, and other utility bills when due.

Q: Is it true that the new law that regulates foreign investment is against
new investments?


A: Not at all. The new law is not only fair, but even positive in the sense
that now everybody knows where he stands. In the long run, it is going to
create a better atmosphere for mutual respect and understanding. Prospective
foreign investment from now on will require permission from the Commission
of Foreign Investments.

Q: Can foreign investors come to Mexico and buy an established industry?

A: As long as they acquire forty-nine percent (49%) of that corporation,
there is no required permit.

Q: What activities are reserved to Mexican citizens?

A: The new law dictates that in radio and television, urban and inter-urban
transportation, gas distribution, and forestry, only Mexican individuals, or
Mexican corporations with a clause that forbids any foreigners to own
shares, can participate.

Q: Which are the activities where capital is welcome?

A: In almost every thing else.

Q: Are the percentages to be owned by foreigners inflexible?

A: No. In those fields where foreign investment is permitted the National
Commission on Foreign Investment might decide to increase the percentage if
it is in the national interest.

Q: What happens with investments already made by foreigners not linked with
foreign centres of decision?

A: Foreign residents not linked with foreign interests or with foreign
centers of decision are considered equal to Mexicans with respect to
investments and are not subject to any percentages.

Q: What should you do when buying a home?

A: After you make the decision to buy, a first-class notary public of your
choice should take charge. It is customary for the buyer to select the
notary public. The Public Registry of Property has to be checked to
ascertain if the property in question has any liens or encumbrances and if
the title is in good legal standing. The notary does this and also presents
the application to the Ministry of Foreign relations when a foreigner is the
buyer. If everything is clear, then the sale proper takes effect. It is also
recommended that you hire an attorney to review the contract.



Information provided by the Law Offices of Jaime B. Berger Stender,
Tijuana, Baja California, Mexico.



Incorporating a Business in Mexico

1) How to Incorporate a Business in Mexico
When thinking international, doing business in Mexico is the same as
everywhere else, it is only a different business environment; and as such,
one must be alert to the different rules of the game, be pro-active and do
the homework. As in the U.S., there are a variety of business formats in
Mexico in which a foreign company can operate.
The most common type of business entities are corporations and limited
partnerships (under any of these legal entities, a foreign company may
operate an independent company, a branch, affiliate or subsidiary company in
Mexico). For the sake of simplicity, this summary report will only address
the two most common ways of structuring a company: Corporation (Sociedad
Anónima) and Limited Liability Companies (Sociedad de Responsabilidad
Limitada).

Corporation (Sociedad Anónima or Sociedad Anónima de Capital Variable)
Limited Partnership (Sociedad Responsabilidad Limitada)
They may be up to 100% foreign-owned. They may be up to 100% foreign-owned.
Minimum capital requirements is $50,000 Pesos in capital stock. Minimum
capital contribution is $3,000 Pesos.
Minimum of two shareholders in the case of a corporation and no maximum.
Administration maybe entrusted to the Board of Directors. Minimum of two
partners to incorporate a corporation with limited liability. Management is
performed by the partners.
No limit to the life of a corporation. The company exists while there is a
business purpose and partners remain the same.
Free transferability of stock ownership. Restricted transferability of
partnership shares. Any changes in the partnership composition may cause the
partnership to be liquidated.
Operational losses incurred by the Mexican entity or subsidiary may not be
used by the U.S. parent company. If structured properly, it may offer tax
advantages by allowing operational losses incurred by the Mexican entity to
be used by the U.S. parent company.
Limited liability to shareholders. Limited liability is afforded the
partners.


In order to select the appropriate corporate structure, one must carefully
assess the fiscal as well as operational benefits of the proposed business
venture.

The process of establishing a corporation "Sociedad Anónima" or a limited
Partnership company "Sociedad de Responsabilidad Limitada" requires of the
following elements:

Name of the Mexican Company.
Capital structure of the Mexican company.
Names of the partners or stockholders of the Mexican company.
Form of management and names of administrators and
Representatives of the Mexican company.
Name of the auditor of the Mexican company.
Name of Company
To incorporate a Mexican company, a permit must be requested before the
Secretariat of Foreign Affairs, which authorizes the use of the name of the
corporation in Mexico. It is customary to submit a list of three possible
names for your Mexican Company.

Capital Structure
The amount and structure of the capital allocation of the company has to be
determined in Pesos (Mexican currency) and stated in the articles of
incorporation and by laws.

Shareholders or Number of Partners
Mexican Law allows that partners or stockholders be individuals or legal
entities.

Administration and Representation
The administration of the Mexican company can be entrusted to either a board
of directors or a general manager. You may also appoint middle managers and
attorneys in fact depending on the company's needs.

Statutory Auditor
Mexican law also requires the appointment of a board of surveillance formed
by two or more statutory auditors, whose main function is the supervision of
the corporation's administration and operations and protecting the partners'
or stockholders' interests.

Before initiating operations in Mexico, it is extremely important to retain
the services of a Mexican attorney, or Mexican Notary. This web site does not take responsibility for any information distributed and does not take responsibility if you use this information.  Remember Laws Change constantly in Mexico.
It is extremely important to retain the services of a Mexican attorney, or Mexican Notary before doing any transaction like the mentioned above.

 


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