[BUYING AND SELLING REAL ESTATE IN MEXICO] 168
Qualified labor, competitive salaries and a big real estate market also contributes to Mexico’s benefit. II. Property Rights in Mexico and Limitations In Mexico, all property rights come from the State itself, who owns “ the original property of lands and water… and has had and has the right to transfer ownership of property to private persons, thus, transforming it into private property. 1 Accordingly, the Mexican Federal Civil Code ( Código Civil Federal ), as well as those Civil Codes of each Mexican State, provide that it is the people’s right to use, enjoy and dispose of their property, under the limitations and modalities established under Mexican law. There are also other several limitations to the ownership rights of real estate property imposed in the Mexican Constitution, like, for example, the Nation’s direct domain over natural resources such as oil, minerals and underground water, or the expropriation of the land by the State in case of public interest situations pursuant to a prior indemnification. As a general rule, only Mexican citizens, by birth or naturalization, and Mexican corporations, have the right to acquire real estate property or to obtain concessions from the Mexican State to exploit national natural resources. However, the Mexican Constitution states that the Nation may grant the same rights to foreigners, provided that they agree before the Mexican Ministry of Foreign Affairs ( Secretaría de Relaciones Exteriores or “ SRE ”) to consider themselves as nationals in respect of such acquired property and shall agree not to invoke the protection of their government in respect thereof, under the penalty, in case of
failure to honor such commitment, to forfeit such real estate property to the benefit of the Mexican Nation. This covenant or statement is known as the “Calvo Clause.” Another restriction to foreigners imposed in the Mexican Constitution is that they will not be able to directly acquire real estate within 100 kilometers (approximately 62.13 miles) along the borders and 50 kilometer (approximately 31.06 miles) from the coast, referred to in Mexican law as the “ Restricted Zone ” ( zona restringida ). However, pursuant to the Mexican Foreign Investment Law ( Ley de Inversión Extranjera or “ LIE ”) and its regulations, foreigners may acquire property located in the Restricted Zone for non-residential purposes, in which case, they would require to give a notice to the SRE of such acquisition within the next sixty (60) days following the date of the acquisition. In such cases, as we will further analyze, a foreign-owned Mexican corporation or a Mexican trust must be created to acquire real estate property. Non-residential purposes pursuant to the regulations of the LIE are considered as those destined to time sharing, industrial, commercial or tourism related activities and generally those used by entities pursuant to their corporate purpose, such as sales or transfers, urbanization, construction or development of real estate projects. Finally, foreigners may acquire real estate properties outside of the Restricted Zone provided that they must obtain a permit from the SRE for such purposes. III. Ways of Acquiring and/or to Invest in Real Estate Property in Mexico After the prospective buyer has find the desired real estate property and its offer has been accepted by the seller, there are several legal vehicles or capacities classically used to own real estate property in Mexico.
1 Article 27 of the Mexican United States Political Constitution ( Constitución Política de los Estados Unidos Mexicanos ) (the “ Mexican Constitution ”).
ILN Real Estate Group – Buying and Selling Real Estate Series
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