Canadians Buying Real Estate in Mexico: A Practical Guide

By Guillermo Cruz Rico, JD, FLC, LL.M.

Do you want to know more about the steps to buying real estate in Mexico?

You should read this article

Introduction

Mexico’s vibrant culture, favorable climate, and affordable living have made it an attractive destination for Canadians seeking to buying real estate, either for investment, vacation, or retirement purposes.

Nevertheless, differences in language, cultural approach, business etiquette and legal systems could be substantial challenges for Canadians considering buying real estate that country. Understanding the legal and practical aspects of purchasing property in Mexico is essential to ensure a smooth transaction and secure your investment and ownership.

Why is Mexico an attractive destination for Canadians?

While comprehensive data for the entire year of 2024 is not yet available, according to the Canadian government , just during the first quarter of 2024, approximately 955,700 Canadian visited Mexico, making it the top overseas destination for Canadian travelers in that period, and a substantial number are considering to buy real estate in that country

Mexico is just a short flight away from Canada, making it convenient for travel. With numerous direct flights and a time zone difference of only a few hours, it’s easy for Canadians to visit or live in Mexico without feeling too far from home.

In addition, Mexicans are known for their hospitality and friendliness. Canadians often find it easy to settle in and feel at home in Mexico, thanks to the warm and welcoming nature of the locals.

This guide covers:

Legal frameworks for foreign property ownership in Mexico
Step-by-step process for purchasing real estate
Key considerations and best practices
Common pitfalls to avoid
Frequently asked questions
Conclusion and actionable steps

Canadians considering living or doing business in Mexico should always consult with a legal professionals who specialize in Mexican law to ensure compliance and protect their rights.

Legal Framework for Foreign Property Ownership

Pursuant Article 27 of Mexico’s Federal Constitution, direct ownership by foreigners is prohibited within 100 km of international borders and 50 km of coastlines (area know as “Restricted Zone,”).

Nevertheless, Mexico’s law has created a figure known as fideicomiso, to facilitate foreign investment while adhering to these restrictions. A fideicomiso is similar to a commercial trust and it is governed by the General Law of Credit Instruments and Operations (Ley General de Títulos y Operaciones de Crédito).

In a fideicomiso, a Mexican bank holds the legal title to the property on behalf of the foreign beneficiary, who retains the rights to use, lease, bequeath or sell the property. A trust initially shall be valid for up to 50 years with the option to be renewed and extended.

In one option available for foreigners, including Canadians, to to hold, enjoy and secure rights over a property without exposing their investment.

Why you should have a Mexican Canadian lawyer by your side

Legal systems and traditions in Mexico and Canada are quite different. The Mexican system is based on codified law and the Canadian system is based on common law/precedents. You need a lawyer licensed and experienced in both Mexican and Canadian law to identify issues and differences in order to avoid unnecessary mistakes and expenses. It is also important to ensure items are properly enforceable and structured to operate as intended in both jurisdictions.

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Step-by-Step Process for Purchasing Real Estate in Mexico

Identify the Property: Research and select a property that meets your needs, considering location, property type, and budget.
Engage Professionals:
- Real Estate Agent (optional): Choose a reputable agent experienced with foreign buyers.
- Legal Advisor: Hire a Mexican Canadian attorney specializing in this type of transactions, to review contracts and ensure compliance with local laws.
- Notary Public (Notario Público): A government-appointed official who formalizes the property transaction and ensures all legal requirements are met.
Conduct Due Diligence:
- Title Search: Verify clear title and absence of liens.
- Property Appraisal: Assess the property’s market value.
- Permits and Zoning: Ensure the property complies with local regulations.
Make sure than terms and conditions are in writing: Once terms are agreed upon, a formal purchase agreement (Contrato de Promesa de Compra-Venta) is drafted, outlining the conditions of the sale. Be aware that this is just one of several steps to secure the transaction.
Finalize the Transaction:
- Payment: Transfer funds securely, considering currency exchange rates and transfer fees.
- Closing Costs: Budget for additional expenses, including notary fees, taxes, and registration fees.
Register the Property: The notary public will register the property with the Public Registry of Property, completing the legal transfer.

Do’s and Don’ts

Do’s:

Conduct Thorough Research: Understand the local real estate market and legal requirements.
Hire Qualified Professionals: Engage experienced agents, attorneys, and notaries.
Visit the Property: Inspect the property personally to assess its condition and surroundings.
Understand the Fideicomiso: Familiarize yourself with the terms and responsibilities of the bank trust.
Budget for Additional Costs: Account for taxes, fees, and maintenance expenses.

Don’ts:

Proceed Without Legal Counsel: Avoid relying solely on the seller’s representations.
Overlook Due Diligence: Skipping property inspections or title searches can lead to future complications.
Ignore Currency Exchange Considerations: Fluctuations can impact the total cost; consider using a foreign exchange service to secure favorable rates.
Assume All Properties Are Eligible: Some properties, like ejido (agrarian and communal) land, have restrictions on foreign ownership.

FAQ

Can Canadians own property in Mexico?

- Yes, Canadians can own property in Mexico. In Restricted Zones, ownership is facilitated through a fideicomiso.

What is a fideicomiso?

- A fideicomiso is a bank trust that allows foreigners to hold property rights over a real estate asset located within a Restricted Zones.
- It is Fideicomiso is a commercial contract, similar to a Canadian trust, and it is governed by Mexico´s federal law.
- Normally, it is a three-party agreement: a settlor or trustor, a trustee and a beneficiary; due to statutory requirements, the trustee must be a Mexican bank or an authorized financial institution.
- Generally takes place by having the seller/developer acting as trustor and irrevocably transferring the property title to the trustee (bank), then the trustee holds the property rights for the benefit of the beneficiary and the beneficiary might have unrestricted use and enjoyment rights over the property. Those rights could be transferred (sold, donated, etc.) to a third party according to the beneficiary instructions

Is the Notary Public acting as my legal counsel?

No, a notary public is a professional appointed by the Mexican government to act as commissioner of oaths and to secure that government fees and transfer and property taxes are covered and reported. Therefore, each party must seek legal advice and representation

Is it safe to acquire real estate in Mexico?

Yes, with proper due diligence and legal assistance, acquaring real estate in Mexico is safe and secure.

Conclusion

Investing in Mexican real estate offers Canadians the opportunity to enjoy property in a diverse and vibrant country.

By understanding the legal frameworks, engaging qualified professionals, and following a structured purchasing process, you can navigate the complexities of foreign property ownership with confidence.

We MC Law Firm are commited to assist our clients to enjoy their plans in Mexico without geeting lost in the process.

If you’re considering acquiring real estate in Mexico, we are here to guide you through every step of the process.

Contact us today for personalized assistance and make your Mexican real estate dreams a reality.

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We, MC Law Firm, have designed a set of services to guide you, step-by-step to prevent any unnecessary risk and secure your transaction in a clear and straight forward fashion.

Guillermo Cruz Rico

If you are a Canadian considering to buy real estate in Mexico, you should read this article. I hope it is helpful for you