Mexico is a democracy that emerged at the beginning of this decade from seventy years of one-party rule. The 2000 election of President Vincente Fox marked a turning point in Mexico’s political life. Following President Fox’s term in office, the closely contested 2006 election and peaceful transition of his successor, President Felipe Calderón, demonstrated the commitment of Mexico’s people to democratic processes.
The North American Free Trade Agreement (NAFTA) among Mexico, USA and Canada was completed in 1994. Since then, foreign investment in Mexico has grown to more than $16 billion a year and Mexico is a free-market economy that increasingly welcomes foreign investment. Mexico ranks twelfth in size in the world’s economies.
The majority of foreign real estate buyers are from the USA; Canada and Latin American countries rank second and third respectively in terms of numbers of buyers. Fourth, but still significant in number, are buyers from the European Union countries. It is estimated that more than one million U.S. citizens, one in four expatriates, live in Mexico year-round or for extended periods of time. 1.5 million U.S. citizens own property there.
Foreign buyers find that generally they can purchase a lot more house for their Dollars or Euros than they can back home. Canada and Europe, like the USA, are also experiencing the demographic force of a wave of “Baby Boomer” retirees who expect to maintain an active lifestyle.
Second-home buyers and retirees are drawn to Mexico because of its relatively lower cost of living, relaxed life style, exotic destinations, mild climate, and the potential for value appreciation.
The Constitution states that only Mexican citizens may acquire direct ownership of land within 50 kilometers (30 miles) of a coastline. Troncones, situated immediately on Mexico’s Pacific Coast, is obviously within this restricted zone.
Given this constitutional law, how can foreigners own real estate within these restricted zones? The answer is a bank trust, the fideicomiso. The fideicomiso was created to enable foreigners to "own" properties within the restricted zones without a constitutional amendment. The ley de fideicomiso was established in 1972 by President Luis Echeverría in order to encourage tourism and investment by buyers from the USA, Canada, and other countries, as well as to stop ownership abuses.
Briefly stated, the fideicomiso is a trust that is set up and maintained through a Mexican bank. The bank is the owner of record for the property and the deed is held by the trust, of which the foreign owner is the beneficiary. The fideicomiso is set up for a term of fifty years and can be renewed for additional fifty year terms. If the trust is terminated, the property is sold and the sale proceeds go to the trust beneficiary. The foreign "owner" of the property enjoys all ownership rights; the property can be sold, rented, pledged as collateral for a mortgage, bequeathed to heirs who can receive the trust property without going through a Mexican probate process, and the like.
The Foreign Investment Act requires foreigner buyers of property in restricted zones to obtain a permit from the Secretary of Foreign Relations; the permit is usually applied for by the trustee bank. All purchases of real estate by foreigner buyers must be registered with the Secretary of Foreign Relations.
There is also a "Calvo Clause" that is required to be signed by foreign buyers (usually inserted into property deeds) stating that they agree to be bound by the laws of Mexico and not seek recourse to law in their home countries.
Finally, the Federal Maritime Terrestrial Zone is a strip of public domain land that extends along the coastlines twenty meters inland from the average high-tide line. Easements may be granted for the private use and enjoyment of the "Zona Federal" by abutting property owners.
The factors influencing property values are very similar to those in play almost anywhere. Generally, buyers from the USA, Canada, and Europe find that the cost of living in Mexico is much less than in their home countries; a fact that is one of Mexico’s great attractions. Buyers should keep in mind that the trade-off for low cost of living may be a lack of the usual level of infrastructure and services.
Troncones offers the following positive attributes that factor into property values and the quality of the living experience generally:
- Access: Troncones is served by an International Airport at Ixtapa / Zihuatenejo and by paved roads all the way to Playa Troncones.
- Infrastructure: Troncones has a community water supply available for hook-up at the property line. Sewage systems are usually septic tanks located on the individual property. Garbage is picked up regularly. Similarly, electrical and telecommunication utilities are readily available. There are no high-rise hotels in the area.
- Services: hospitals, medical facilities, retail stores, grocery stores, good restaurants.
- Community: presence of other expatriates.
- Attitude: acceptance by local population of foreigners and newcomers.
- Atmosphere: relaxed, informal.
- Climate: Sunshine and no rain during the tourist season (November to April).
- Recreation: boating, fishing, golf, ecotourism, surfing and cultural activities
Although property values have risen rather steeply in the past five years or so, they still compare extremely favourably to similar oceanfront properties located in the southern USA.
For foreigners, the process of finding and purchasing a property in Mexico follows the same general sequence and principles as in the USA, Canada, and Europe. Purchasing real estate involves:
- Finding the property
- Negotiating an offer
- Performing due diligence
- Obtaining proper documentation
- Arranging payment
- Closing the transaction
Within the transaction’s sequence of events, there are key differences in procedures, documents, and people involved in the transaction. We can guide you through these processes.
Importantly, completion of the transaction, the closing, must be performed by a Notario and takes place at the office of the Notario. It would be a mistake to equate the Notario with a Notary Public, common in the USA and Canada, whose primary function is to authenticate signatures on documents. The Mexican Notario is an attorney who has practiced his / her profession for at least five years and has been appointed by the governor of the state in which he / she is practicing.
The Notario is usually selected by the buyer and is probably the most important official a buyer will encounter during a real estate transaction in Mexico. The selection of a Notario does not preclude the involvement of your own attorney in the process. In fact we encourage such involvement.
The Notario’s specific functions are to:
- Authenticate the seller's right to sell the property
- Examine the title to establish that there are no prior claims or liens on the property
- Ensure the legality of the transfer from seller to buyer
- Finalize the transaction by signing the applicable documents
- Issue the escritua, the final deed, to the buyer
- Preparation of tax declarations for the impuestos sobre la renta, capital gains, and acquisition taxes, collection of taxes and payment to Hacienda
- Enter the record of the transaction in the Public Registry
Please be in touch, we'd love to hear from you!
1-877-992-9927 Email: info@tronconesoceanfront.com