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 and buy real estate, they must have a bank act on their behalf, much as a trust is used 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.
A 'Fideicomiso' or bank trust is defined for real estate purposes as a transaction between a Mexican bank and foreign individual or firm investing in areas otherwise restricted to foreign investment. The bank serves as a trustee or legal owner with respect to a certain real estate property interest and the investor serves as the legal beneficiary of the trust. The bank holds the title to the property in trust for the beneficiary who retains the exclusive right to use and control the property.
As a trustee, the bank acts on behalf of the beneficiary in transactions involving the property, including the decision to transfer, assign or otherwise dispose of his or her interest in the property.
The trust is essentially a contractual arrangement which, in most respects, is identical to the type of trust used in North America. Trusts are established for an initial 50 year periods and can be renewed.
New rules governing foreign investment through Real Estate Trust were put into effect in 1993. These rules provided the stability and protection of legal certainty for foreign investments. Mexican law now expressly provides that at the end of the 50 year term of the trust, upon request, the Mexican government will issue a new permit which provides for a new 50 year term no matter how much time remains on the original trust.
While a Mexican bank holds title to the property in these transactions, the bank is legally obligated to follow terms outlined in the trust documents that comply in all areas with the request of the foreign investor who is the trust beneficiary.
As the beneficiary, the foreign investors have a personal and exclusive right to use, occupy and possess the trust property, including the right to build upon it, subject to applicable construction and zoning regulations. In addition, the beneficiary may transfer or assign his/her beneficial interest to any person and may keep the profits from the sale of the property according to the instructions given to the trustee, subject to applicable tax laws and expenses of sale.
Foreigners that decide to invest in real estate in Mexico agree, because of such action, not to invoke the protection of their governments with respect to such properties.
Under the Mexican Constitution, only Mexicans have the right to own land or receive mineral or water rights. Foreigners have the right to own real property, provided they do not invoke the protection of their government. That sounds reasonable enough, doesn't it? All this means is that any dispute concerning land ownership will be decided by Mexican courts, treating foreign landowners the same as Mexican nationals. Foreigners have no legal recourse in the legal system of their homelands. This is done to prevent the historic recurrence, prevalent in Latin America in the past 200 years, of a capital-exporting country meddling in the sovereign affairs of another nation to protect a private party's economic interests.