Clients often ask about the restrictions on foreign ownership of Mexican coastal and border real estate. 

Here are the basics:

1.   Article 27 of the Mexican Constitution prohibits foreign (i.e., non-Mexican) ownership of: (A) Land within 100 kilometers (62 miles) of the territorial borders of Mexico; and (B) Land within 50 kilometers (31 miles) of the coast of Mexico (collectively, this land is called the “Restricted Zone“)

2.   The 1998 Foreign Investment Law creates certain exceptions to the constitutional prohibitions on foreign ownership of Mexican real estate located in the Restricted Zone.  The availibility of the exceptions depend on whether the real estate will be used for residential or non-residential purposes, as defined under the Foreign Investment Law.

  • Residential Purposes.  If the real estate will be used for a second home, rental income property, or a primary residence, then the foreign buyer must buy the real estate through a Mexican trust (fideicomiso), with a qualified Mexican bank serving as trustee (fiduciario).  The seller (and settlor of the trust, or fidecomitente) will convey the title to the trust at the closing.  The buyer will be the beneficiary (fideicomisario) of the trust and may generally use, transfer, gift, or sell the real estate contained in the trust to third parties, either directly or by instructing the trustee to do so.  The trust has an initial term of 50 years, which may be extended for additional 50-year periods by written application to the Ministry of Foreign Relations (Secretaria de Relaciones Exteriores), which, as long as the purposes of the trust are the same as when the trust was formed, should be approved.  The buyer may name secondary beneficiaries of the trust to make it easier to pass the real estate to children or other heirs.  Such beneficiaries may be individuals, corporations, partnerships, or other entities.  However, when the real estate held in the Mexican trust is a condominium or other property that is subject to bylaws or regulations, an entity is the beneficiary of the trust, and ownership of the entity is shared among investors, the entity should make certain that the shared ownership structure does not violate such bylaws or regulations prior to purchasing the property.  
  • Non-Residential Purposes.  If the real estate will be used for non-residential (i.e., commercial) purposes, then the foreign buyer may purchase the land through a foreign-owned Mexican corporation, limited liability company, or other entity.  Article 5 of the 1998 Regulations to the Foreign Investment Law list some of the activities that are deemed non-residential use of real estate, as follows:
  • subject to a time share;
  • intended for some industrial, commercial, or tourism activity, and which may be used simultaneously for residential purposes;
  • acquired by credit institutions, financial brokers, and credit auxiliary organizations, repossessed to recoup debts in their favor;
  • used by legal entitites to fulfill social objectives that may consist in the transfer, urbanization, construction, and all other activities inherent to the development of real estate projects until they are commercialized or sold to third parties; or
  • used for commercial, industrial, agricultural, livestock, fishing, forestry, or the rendering of services.

The foregoing is merely a summary of the restrictions on foreign ownership of Mexican coastal and border real estate.  Foreign investors in Mexican real estate should consult a competent Mexican attorney before entering into any real estate transaction in Mexico.