Mexico Real Estate: Acquisition of Real Estate in Mexico

Acquisition of real estate by foreign individuals or entities: The right of foreigners, whether individuals or entities, to acquire real estate in Mexican territory depends on the location of such real estate:

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a) Restricted zone. Real estate located within the so-called restricted zone, which is a 62-mile strip along the borders and a 31-mile strip along the beaches of Mexico, cannot be directly owned by foreigners under any circumstances.

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However, foreigners can acquire rights to the use and benefits of real estate located within the restricted zone through a trust with the permission of the Foreign Relations Ministry (Secretaría de Relaciones Exteriores, SRE). In this case, it is the credit institution that, as fiduciary, acquires rights over the real estate; the foreigner, as beneficiary, has the right of use and enjoyment thereof, including any fruits or products obtained and, in general, any proceeds resulting from any profit-yielding operation or exploitation, through third parties or the fiduciary institution. The duration of these types of trusts is 50 years, which may be extended with the authorization of the SRE;

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b) Unrestricted zone. Real estate located outside of the restricted zone can be directly acquired by foreigners, whether individuals or entities, provided that (1) prior to the acquisition a writ is presented to the SRE in which the foreigner agrees to be considered a Mexican national with respect to such property and not to invoke the protection of its/his/her government (“Calvo Clause”), and (2) the SRE grants the corresponding permission.

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Acquisition of real estate by Mexican companies with foreign investment.

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For Mexican companies with foreign investment, to be able to acquire rights over real estate located in Mexican territory, they must have a Calvo Clause in their company by-laws. Furthermore, the type of rights that these companies can acquire—either direct ownership or rights of use or enjoyment of the real estate—depends on where the real estate is located.

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a) Restricted zone. In the case of real estate located in the restricted zone, the purpose for which such property will be used must be taken into account:

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• Residential purposes. Mexican companies with foreign investment cannot acquire direct ownership of real estate located in the restricted zone when it will be used for residential purposes, that is, for housing for the use of the owner or third parties. In this case, such companies may only acquire the rights of use or enjoyment of the real estate through a trust with the prior permission of the SRE;

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• Non-residential purposes. Mexican companies with foreign investment can acquire direct ownership of real estate located within the restricted zone provided such property will be used for non-residential activities. In this case, a notice must be filed with the SRE after the acquisition;

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b) Unrestricted zone. There is no restriction on Mexican companies with foreign investment acquiring ownership of real estate located outside of the restricted zone, provided their by-laws contain the Calvo Clause.

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The above-described rules applicable to the acquisition of real estate by foreigners or Mexican companies with foreign investment can be summarized as follows:

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Information Provided by Von Wobeser & Sierra, S.C.