Acquisition of Real Estate in Mexico by U.S. Citizens and American Companies

Abstract

For purposes of acquisition of real estate by foreigners and foreign legal entities, the Republic of Mexico is divided into two large areas: a) the Restricted Zone; and, b) the Permitted Zone. The Restricted Zone is the real estate located in a strip of 64 miles along Mexico's border with the United States and along Mexico's coastlines in the Pacific Ocean, the Gulf of California, the Gulf of Mexico, and the Caribbean Sea. The entirety of the Baja California peninsula is also comprised under this zone. The Permitted Zone is the remaining real estate located in the inland part of that country. These two areas derive from the mandate found in Article 27, paragraph I, of Mexico's Federal Constitution of 1917 that prescribes that only Mexicans by birth and Mexican legal entities (with no foreigners or foreign investment in them) are the only ones who are allowed to have the direct ownership of real estate in the Restricted Zone. This outright constitutional prohibition against foreigners and the resulting two zones, have resulted in two contrasting legal regimes for the acquisition of real estate by Americans and American companies in that country under Mexican law. The articles discusses the specific requirements applicable to the acquisition of real estate by Americans and American companies in each of those two zones, with special attention to real estate for commercial purposes and real estate under the so-called Fideicomiso regime (i.e., fifty-year real estate trust contract). The articles ends with a discussion on the indispensable professional involvement of Notary Public (Notarios Publicos) and Mexican fiduciary institutions in Fideicomiso transactions, the special legal characteristics of the Federal Maritime Land Zone, the questionable validity of the Article 27 Permit, and the need to erase the discriminatory treatment against foreigners.