Buying property as a foreigner: Understanding ejido, fideicomiso and corporations

Buying land in Mexico can be confusing, especially if you’re looking at buying seaside or along the border. There are rules throughout the country that say a non-Mexican person cannot own land within 50 kilometers of a coastline or 100 kilometers from any national border (Article 27 of the Mexican Constitution).

To make matters even more confusing, non-Mexican people are also forbidden from purchasing Ejido land. Many people have been duped into buying this type of land that, truth be told, they can never own.

Buying Ejido land

When buying land in Mexico, it’s important to understand exactly what Ejido land is. In Mexico, Ejido a piece of land farmed communally under a system supported by the state. This means that Ejido land is not private property, and if sold, can only be sold to Mexican nationals.

For Mexicans, buying Ejido land is no easy task since they still need to have the agreement of the entire community that owns the land. If an Ejido property is sold with the consent of all owners, the buyer can risk a legal battle after the fact, which in the worst case scenario, means the land will be returned to the original owner(s).

The owner(s) has rights to possession over the communal land, but there is no deed in the event he wants to sell it. For an owner of Ejido communal land to sell, he needs the approval of the assembly of the commissary.

The commissary will never approve selling their to a foreigner because it would be against the law.

The only way to acquire Ejido land is to go through a privatization process that transfers the property to a Mexican citizen through a title or deed. Transferring Ejido property into private ownership is a time consuming process without guarantees of success since the land is located in the restricted zone, (which is any property within 50 kilometers of the coast and 100 kilometers from the border).

Buying land through a bank trust or fideicomiso

A foreigner may only purchase this type of land through a trust. A bank trustee may not hold property in trust without a private deed, which again, poses one of the initial issues that communal land owners do not have deeds.

Mexico’s Foreign Investment Law does allow foreigners to acquire indirect title to land in the restricted zone. Non-Mexican people wishing to buy land within the restricted zone that is not Ejido can do so only with a bank trust or fideicomiso.

The bank trust process in Mexico is known as a fideicomiso, which is a three-party contract by means of which the seller (settlor/fideicomitente) irrevocably transfers to a bank (trustee/fiduciario) real property so that a third party (beneficiary/fideicomisario) can use and enjoy such real property.

The transfer of the real property from the seller to the bank is a definite and irrevocable transfer of title. Under Mexican law only an authorized Mexican banking institution can be a trustee. The bank cannot encumber or sell the property without the express written consent of the beneficiary.

Property in the restricted zone can also be purchased through a company.

Buying land through a company

As of 1995, foreigners can fully own, operate and administer Mexican corporations. There are no investment restrictions on foreign-owned Mexican corporations aimed at buying and developing property.

Mexican corporations require a minimum of two associates or shareholders that can both be foreigners. There is no need to have a Mexican partner. There are several different types of Mexican corporations, however the two most common are the S.A. de C.V. and the S. de R.L. de C.V.

The S.A. de C.V. is a limited liability corporation of shares and the S. de R.L. de C.V. resembles a limited liability partnership.

Once your Mexican corporation is formed, it has the legal capacity to acquire property anywhere in Mexico, including the restricted zone.