Until 1993, it was not possible for foreigners to hold title to land in Mexico that was 100 kilometers from a border, or 50 kilometers from either coast. This was, and indeed, still is, prohibited by the Mexican Constitution. In the 1980s, however, it became obvious to the Mexican government that foreign investment in real estate would be an important way to establish a strong and stable economy.
In 1993, then, the Foreign Investment Law was passed whereby foreigners may purchase land in restricted zones provided the deed is held in trust by a trustee. Thus, banks such as Banamex and Bancomer operate as trustees and can hold your deed in trust for you. The banks, which must hold a permit issued by the Mexican Secretary of Foreign Relations, charge an annual fee for this service, generally around $500 USD. The trust agreement is valid for 50 years and must be renewed thereafter for another 50 years within 90 days of the expiration of the first term.
It is through the use of this trust arrangement that compliance with the Mexican Constitution can be maintained: technically you, as a foreigner, do not hold your deed. Instead, it is held in trust for you by a trustee.
Do not confuse this with a 99-year lease. When you buy land in Mexico, you are buying it, not leasing it. You may sell the land at any time, and you may leave it to anyone you choose in your will. If you sell it, or bequeath it, the new owner, if a foreigner, must set up a bank trust, just as you did. But in his case, the first 50-year term commences at the time the land is transferred, and does not date from the time you initially purchased the land.
Terms you should know:
||Beneficiary(ies) of the Trust (you)
Land may be purchased in more than one name, and in the deed, you will also be asked to name substitute beneficiary(ies) in the event of your death. Also, you should know that when you set up a real estate trust, you must agree to adhere to the laws governing real estate transactions in Mexico, and not those of your own country.
Not all land along the coasts is regularized. We recommend that you only purchase land that have been approved for regularization by the federal government. To become 'regularized' the local ejido owning the land (see section on ejido land) must vote for regularization, and the government must approve it.
All the densely populated areas of Jalisco have been regularized. And almost all the areas of Nayarit on the Bay (Nuevo Vallarta North to Punta Mita) have been regularized, as have Sayulita and San Francisco. However, there are patches of beachfront that have not yet been regularized such as Punta Negra and Liitibu.
Following the Mexican Revolution, the government ceded land to the local inhabitants, mostly of Indian origin. This was during a period when vast areas of Mexico were sparsely populated, there was no concept of individual land ownership. The land was ceded to ejidos (pron. eh-heedo), or cooperatives, for internal administration. The ejido could decide whether they wanted to hold all of the land public for the use of every member of the collective; or it could decide whether they wanted to permanently distribute it individually to its members. In many cases, some land was apportioned, and some held as public.
Today, ejidos still manage much of the collective ownership of land in Mexico. The collective elects administrators who function much as a mayor and his staff do in small towns in the U.S.
Mexican citizens may buy ejido land, but foreigners may not, even through a bank trust. If a Mexican national purchases ejido land, the transfer of property is recorded by the the ejido, not by the government in Mexico City.
Many foreigners purchase ejido land by placing the title to the land in the name of a trusted friend or relative who is Mexican, who then becomes a member of the ejido, relying on the hope that when, or if, the land is regularized, ownership can be converted to a fideicomiso in their own name. As ejido land is much less expensive than regularized land, many foreigners have elected to buy land this way. However, they do so recognizing that they have absolutely no rights. If their friend or relative decides they want that land, and perhaps that nice new house, for themselves, legally it is theirs, and the foreigner has no recourse whatsoever in the Mexican legal system.
There is no safe way to buy ejido land as a foreigner; but if you do, by all means meet with the managers of the ejido and ask to see their records on the property in question. Ask the ejido to insure that the person selling you his property actually has sole rights to it; and ask the ejido to record the sale. In the past, foreigners have purchased beachfront property from fishermen for peanuts, erected houses for little more, and then find that the fisherman's long-lost cousin surfaces many years later to claim that the land is his because it initially belonged to a common grandfather. In cases such as these, which have gone all the way to the Mexican Supreme Court, foreigners have been thrown off their land and treated as squatters. This happened in Ensenada several years ago on beachfront property that had come to be worth hundreds of thousands of U.S. dollars. Those Americans were not schnookered, however. They knew they were not allowed to own that land; but they hoped that possession would be 99/10ths of the law. They took a risk and paid the price.
Ergo, only buy regularized land! That is the only way your purchase will be fully protected.