You should first understand the legal requirements necessary to secure your rights in the property and know how to properly carry out the transaction. Although the basic elements of the transaction are the same as in the U.S., there are some important differences that you should be aware of.

The legal foundation for real estate law in Mexico starts with the Federal Constitution. Each state in Mexico has its own Civil Code which, especially in the case of the provisions concerning real estate, is usually exactly the same as the Civil Code for the Federal District. Nevertheless, it is advisable to check the Civil Code of the state in which you intend to purchase to make sure that there have not been any changes.

It is also important to consult a Mexican attorney to make sure that any of the state or municipal laws do not conflict with the federal provisions. Most of these principles are reflected in the various state legislation, but, to be sure, check with a competent Mexican real estate attorney.

The Mexican Constitution prohibits direct ownership of real estate by foreigners in what has come to be known as the "restricted zone". The restricted zone encompasses all land located within 100 kilometers (about 62 miles) of any Mexican border, and 50 kilometers (about 31 miles) of any Mexican coastline. However, in order to permit foreign investment in these areas, the Mexican government created the "fideicomiso", which can be roughly translated as a real estate trust. Essentially, this type of trust is similar to trusts set up in the United States, but in this case a Mexican bank must be designated as the trustee, and, as such, has title to the property and is the owner of record. The Mexican Government created the "fideicomiso" to reconcile the problems involved in developing the restricted zone and to attract foreign capital. This enabled foreigners, as beneficiaries of the trusts, to enjoy unrestricted use of land located in the restricted zone.

A "fideicomiso" is a trust agreement created for the benefit of a foreign buyer, executed between a Mexican bank and the seller of property in the restricted zone. Since foreign buyers do not have the capacity to enter into a normal real estate sales contract, due to Constitutional restrictions, the bank acts on their behalf.

The bank, as trustee, buys the property for the foreigner, and has a fiduciary obligation to follow instructions given by the beneficiary. The beneficiary of the trust retains and enjoys all the rights of ownership while the bank holds title to the property. The foreigner is the beneficiary of the trust and is entitled to use, enjoy and, if he or she should decide to, even sell the property held in trust at its market value to any eligible buyer.

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