For the past 15 years, Cancun has thrived as one of the most desired overseas real estate investment and relocation hotspots for North American second home buyers. In recent years, the dream of owning property along the Yucatan Peninsula has also become increasingly attracting European investors.

Many buyers making their initial enquiries into the tropical paradise become confused when trying to understand the Mexican real estate trust agreements, otherwise known as a Fideicomiso. The processes involved in acquiring Mexican real estate are relatively straight forward, yet a little bit of initial knowledge can go a long way in comprehending the regulations relating to the purchasing processes.

As Cancun and the majority of the most sought after investment and relocation areas of Mexico are located along the coastal regions, they also fall into restricted zones. While previous to 1994 foreigners were not able to purchase real estate in Mexico, the changes in the law to attract foreign investment were accompanied by the zoning restrictions. Areas of Mexico falling into these restricted zones include any land within 50km of the coastline, or 100km of the country’s borders.

A Fideicomiso trust agreement is required when purchasing property within the restricted zones. The trust agreement enables the equivalent of a title deed ownership, authorised by the Mexican government. The trust agreement is set up by a Mexican bank acting as a trustee, with a validity of 50 years.

The foreign buyer becomes the beneficiary to the trust, enjoying full ownership rights such as the ability to re-sell, rent, mortgage and inherit. The bank acting as the trustee is legally obliged to respect the buyer’s full rights and follow any instructions provided by the benefactor.

Regulations by the Mexican government ensure that only selected banks are authorised to hold the real estate trusts, where full examinations of the legal paperwork for the properties are carried out prior to completing the purchase. Upon expiry of the Fideicomiso, if not automatically renewed, the benefactor retains full rights to all the profits resulting from the use or sale of the real estate.

Since the granting of permission for foreigners to purchase real estate in Mexico’s restricted zones, the demand for properties has sharply increased. Long established as a preferred holiday destination, the attraction of foreign investment for boosting the Mexican economy has lead to relaxing the laws towards real estate ownership. Real estate developments have been increasingly modified to comply with the demands of foreign buyers, with luxury properties constructed to typical US criteria becoming standard constructions.

When planning to purchase property in Mexico, the use of a legal representative familiar with the local processes is vital for ensuring full understanding of the processes involved. Continued demand is seeing capital gains continuing to grow, with rental demand providing exceptional returns in sought after areas of this year-round destination.

This entry was posted on Thursday, October 29th, 2009 at 14:05 and is filed under Emerging Markets, Mexico. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.