Foreign Investment Commitment For Properties Over 2000m2

What restrictions apply for the constitution of a Restricted Zone trust?
BY: RAUL LEON

There are only two restrictions to have in mind:

If the real estate property is subject to an “ejido” (a Mexican special type of communal ownership originally established for farming communities), such property must pass through the legal process of Derecho Al Tanto or it may not be legally transferred and may be subject to nullification of the transaction. Make sure you have a Derecho Al Tanto before you purchase!

If the total land surface of the real estate property is more than 2000 square meters, a foreigner who wants to purchase more than 2000m2 is obligated to subscribe and grant to the Foreign Affairs Ministry a Promise of Investment Letter, through which he legally obligates himself to invest certain amount of money into the property in a certain time frame according to the following table:

Increasing successively each 1,000 M2 or fraction.

Other requirements for a foreigner purchasing property in Mexico includes, but is not limited to an SRE permit.

What is the SRE permit?   (Secretaria de Relaciones Exteriores)

It´s a permit granted by the Foreign Affairs Ministry prior to the constitution of the Trust in the Restricted Zone, and such a permit authorizes the trustee to create a trust to hold the property and ownership of a property, on behalf of one or more specifically designated foreigners, for a period of 50 years renewable. There is one major condition to the granting of the permit: The foreigner, in all affairs referred to the real estate property, shall consider themselves as Mexican nationals and obligate themselves not to invoke the protection of his foreign country government in case of any controversy.  Should the Foreigner fail to abide by this condition, they will lose the property in favor of Mexican Nation.  (This makes sense, you cannot sue a person in the United States in Mexico for property in the United States!)

This event has never happened in the history of the Restricted Zone Trust, but, the reason it exists is historically because of the French invasion in 1838 and the North American invasion and loss of Texas in 1884.

Additionally to the permit, once the trust is executed, it has to be registered in the Foreign Investment Registry and in the Public Property and Commerce Registry.

It´s important to notice that the Foreign Affairs Ministry grants a permit in behalf of any Foreigner EXCEPT in the case of any citizen of the countries that figure in the Non-Cooperating Countries list of the Financial Action Task Force (FATF) because of international trades subscribed by Mexico.

Which are the costs involved in a closing?

The costs of a closing are the same as in a direct purchase with nationals except for the following concepts:

SRE Permit Fee.  The permit fee is fixed, but the processing fee to obtain the permit is variable depending on the company or person hired for the obtaining of the permit.

Foreign Investment Registry Fee is fixed, but the processing cost that its variable depending on the company or person hired to obtain the inscription.

Constitution of the Restricted Zone Trust: This is a very variable cost and changes from place to place, trustee to trustee, but regularly it is a fixed fee that has no relation with the cost of the property and is more or less standard in every location.

Annual administration fee: This is also a very variable cost and changes from place to place, trustee to trustee, but regularly it is a fixed fee that has no relation with the cost of the property and is more or less standard in every location.

By Raúl León, Attorney At Law, Expert in Mexican Trust (Fideicomiso), Commerce & Real Estate Attorney. For more information, contact Lic. Raul Lleon at US: Cel. 011 521 624-151- 6332,, Local Cel: (624) 151-6332,  e-Mail: posaideon@prodigy.net.mx posaideon@gmail.com. ,