The Mexican real estate market continues to grow despite the
slowdown of the US economy in the hospitality sector. Foreign
investors continue participating in real estate transactions in
Mexico, as residential complexes, shopping malls and industrial
parks are being built, financed or developed totally or partially
with foreign capital. This article aims to provide a general
overview of the main considerations and legal structures for
investing in real estate in Mexico, in particular, by examining the
Ways to invest.
The documents required in various corporate real estate
Completion considerations and jurisdiction specific
Ways to invest
Viable business entities (direct (real estate
acquisition) and indirect (stock acquisition) investment) and
necessary steps for implementation
Although the General Law of Mercantile Companies (Ley
General de Sociedades Mercantiles) contains six different
entity forms, the most commonly used structures are stock companies
(sociedades anónimas) (SAs) and limited liability
companies (sociedades de responsabilidad limitada) (SRLs).
Ventures structured through business trust agreements
(fideicomisos) are also widely used.
The Securities Market Law (Ley del Mercado de Valores)
contains some subclasses of stock companies, such as the investment
promoting stock company (sociedad anónima promotora de
The most typical indirect investment vehicle used in Mexico is
the stock corporation, where the liability of the shareholders is
limited to the amount of their contribution to the capital stock,
which is represented by negotiable instruments.
Corporate name. An application must be filed
with the Ministry of Foreign Affairs (Secretaría de
Relaciones Exteriores) (MFA) for authorisation to use a
Capital stock. Under Mexican law, stock
corporations must be incorporated by at least two shareholders with
a minimum capital stock of MXN50,000 (about US$4,860). This type of
entity can be incorporated either as a variable or fixed capital
stock corporation. Variable stock corporations have fewer
formalities for increasing or decreasing the variable portion of
their stock (that is, notarial formalisation or by-law amendments
may not be required).
Shareholders' meeting. This is the supreme
authority of a corporation. Its tasks include passing resolutions
to approve each fiscal year (that is, to approve certain financial
information and other matters) and on various other material issues
(for example, amending the corporation's constitutional
documents, merger or spin-off, and so on).
Administration. A board of directors or a sole
administrator can manage a Mexican company. Foreign national
individuals residing in Mexico and deriving income from a Mexican
source must have the appropriate visa from the National Institute
of Migration (Instituto Nacional de Migración). If
provided for by the relevant company by-laws, resolutions by the
board of directors can also be passed and implemented by a
unanimous written resolution, adopted without a meeting.
Statutory auditor. The statutory auditor
(comisario) (usually appointed from an external auditing
firm) is in charge of the supervision of the corporation and also
reviews and provides a report on the financial information that the
board of directors must submit annually to the shareholders'
Attorneys-in-fact. Legal acts by a Mexican
company must be carried out by an attorney-in-fact, who is
authorised to do so through a power of attorney. There are four
types of power of attorney, for:
Lawsuits and collections.
Acts of administration.
Acts of ownership.
Subscribing and guaranteeing payment of negotiable
Powers of attorney can be granted to one or several individuals,
to act jointly or separately, and can also be limited as special
powers of attorney depending on the level of authority to be
Shares of stock. The capital stock is
represented by negotiable instruments (shares) which are freely
transferable, unless limited in the company's by-laws.
Generally, the above apply to SRLs (except for the minimum
capital stock, which is MXN3,000 (about US$292)). In addition,
management of the company can be carried out by a board of managers
or a sole manager (instead of directors). Instead of shareholders,
SRLs have members (no more than 50). Unlike corporations with
endorsable stock certificates, the capital stock of an SRL is
evidenced through membership interests that are recorded in the
relevant corporate book. The SRL is a more closed entity than a
stock company as the entrance of new members may require the
consent of existing members. Some jurisdictions (such as the US)
view SRLs as pass-through entities for tax purposes. SRLs cannot be
The incorporation of a company (articles of incorporation and
by-laws) must be formalised in a public deed before a notary public
and then filed with the Public Registry of Commerce (PRC). This
public deed (first notarial counterpart or primer
testimonio), along with the PRC registration, evidence the
legal existence of the entity. This document is also used for other
legal steps, such as registering with the Tax Payers'
Ownership of rustic lands by business organisations for
agrarian, cattle breeding or forestry purposes is subject to
compliance with several requirements, in particular, that:
Its corporate stock must designate a special class of T-series
shares ("T" standing for "tierra",
meaning land), which are equivalent to, and representative of, the
capital contributed in agrarian, cattle breeding or forestry lands.
These shares will be ordinary, although, if the company is
dissolved, T-series shareholders will receive land as
Foreign nationals must not hold more than 49% of T-series
The Mexican Constitution sets out that foreign nationals cannot
acquire direct ownership of real estate within the Restricted Zone
(this is the band of land that extends out 50 kilometres along the
beaches and 100 kilometres along the borders).
Direct acquisition. To acquire title to real
estate outside the Restricted Zone, an investor must:
File a notice for a permit with the MFA.
Enter into a sale and purchase agreement with the seller before
a notary public.
Register the first authentic copy of the public deed with the
relevant Public Registry of Property (PRP).
Trust agreement (fideicomiso).
Ownership rights over real estate property located inside the
Restricted Zone by foreign nationals can only be achieved through
the use of a trust agreement. A Mexican bank is the fiduciary
trustee of the property and the foreign individual or entity has
the right to use and enjoy the property as a trust beneficiary (the
parties in an ordinary trust agreement are the settlor(s)
(fideicomitente(s)), the trustee (fiduciario) and
the trust beneficiary(ies) (fideicomisario(s)). Only
Mexican banks (and a few other entities in the Mexican financial
sector) can act as trustees. The use and enjoyment of the property
are subject to the terms and limits set out in the authorisation
granted by the MFA. Based on this, the trust can last up to 50
years, renewable according to the law. The creation of a real
estate trust agreement requires formalisation by a notary
In its capacity as trust beneficiary, the foreign national can
instruct the Mexican bank to encumber or transfer title to the
property to a person appointed by it and then receive the proceeds
of the sale of the property.
Additionally, for properties that are not used for residential
purposes, Mexican companies that are wholly owned by foreign
nationals can purchase real estate located within the Restricted
Property held under a real estate trust agreement can be
transferred by either:
Transferring the trust beneficiary rights.
Executing and extinguishing the trust agreement by instructing
the trustee to transfer the principal to another party. This party
can be an individual, an entity with rights to acquire land in the
Restricted Zone, or even a different trust estate.
A trust can be structured as revocable or irrevocable depending
on the underlying transaction. For example, in an outright sale
through a trust, the settlor/seller holds no interest in the
property once it passes to the trust estate.
Revocable trust agreements are used for purchases involving
payment in instalments, conditional sales or financing, and also
with transactions involving conditions precedent such as:
Governmental authorisations (such as competition).
Even though by statute the trustee is subject to certain
fiduciary duties, ordinarily the trust agreement contains indemnity
provisions in favour of the trustee (depending on the