Restricted Zone Trust as a Property Title: Considerations and Recommendations

In Mexico, a restricted zone trust is a legal mechanism used mainly by foreigners to acquire property in restricted areas of the country, specifically those located in coastal and border areas. Due to constitutional restrictions that prohibit foreigners from owning property directly within 50 kilometers of the coast and 100 kilometers of the borders, the restricted zone trust offers a safe solution for real estate purchasers.

However, after making the decision to purchase an existing property in Vallarta · Nayarit, it is crucial to undertake some essential tasks to ensure a smooth transition. In order to learn about some of these steps, the Vallarta Real Estate Guide editorial team reached out to Mexlaw (mexlaw.com), a Mexican-Canadian law firm, whose real estate department provided a detailed guide to help make this process proceed as smoothly as possible.

Mexlaw, a Mexican-Canadian law firm, provides detailed guidance to help make this process as smooth as possible.

A good starting point is to review the final closing steps for foreigners when purchasing a property in Mexico. The notary has 15 days to make the ISABI payment (Tax on the Acquisition of Real Estate) to the municipality, which allows for the change of ownership on the property tax receipt. “The notary’s office pays the ISABI to the municipality as one of the requirements needed to be able to register the property in the Public Property Registry. Once the deed has been signed and the tax paid, in approximately four months the statement will be ready, which is the title that proves that everything has been properly registered.”

CHANGE OF OWNERSHIP AND REGISTRATION

With the statement in hand, the change of ownership is carried out by the municipality. Although municipal authorities ideally start this process in a timely manner, due to the high volume of applications, certain delays may occur.

To speed up the process, recommendations include:

• Visit the municipality with all the necessary documents including the copy of the deed (with registration receipt), a copy of the ISABI (Tax on the Acquisition of Real Estate) payment receipt, a copy of the new owner’s ID, and a letter requesting the change of ownership.
• If a third party is going to carry out this procedure, the new owner must provide them with a simple power of attorney.

Then, once the change of ownership is complete, the next property tax bill will be in the name of the new owner or trustee. If for some reason the change of ownership does not complete, the property tax will continue to appear in the seller’s name.

TRANSFER OF CONTRACTED SERVICES

Once the statement has been obtained, the utility services previously contracted in that property can be changed to the name of the new owner (including water, electricity, internet, etc.). “Here, our only recommendation is to make sure that all your documentation is in order and immediately go to the appropriate offices as soon as possible. Acting promptly can speed up the process and minimize any potential delays and costs. Once this is done, then the new owner will have proof of their official address in Mexico in their name,” they say.

PAYMENT OF CONDOMINIUM FEES

For this point, it is recommended to check the policies outlined in your condo association to confirm payment methods (either by wire transfer and/or cash) and coordinate the payment details along with them.

ANNUAL EXPENSE PLANNING

• Payment of Property Tax

This tax must be paid annually, preferably from January to March to take advantage of municipal discounts for early payments. This payment must be made directly to the municipality, using the cadastral number.

• Federal Zone Payment (for beachfront properties)

This payment is made annually or bimonthly, either online or at the municipality’s cashier, also using the cadastral number.

• Fiduciary Payment

This payment is made annually by electronic transfer or credit/debit card. Payment details must be coordinated directly with the bank holding the trust.

CONSIDERATION OF IMMIGRATION STATUS

Mexlaw suggests reviewing the immigration status for new owners and recommends exploring the benefits of becoming a temporary or permanent resident. “For these considerations, it is best to contact an immigration specialist for personalized guidance and information,” they conclude.

By following these steps and recommendations, Mexlaw emphasizes the importance of careful planning to ensure legal compliance and facilitate a successful transition.