This is a question I do not like to address - while the general
law seems quite clear, local practices can make the law seem
somewhat irrelevant. I'll give here the facts based on national
law as I've understood it to be for many years.
In considering Mexican law as it affects foreign ownership of
land, it helps to keep in mind that ownership of land was a
central issue of the Mexican Revolution earlier in this century,
and it remains a major concern for many citizens. There is also
the memory of what happened in Texas over 140 years ago:
foreigners flocked into that area, acquired land, and then
seceded from Mexico - eventually leading to the loss of over
half of Mexican land to the United States.
The basic answer to this question of foreign ownership is
"Yes, and No!".
A foreigner can own land in Mexico as long as the land is
more than 100 kilometers from the "Federal Zone," a strip of
land reaching 20 meters inland from the high tide line along the
ocean borders of Mexico.
A foreigner cannot own land in Mexico if the land is less
than 100 kilometers from the Federal Zone. This case applies to
all of Baja California!
It is my understanding that this is written into the Mexican
constitution. I believe that it also applies to areas near the
land borders of Mexico as well. However, the ocean borders
application suffices to cover Baja California.
Okay, you've heard of all those people "owning" land in Cabo San
Lucas, and you want to be a part of that "money machine." Well,
if they are non-Mexican, they don't own the land -
despite what they might be saying. Most likely, they have a 30
to 50-year "trust" to use the land as they wish.
The way to secure such a trust is through an intermediary bank.
At the end of the period of the trust, it must be renewed or the
land will be sold. If the land is sold to another foreigner
during the period of the trust, a new trust must be created
(costs will have to be renegotiated, etc.).
It has been reported to me, by people having land trusts, that
the banks have been steadily increasing the annual fees charged
for their "service." This is something any potential buyer
should check into. Find out what the fee was a few years ago,
and what it is now. The work done by the banks is simple
paperwork, I am told - not something which would justify rapid
increases in the fees. Note also, the annual fee is pegged to
the perceived value of the property in question.
A neighbor in La Paz recently told me of the bank raising his
annual trust fee on a piece of property by almost 100% - on a
dollar basis! He went to the bank to determine a reason for
this dramatic change, and "inflation" was quoted as being the cause.
After much discussion, the bank agreed to an increase of about
30% - so the matter is negotiable.
There are several prominent examples of land ownership problems
in Baja California: the Hotel Punta Arenas southeast of La Paz
and the Hotel Serenidad in Mulegé.
The Hotel Punta Arenas was closed, and essentially "trashed."
The real owners did not want to renew the lease, and intended
taking over the operation of the hotel at the expiration of the
lease. The lease expired and the real owners took back the land
and all improvements made on it, but could not succeed in getting
the hotel operating again.
In early 1998 the hotel reopened, I have no details regarding ownership.
A brief stop in late 1999 showed the resort to have been nicely
restored to operating condition.
The Hotel Serenidad was taken over in July '96 by a group
claiming ownership of the land, and that group continues to hold
physical possession. A judge in Mexico City has ruled in favor
of the developers of the hotel, however the situation remains a
standoff. This case is especially interesting because it
essentially involves Mexican ownership on both sides.
Note: On June 20th, 1997, the hotel reopened,
although the legal questions remain unsettled.
A front-page article in the January 29, 1997 Los Angeles Times
"Standoff at the Hotel Serenidad,"
and covers many of the issues being fought over. The subheading
of this article reads: "Last July, peasants took over a resort
in Baja California, saying it sits on land the government gave
them. Their defiance points up the conflicts in Mexico between
local claims and the need for outside money."
My personal advice in the matter of "investing" money in Mexican
real estate, where true ownership is prohibited or unclear, is
put in only money you can walk away from without harming your
lifestyle or future security.
For reference, here is the statement relative to this subject
provided in the U.S. State Department Consular Information Sheet
on Mexico (the full document is on the
State Dept. Info Page):
REAL ESTATE AND TIME-SHARES: U.S. citizens should be
aware of the risks inherent in purchasing real estate in Mexico,
and should exercise extreme caution before entering into any
form of commitment to invest in property there. Investors must
recognize the absolute need to obtain authoritative information
and to hire competent Mexican legal counsel when contemplating
any real estate investment. Mexican laws and practices
regarding real estate differ substantially from those in the
United States. Foreigners may be granted the right to own real
property only under very specific conditions. Whether investing
through a trust mechanism in border and coastal areas or by
outright purchase in Mexico's interior, U.S. citizens are
vulnerable to title challenges that may result in years of
litigation and possible eviction. Title insurance is virtually
unknown and untested in Mexico. In addition, Mexican law
recognizes squatters' rights, so homeowners can spend thousands
of dollars in legal fees and years of frustration in trying to
remove squatters who occupy their property.
American citizens also should exercise caution when
considering time-share investments and be aware of the
aggressive tactics used by some time-share sales
representatives. Buyers should be fully informed and take
sufficient time to consider their decisions before signing
time-share contracts, ideally after consulting an independent
attorney. They should resist pressure to sign a contract the
very day that they see the model unit. Mexican law allows
time-share purchasers five days to cancel the contract for
unconditional and full reimbursement. U.S. citizens should
never sign a contract that includes clauses penalizing the buyer
who cancels within five days.