In August 2012, an initiative to add and amend certain dispositions of the Constitution and the Law of Foreign Investment was submitted before the Chamber of Deputies. The initiative has already been approved by this Chamber, and its approval is pending on the Senate.
To this day, Article 27 of the Mexican Constitution forbids that foreigners to acquire direct property over real estate within 100 km from the border and 50 km from the coast (the ?Restricted Zone?.
This prohibition has been circumvented through the use of trusts that are constituted to allow foreigners to have domain over the real estate even when they are not direct owners.
The initiative proposes to modify the constitutional text to allow the foreigners the possibility to acquire properties in the Restricted Zone (both in the coast and the border) as long as the real estate is destined only for housing with no commercial purposes.
The intention of the amendment is to eliminate intermediaries and allow the foreigner to have direct domain over the real estate, giving more legal certainty over his property and facilitating the purchase and sell of it. Likewise, tax collection could be done directly with the owner, creating a simpler tax control for the authorities.
Consequences
Some of the critics of this initiative sustain that its approval would difficult the access to the beaches and deprive Mexicans from its enjoyment. This would not be a consequence of the amendment since it has already been happening regularly with private property along the coast (with both national and foreign owners).
A true solution for this problem would be to establish, in the urban development legislation, more strict duties to the owners; increasing the obligation to build and preserve enough public entrances to the beach every certain amount of coast meters, as well as to effectively sanction incompliance with this provisions.
�Will it increase foreign investment?
Although the initiative also seeks to promote foreign investment in real estate, we consider that is not very likely that the inversion will increase considerably just by the approval of this amendment.
The possibility to avoid intermediaries will certainly allow certain savings to the foreigner, both economical (between $1,500 and $2,000 dollars approx.) and practical (saving time from formalities), however, we consider that it will not be a determining factor for investors, who normally consider those costs within the price of the estate, and who often consider other circumstances, such as quality of life and security, to be far more important when deciding to buy or not certain estate.
Real Opportunities
Even when we consider that some of the goals of the amendment are not going to be really achieved, if it is approved, it is true that it would bring real opportunities to certain sectors.
First, it would certainly facilitate the procedure to acquire property for foreigners (who still will have to request permission to the Foreign Relations Ministry), and although it may not be the determining factor for most investors, it will certainly benefit those that already considered M�xico as a good opportunity for a real estate investment.
Moreover, it would allow persons that already have real estate in Mexico, to make a transition from the trust regime to a direct property title, which will in fact give them more legal certainty over their property. This would also allow tax authorities to make a more transparent and simpler collection.
This transition process will require the termination of the trust trough an agreement with the trust institution, the transmission of the property of the good subject to trust to the foreigner, the registry of such transmission, and the ordinary notarization indicating the new owner. It is important to mention that the foreigner will keep tenure of the property during the whole procedure.
Conclusion
There is still no complete certainty as to if the initiative will be approved, or if it will preserve its same dispositions after the Senate?s deliberations, so we will have to wait to see the actual result. I case of approval, we have to take into account that additional time will be required to make the necessary legal and regulative adjustments for its correct application.It is worth to mention that the beach is never sold, the beach is property of the nation and the land that can be owned by private parties is the one adjacent to the beach.
