Without doubt, Puerto Vallarta is one of the most beautiful places in North America. Located on the coast of Mexico, this town has become a Mecca for tourists over the last half century. Where people find they love to vacation, they inevitably think about buying property for retirement, leisure, and maybe even investment purposes. It is important for those thinking about purchasing property in Puerto Vallarta to keep in mind that Mexican culture is very different from what we take for granted in the rest of North America. Although agreements such as NAFTA have more closely aligned the way our countries do business, Mexico remains an autonomous country with a government that may do as they choose.

Buying property in Puerto Vallarta, therefore, does come with some risks that are not as high in the United States or Canada. Fortunately, these risks are still fairly low; Mexico has acknowledged the rights of property owners, even foreigners, for many years. In fact, the country has made it much easier for foreigners to own property, as we shall see in this article.

Old restrictions on property ownership

The Mexican constitution, as drawn up in 1917, established that no foreign person could own property in Restricted Zones of the country. These zones were defined by their proximity to the coast (50km) or any border (100 km). Foreigners could simply not claim legal title to any land within those zones.

After the North American Free Trade Agreement was passed in 1993, the Mexican government began to try to get around this constitutional stipulation. The result is that foreign owners may now own property within these restricted zones (which includes virtually all of Puerto Vallarta), but in order to do so certain steps have to be followed.

The Fideicomiso Trust

The Mexican government decided that in order to hold property in restricted zones, foreigners had to do so through the use of a bank trust. A Mexican bank would hold the property in trust for the foreign owner; thus the property was still officially in Mexican hands, but was actually owned by the foreigner.

The Trust can be administered by any Mexican bank, and is allowable for any properties in the restricted zones. The trusts run for periods of 50 years and are renewable at any time during its existence. Property ownership through the trust allows foreigners the same rights to property in Mexico as they enjoy under US or Canadian law.

The trust themselves cost around $1,000 to establish and around $350 a year to maintain, but they are the only way that a foreigner can legally own property in places such as Puerto Vallarta.

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