The Restricted Zone - The Most Valuable of All Baja Real Estate


 

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Over the years, ownership policies of Baja real estate have evolved.  Mexico now embraces foreign investors and second-home owners who want to acquire Mexican real estate.  However , those who set out to purchase real estate in Baja are confronted with many different types of land that can be purchased , and not all have the same value.

Let’s look at the four major types of land in Baja:  the Restricted Zone, the Federal Maritime Land Zone, the Unrestricted Zone, and Ejido Land.

The Restricted Zone

The Restricted Zone is the prime land that most international buyers are after. This is land that is more than 66 feet away from the mean high tide line, up to 32 miles away from the ocean, and up to 64 miles from international borders.  U.S. citizens and other non-Mexican nationals are buying this land using an instrument called a fideicomiso,” also known as a Mexican bank trust.

This Mexican bank trust is a dream come true for international buyers of Mexican real estate. It gives non-Mexican owners of Mexican real estate the power they need to control their land purchase, very similar to the way a U.S. citizen would enjoy owning real estate in the United States. For example, using a fideicomiso, you would be able to will the land or home to your children, rent it, subdivide it, lease-option it, enjoy it, sell it, improve it, or do anything else that can be done with Mexican real estate.

This bank trust costs about $1,600 to set up and about $600 a year to maintain, depending on the size of the land.  If you decide to sell your property, the bank trust is easily transferable, making your property more marketable.

Many Mexican nationals don’t use fideicomisos to buy land, as the Restricted Zone is not restricted to them. They buy land using a deed called an escritura publica.  When looking to buy Mexican real estate, you will be buying from someone that has either a fideicomiso, or an escritura publica.  

One final word of caution:  if someone quotes you a lot size of beach front land, make sure that no portion of that land falls in the Federal Zone.

The Federal Zone

The Federal Maritime Land Zone, also called the Federal Zone, is a thin strip of land that hugs the oceans, some rivers, waterways, and international borders. No one can own this land, not even Mexicans. This includes land along the Pacific Ocean and Gulf of California, from the mean high tide line to 66 feet up the beach. This 66 foot strip of coastal land is a buffer from the ocean to the first row of homes.

Some big hotels, Mexican land owners, large developments, and marinas apply for special permits, called concessions, to rent this land from the government. Some home owners with significant beach front real estate also apply for concessions to lease this land from the Mexican Government. If you own a beach house, it may make sense to get a concession for the land in front of your home just to avoid the possibility of anyone else getting that concession and putting up a business or other structure.

The Unrestriced Zone

The Unrestricted Zone is the inland part of Baja that is more than 32 miles from the ocean and more than 64 miles from international borders. If you’re a U.S. citizen you can purchase this land without setting up a fideicomiso.  The Unrestricted Zone allows foreigners to own land using an escritura publica just like a Mexican citizen.

Ejido Land

Ejido land is communal land that is shared among a group of Mexican nationals.  As a non-Mexican national, I don’t recommend you buy this land unless you are a professional investor of Mexico real estate or you really understand the details.

This land is less desirable for real estate purchases because clear title can be difficult and costly to get, and sometimes never comes. When you buy ejido land you are usually only buying the rights to use the land rather than own the land, depending on the ejido.

Each ejido has its own governing body.  Therefore one ejido may have different culture and methods for allocating land than the next.  Many Mexicans feel very comfortable living on and being in control of their parcel of ejido land as it is land on which many Mexicans were born.

Ejido land is many times offered for sale by developers making promises that at some time in the future, 3 to 8 years or more, the land will be regularized for clear title.  Regularization of ejido land is a lengthy legal process that is not always achieved.  Banks don’t offer fideicomisos on ejido land, and title insurance companies don't insure ejido land.  The only way a non-Mexican can securely control ejido land is by setting up a Mexican corporation and having the Mexican corporation control the property.

by Mario Restrepo

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