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Market spotlight

Trends and prospects

What are the current trends in and future prospects for the real estate market (both commercial and residential) in your jurisdiction?

The current trends in and future prospects for the Mexican residential real estate market centre on the development of vertical residential complexes. This development is a natural consequence of the lack of space in major cities and will help to increase the number of horizontal complexes. Urban planning authorities have begun updating certain areas in the most important Mexican cities in order to begin developing vertical condominiums.

New residential complexes are commonly part of mixed-use developments, where offices and commercial spaces are included in the real estate developments. The goal of these new complexes is to create a more centralised population, reducing the distances between individuals, their jobs and amenities.

In relation to the commercial real estate market, the creation of the Mexican version of real estate investment trusts (commonly known as ‘FIBRAS’) and other similar vehicles has resulted in an expansion of the commercial real estate market. Several large international companies are focused on developing or expanding their existing facilities, especially through build-to-suit transactions – principally in the retail sector.

Further, as part of reforms to the Mexican pension fund sector, which has grown and evolved consistently over the past two decades, Mexican pension funds (commonly known as ‘AFORES’) have become primary sources of capital and financing for projects. AFORES initially focused on infrastructure and energy projects; however, over the past few years they have turned their attention to real estate developments.

Finally, the hospitality market has grown considerably and is expected to maintain its upward trajectory as a result of the growth in tourism levels over the past few years.

Rights and registration


What types of holding right over real estate are acknowledged by law in your jurisdiction?

Mexican law provides the following rights over real estate:

  • ownership;
  • use and occupancy;
  • usufructs;
  • easements; and
  • mortgages.

In addition, a feature that differentiates the Mexican market from other jurisdictions is that real estate developers commonly use trusts (where Mexican banks act as trustees) as vehicles of ownership and collateral for the development of projects. Mexican trusts allow for the creation of a bankruptcy remote vehicle (ideal for collateral purposes) and also have the benefit of acting as either transparent tax entities or tax contributors.

Are rights to land and buildings on the land legally separable?

Yes; however, Mexican law provides a legal presumption in favour of the landowner, which states that all constructions on a landowner’s property are owned by the landowner and were constructed at its cost. The legal consequences for building on someone else’s real estate will depend on whether the constructor or the real estate owner acted in good or bad faith.

Which parties may hold and exercise rights over real estate? Are there restrictions on foreign ownership of property?

Anyone with legal capacity may hold and exercise rights over real estate.

As a rule, foreigners may invest in real estate before obtaining the corresponding permit from the Ministry of Foreign Affairs or a record from such ministry that the corresponding notice was provided before acquisition, as provided by the Foreign Investment Law.

However, there are certain exceptions to this rule. First, foreigners cannot hold the status of ‘ejidatarios' (as defined in the Agrarian Law) and therefore cannot be assigned rights over such real estate under the agrarian regime.

Further, foreign ownership of real estate is limited to land outside the designated restricted zone – that is, any area within 100 kilometres of any neighbouring border or 50 kilometres of any coast. However, the Foreign Investment Law provides that foreigners may acquire interests in real estate located in the restricted zone through a trust, subject to the following provisions:

  • a permit must be obtained from the Ministry of Foreign Affairs; and
  • the trust must have a maximum duration of 50 years, which may be renewed for another 50 years.

How are rights, encumbrances and other interests over real estate prioritised?

Rights, encumbrances and other interests over real estate are prioritised depending on their registration in the corresponding public registry of property. Although each state has a registry and the effects of registration are declarative (except Quintana Roo), registration provides the registered title holder a good-faith assumption which is extremely valuable under Mexican law. Mexican law also permits the creation of second and successive mortgages.


Must real estate rights, interests and transactions be registered in your jurisdiction? What are the legal effects of registration?

Most real estate rights, interests and transactions (eg, not minor term leases) must be recorded in the corresponding state’s public registry of property in order to be effective against third parties. As aforementioned, in all real estate public registries (except in Quintana Roo), the registration of a certain right, encumbrance or interest over real estate is for informative purposes only and therefore the registration does not constitute any rights. That said, registration awards the real estate rights with publicity and prioritisation.

What are the procedural and documentary requirements for entry into the national real estate register(s)? Can registration be completed electronically?

There is no national real estate register. Instead, each state has its own real estate public registries and these may be divided into several internal jurisdictions according to the different municipalities.

Registrations are typically made using public notaries, since state law requires their intervention for most real estate transactions and that they be made by way of a public deed (depending on the amount of the transaction). However, original or certified copies of the agreements or titles must be delivered to the public registry of property and registration rights must be paid in anticipation of the corresponding registration.

Unfortunately, although most public registries are transitioning to electronic databases for registrations, originals of the agreements or titles are required in order to perform a registration.

What information is recorded in the national real estate register(s) and to what extent is such information publicly available?

Since the goal of public registries of property is to provide the public with information about the legal status of the real estate in their jurisdiction, all transactions, rights and interests affecting real estate may be recorded in the corresponding registries and such information is publicly available.

Is there a state guarantee of title?


Sale and purchase


How are real estate brokers regulated in your jurisdiction (eg, through caps on commission or disclosure obligations)?

Some states regulate real estate brokers; however, these types of regulation are relatively new and are intended only to promote the certification of real estate brokers. No laws prohibit persons from acting as real estate brokers in Mexico.

Notwithstanding the above, real estate brokerage activities are ordinarily regulated through an agreement. These agreements often contain standard provisions such as confidentiality and exclusivity. In relation to compensation provisions, under a sale and purchase transaction, the brokerage fee most commonly agreed on is a percentage of the purchase price (eg, 2% to 4% under a housing sale and purchase transaction).

Due diligence

What due diligence should be conducted before conclusion of a real estate sale contract?

Given the importance of the public registries of property, due diligence regarding real estate is centred on reviewing whether the information provided by the seller to the buyer is reflected in the corresponding entry in the public registry of property and ensuring that no lien or encumbrance is registered.

It is common for the information included in registered deeds regarding the surface of the real estate not to match the actual real estate or the information included in the cadastral registries of the municipality. When real estate is destined for development, these differences can affect the registration process, construction potential and permitting; therefore, it is important to identify any issues and attempt to resolve any differences beforehand.

Another important aspect is the environmental status of the specific real estate. Phase I studies are normally performed as part of the due diligence process for real estate that is destined to become major housing, commercial or industrial facilities.

Further, due diligence includes ensuring that the specific real estate has no due fees in relation to real estate tax, ministration water rights or other relevant services (eg, electricity).

For real estate that will be used for a specific purpose (eg, housing facilities), due diligence must be conducted on the urban specifications, including:

  • any licences or permits associated with existing or potential constructions; and
  • the feasibility of public services (eg, water, sewage and electricity).

Finally, for beachfront real estate, it is important to review the status of the federal zone maritime concession, which allows real estate owners to use (not construct) the beach located in front of their property. Since sea tides may move beach boundaries, beachfront concessions may move in favour or to the detriment of concessionaries. Due diligence in this regard is aimed at confirming that the concession is in place and paid for and that there are no constructions over the surface. 

Preliminary agreements

Are any preliminary agreements typically entered into before conclusion of a sale contract?

Yes, promised purchase agreements or binding and non-binding letters of intent are normally executed before executing the final agreement before a public notary.


Must sale contracts be concluded in writing? If so, must they be notarised?

Yes, sale contracts over real estate must be concluded in writing and, except for extremely low income real estate transactions, all state laws provide that the sale and contract agreement must be notarised by a notary public and recorded in the public registry of property in order for the owner to have rights against third-party oppositions.

Can sale contracts be concluded electronically?

No, since the notarisation requirement necessarily implies the presence of the parties or their representatives before the public notary.

What provisions are usually included in a sale contract?

Common representations relating to the legal and physical status of the real estate are included in a sale contract and therefore provisions are included in order to specify the consequences of a mismatch between such representations and the actual legal and physical status of the real estate (eg, price variations for differences found in the actual surface of the property).

Obligations and liabilities

What are the seller’s disclosure obligations and other liabilities, and what are the consequences of breach?

Mexican law does not include a specific disclosure obligation; however, since sale and purchase agreements are performed before a notary public, the notary public must obtain from the public registry of property and cadastral and water ministration authorities information in order to review the general status of the real estate described in the corresponding deed.

However, it is common practice to disclose all information relating to the current status of the real estate and, if breached, the buyer may rescind the corresponding agreement and request payment of any damages.

What contractual warranties are usually given by the seller?

According to Mexican law, a seller must warrant a buyer from any hidden defects and provide a warranty that the transferred real estate was its property, and therefore the buyer's possession will not be affected by a third party alleging a better right. 

This obligations may be limited or waived on agreement by the parties.

Environmental indemnities and price variations are common practice if a physical survey reveals that the real estate is smaller than disclosed in the sale and purchase agreement.

Are there any other obligations on the buyer, aside from paying the purchase price?

Not under law. 


What taxes are payable on the sale and purchase of real estate? Are any exemptions available?

In general, there are three types of tax related to the sale and purchase of real estate:

  • acquisition tax (local tax);
  • value added tax (federal tax) – for construction not destined for residential purposes; and
  • income tax (federal tax) – an exemption may apply if:
    • the real estate has been used by the seller as its residence;
    • the seller has not sold other real estate as its residence in the past three years; and
    • the compensation does not exceed the limits provided in the income tax law.

Transfer of title

When does title in the property transfer?

According to Mexican law, property transfers occur when there is an agreement between the parties regarding the object to be transferred and the price. When preliminary agreements are executed, it is important to draft them in a way that allows for the transfer to occur while the definitive public deed is executed (eg, by including conditions precedent); otherwise, all resulting taxes may be levied on the date of the preliminary agreements.


What is the typical duration of a sale transaction?

If no relevant issues are raised during due diligence, a sales transaction may last between one and three months.



Must a lease agreement be concluded in writing?


Are there any regulations setting out mandatory or prohibited provisions in lease agreements?

Yes. Depending on the state regulations, there may be mandatory provisions relating to the protection of housing lessees (eg, preferential renewals, right of first offer and compliance with health and safety provisions).

Most states include prohibitions regarding the lease period and extensions, depending on whether the real estate will be used for housing, commercial or industrial purposes. 

What provisions are typically included in lease agreements?

This depends on the type of leased real estate; however, agreements typically include:

  • purpose;
  • delivery of the property;
  • access;
  • permits;
  • terms and duration;
  • rent (compensation);
  • rent increases;
  • guaranty deposits;
  • insurances;
  • sub-lease;
  • assignment;
  • enhancements and adaptations;
  • termination; and
  • maintenance fees.

What are the standard forms of lease agreement used in your jurisdiction?

There are no specific standards. Leases vary depending on the type of real estate being leased (eg, for residential, retail, office space or industrial purposes).

Length of term

Are there any regulations on minimum and maximum terms of leases?

Yes, although they are regulated differently depending on the corresponding state law. For example, in Mexico City, the following minimum and maximum terms apply:

  • real estate destined for housing purposes – a one-year minimum term; and
  • real estate destined for commercial or industrial purposes – a 20-year maximum term.

Are long-term tenants accorded any special rights as to extension or renewal of leases?

Yes, most of the state regulations provide special rights for long-term tenants. For example, under the Mexico City Civil code, if a lease agreement has lasted for at least three years, the tenant (with no due rent payments) must be preferred above any other potential tenants if the lessor wants to execute a new lease agreement.


What regulations (if any) govern rent increases?

No regulations govern rent increases, as this is agreed by the parties.

What regulations (if any) govern rent security deposits?

No regulations govern rent security deposits, as this is agreed by the parties.

Can the tenant withhold rent payments on any legal grounds?

The right to withhold rent payments is not contemplated in the provisions that regulate lease agreements; however, the parties may agree to specific circumstances which allow rent payments to be withheld.


Under what circumstances is sub-letting typically allowed?

The lessor’s consent is needed in order to sub-let real estate. If a tenant sub-lets the real estate without the lessor’s consent, the lessee must respond jointly with the sub-lessee if any breach or damage to the lessor or the real estate occurs.

Obligations and liabilities

What are the general obligations and liabilities of the landlord in respect of the property and what are the consequences of breach?

The landlord’s main obligations include:

  • delivering the real estate in a condition suitable for its agreed purpose;
  • maintaining the real estate in a condition suitable for its agreed purpose and performing any necessary repairs;
  • not obstructing the tenant’s use of the real estate;
  • providing warranties for specific use of the real estate by the tenant; and
  • responding to any hidden defects in the leased real estate.

What are the general obligations and liabilities of the tenant in respect of the property and what are the consequences of breach?

The tenant’s main obligations include:

  • paying rent;
  • remedying any damages resulting from its fault or negligence;
  • using the leased real estate for the agreed purpose; and
  • for real estate in a condominium, complying with the regulations thereof.


Are any taxes payable on rental income? If so, are any exemptions available?

Yes – rental income tax must be paid by tenants. Further, value added tax (VAT) is payable under lease agreements; however, if the lease is for housing, no VAT will apply.

If the property leased for housing purposes includes rental furniture, tax law interprets such lease as not destined for housing purposes, and therefore VAT must be paid in connection with the portion of the rent that is allocated to the movable assets.


Are the landlord and tenant bound by any insurance requirements?

No; however, in real estate agreements for commercial or industrial facilities it is customary for both parties to maintain certain insurance policies. When the property is located in a condominium, local law may require the condominium to maintain certain insurance policies.

Termination and eviction

What rules and procedures govern termination of the lease by the landlord and the tenant’s eviction from the property?

Most states have special judicial procedures which govern disputes and the termination of lease agreements.

These special procedures are intended to be quicker than ordinary civil procedures by providing a single hearing (instead of two), during which the judge’s ruling must be issued (which is atypical in Mexican judicial procedures).

In order to evict a tenant, the special lease procedure must be concluded and a ruling must be issued by the judge ordering the eviction. If the tenant does not comply with the order, the landlord may request the judge to provide police support in order to remove the tenant from the property, if necessary.


Finance providers

What are the typical providers of real estate financing in your jurisdiction? Are there any restrictions on who may provide financing?

No; there are no restriction on who may provide financing for real estate developments.

The most common financing providers are banks, Mexican pension funds (AFORES), real estate investment trusts (FIBRAS) and real estate funds, which may also act as investors on real estate projects.

Financing structures

What are the most common structures used to secure real estate financing and how are these security interests perfected?

The most common structures to secure financing are:

  • mortgages over real estate; and
  • guaranty trust agreements, which may include not only the real estate, but also funds from the project, licences, contracts and insurance policies.

Guaranty trusts agreements are also used in the financing of offices, retail stores and industrial parks, since the trust is a perfect vehicle to capture lease agreements executed with tenants and the cash flow resulting therefrom.

What covenants are typically made in financing agreements?

Some common covenants included in financing agreements are:

  • performance by the borrower;
  • use of funds and proceeds resulting from the sale of units in the development;
  • warranty of title to the real estate;
  • minimum conditions for the sale or lease of units in the development;
  • insurance requirements;
  • care and use of the property;
  • restrictions in relation to creating liens and encumbrances over the property; and
  • covenants designed to maintain the financial independence of the financed project from other projects being constructed by the developer.

Enforcement of security

How are security interests enforced in the event of default?

The procedure to foreclose on collateral depends on the type of security. The enforcement of a mortgage begins when the lender files a claim before a court demanding payment of the indebtedness and requesting the foreclosure of the mortgaged property to satisfy the defaulted obligations. If the borrower cannot satisfy the defaulted obligations or make a payment, the court will order the mortgaged property to be auctioned. Most state statutes provide for special mortgage foreclosure procedures which tend to be quicker than ordinary civil procedures.

Foreclosure procedures are also one of the main reasons why guaranty trusts are commonly used in Mexico: guaranty trusts provide for private (non-judicial) foreclosure procedures. Non-judicial foreclosure procedures are agreed on in the trust agreement and, in order to be enforceable, they must meet certain minimum requirements, such as granting the borrower the ability to pay the amounts due before the foreclosure starts. The procedures are usually conducted by the trustee, who may seek the assistance of an appraiser and real estate agents.

What is the typical timeframe for the enforcement of security?

The timeframe for foreclosure of collateral also depends on the type of security interest. For example, enforcement of a mortgage typically takes between eight and 24 months. The timeframe for the foreclosure of a trust depends on the procedure agreed on in the trust, but because of its extrajudicial nature, it is customarily quicker than the foreclosure of a mortgage.


Investment climate

What is the general climate of real estate investment in your jurisdiction?

Despite the volatility of the macroeconomic environment regarding international commerce and monetary indicators and the fact that Mexico’s economic growth did not reach the expected levels due to several factors (eg, insecurity, corruption and low oil prices), Mexico’s real estate climate is perceived as a favourable one and international investment has continued to be seen in real estate developments.


Who are the most common investors in real estate?

Mexican pension funds (AFORES), real estate investment trusts (FIBRAS), real estate developers and local and international real estate private equity funds.

Are there any restrictions on foreign investment in real estate?

There is no restriction on foreigners investing in Mexican real estate if the real estate is held through a Mexican entity or trust.

Foreigners may directly invest in real estate before obtaining the corresponding permit from the Ministry of Foreign Affairs or a record from the ministry that the corresponding notice was provided before its acquisition, as provided by the Foreign Investment Law.

Further, foreign ownership of real estate is limited to land outside the designated restricted zone – that is, any area within 100 kilometres of any neighbouring border or 50 kilometres of any coast. However, the Foreign Investment Law provides that foreigners may acquire interests in real estate located in the restricted zone through a trust, provided that:

  • a permit is obtained from the Ministry of Foreign Affairs; and
  • the trust has a maximum duration of 50 years, which may be renewed for another 50 years.

Investment structures

What structures are typically used to invest in real estate and what are the advantages and disadvantages of each (including tax implications)?

The feature that singles out Mexico in comparison to other jurisdictions is the common use of trust agreements for the development of real estate projects. Trust agreements may act as transparent tax entities or tax contributors.

Particular advantages and disadvantages of a given structure depend mainly on:

  • the type of real estate being developed;
  • whether the resulting project is destined for the sale or lease of real estate;
  • access to bank financing; and
  • the particular tax regime of the investors (whether they are Mexican individuals or entities or foreign individuals or entities).

Planning and environmental issues


Which government authorities regulate planning and zoning for real estate development and use in your jurisdiction and what is the extent of their powers?

Ecological planning At the federal level, the Ministry of Environment and Natural Resources (SEMARNAT) is responsible for developing the overall national ecological zoning plan.

Local environmental ministries can also issue ecological zoning plans relating to their jurisdiction (as long as they are expressly conferred to them and do not fall under federal jurisdiction).

Urban planning Local ministries of urban development and municipal authorities can issue and enforce urban development legislation and regulations within their corresponding competence and jurisdiction and ultimately issue the corresponding land use and construction licences.

What are the eligibility, procedural and documentary requirements to obtain planning permission?

Depending on the type of activity, a review of the federal and local legislations and regulations must be undertaken in order to ensure that such activity is permitted under the ecological and urbanistic zoning plans. If permitted, the following documents may be required for the construction and operation of infrastructure:

  • an environmental impact authorisation;
  • an authorisation for the forestry land use change;
  • a land use licence;
  • a construction licence;
  • water concession titles or water supply agreements with the corresponding authority or services provider;
  • a wastewater discharge permit; and
  • a registration for the generating of waste and management plans.

Can planning decisions be appealed? If so, what is the appeal procedure?

Yes. Depending on federal or local jurisdiction, planning decisions can be appealed by filing:

  • a review appeal before the authority that issued the planning decision;
  • an administrative suit before the Federal Court of Administrative Justice; or
  • an amparo suit where local or federal legislation do not provide means for appealing planning decisions or urban development legislation. 

What are the consequences of failure to comply with planning decisions or regulations?

Failure to comply with the corresponding legislation on planning matters could result in:

  • the imposition of economic penalties;
  • the suspension of activities;
  • the revocation of permits or licences; or
  • partial or total shutdowns on a temporary or permanent basis.

What regime governs the protection and development of historic and cultural buildings?

The protection of historic, cultural and archaeological monuments, buildings and vestiges is governed by the Federal Law on Monuments and Archaeological, Artistic and Historical Monuments and Zones and its regulations. The National Institute on Anthropology and History (INAH) enforces the law and preserves the cultural and archaeological patrimony.

Government expropriation

What regime applies to government expropriation of real estate?

In order for the government to expropriate certain real estate, the corresponding authority must prove that such expropriation is being executed as a result of a specific public benefit or use.

Mexican law contemplates, among other things, the following scenarios as public utility causes:

  • the establishment, exploitation and conservation of a public service;
  • the constitution, expansion or alignment of streets, avenues, bridges, tunnels and highways to facilitate urban and sub-urban transit;
  • the decoration, expansion and sanitation of towns and ports;
  • the construction of hospitals, schools, parks, gardens, sport and landing facilities and federal offices; and
  • the construction of public infrastructure and ministration of public services which require real estate or improvements to existing real estate.

What is the required notice period for expropriation and how is compensation calculated?

Once the expropriation decree has been published in the Federal Official Gazette, the affected individuals must be notified personally within 15 business days of publication.

Compensation is calculated by certified appraisers and the value may not be under the values assigned to the real estate by the cadastral authorities.

Environmental issues

What environmental certifications are required for the development of real estate and how are they obtained?

For the preparation of a site and the construction of a real estate project, the following permits may be required:

  • an environmental impact authorisation (issued by SEMARNAT or the local corresponding authority), depending on the surface to be affected or constructed, the heights of the buildings and water consumption (among other elements);
  • an authorisation for land use change in forestry areas, where applicable;
  • INAH authorisation for constructions on land which contains archaeological monuments or vestiges;
  • a land use licence; and
  • a construction licence.

In regard to the operation of real estate developments, the following environmental permits and approvals may also be required:

  • concession titles for the use and exploitation of domestic waters or a wastewater discharge permit onto federal land and the corresponding agreement with the local or municipal authority for the supply of water and discharge of wastewater into the local sewage or drainage system;
  • registry (before SEMARNAT) as a hazardous wastes generator or special management waste generator; depending on the volume of waste generated, the developer may be required to elaborate a management plan and submit it for approval before the corresponding authority;
  • a comprehensive environmental licence, if applicable;
  • approval of the internal civil protection plan; and
  • an operation licence (issued by the corresponding municipality).

What environmental disclosure obligations apply to real estate sales?

The following must be disclosed in a real estate sale:

  • evidence of contamination of the soil, the ground (above or under) or water that may require remediation; and
  • any administrative procedure initiated by urban or environmental authorities.

What rules and procedures govern environmental clean-up of property? Which parties are responsible for clean-up and what is the extent of their liability?

The applicable legal framework is the General Law of Ecological Equilibrium and Environmental protection and the General Law for the Comprehensive Management of Wastes and its regulations. SEMARNAT governs soil contamination caused by hazardous wastes or materials.

The specific methodology for characterising and resolving contaminated soil is established in Official Standard 183-SEMARNAT/SSA1-2012 regarding maximum permitted limits of hydrocarbons in soil and procedures for its characterisation and remediation specifications.

There are three types of liability in regard to soil contamination: civil, criminal and administrative. Those that actively contaminate the soil may be held accountable in terms of civil and criminal responsibility; however, owners or lessees may also be responsible in administrative terms. 

Are there any regulations or incentive schemes in place to promote energy efficiency and emissions reductions in buildings?

There is a programme for the certification of sustainable edifications currently in force in Mexico City in relation to the construction and development of buildings within its jurisdiction.