Mexico: Real Estate Comparative Guide

1 Legal framework

1.1 What legislation governs real estate in your jurisdiction?

Real estate in Mexico is primarily governed by:

• the Mexican Constitution;
• federal laws; and
• state laws.

The key laws that govern real estate in Mexico include the following:

• Mexican Constitution: The Mexican Constitution sets forth the general principles and framework for land ownership, property rights and the regulation of real estate in Mexico.
• Civil Code: The Civil Code contains provisions related to:
• • property rights;
  • real estate transactions;
  • obligations and contracts; and
  • the legal framework for real estate ownership and transfers.
• Federal Law on Agrarian Reform: This law regulates agrarian matters, including:
• • the distribution and use of communal land;
  • ejidos (agricultural communities); and
  • the rights and obligations of ejidatarios (members of ejidos).
  • Agrarian Justice and Conflict Resolution
• Federal Law on Land Registry: This law establishes the legal framework for the registration and public record of property rights, including the creation, modification and cancellation of real estate liens and encumbrances.
• Federal Law on Notaries Public: This law governs the organization and operation of notaries public in Mexico. Notaries play a crucial role in real estate transactions, as they authenticate and certify legal documents, such as property deeds and mortgage agreements.
• Foreign Investment Law: The Foreign Investment Law sets out the regulations and requirements for foreign individuals and entities to invest in real estate in Mexico, particularly in restricted zones near the coastline or borders.
• Environmental laws: Various federal and state laws govern environmental protection, conservation and sustainability, impacting real estate development and land use.
• Tax laws: Tax laws – including the Federal Tax Code and state-specific tax laws – impose taxes and obligations related to real estate transactions, such as property transfer taxes and value-added tax.
• Urban development laws: Each state in Mexico has its own urban development laws that regulate:
• • land use;
  • zoning;
  • construction permits; and
  • urban planning.

1.2 What special regimes apply to different types of real estate?

In Mexico, different types of real estate may be subject to specific regulations and special regimes. The common special regimes that apply to various types of real estate in Mexico include the following:

• Residential real estate: Residential real estate in Mexico is generally subject to zoning regulations, building codes and housing development regulations at the federal, state and municipal levels. There may also be specific regulations relating to affordable housing or social housing programmes.
• Commercial real estate: Commercial real estate – such as office buildings, retail spaces and industrial properties – may be subject to:
• • zoning restrictions;
  • land use regulations; and
  • environmental regulations.
• Additionally, there are specific regulations for commercial leases, including provisions relating to:
• • lease terms;
  • rent increases; and
  • tenant rights.
• Touristic real estate: Touristic real estate – including hotels, resorts and vacation properties – is subject to special regulations aimed at promoting tourism and protecting the interests of tourists. These regulations may include requirements for:
• • permits;
  • licensing;
  • safety standards; and
  • environmental impact assessments.
• Agricultural real estate: Agricultural properties in Mexico are subject to specific regulations related to:
• • land use;
  • water rights; and
  • agricultural practices.
• There may be restrictions on the use of certain lands for agricultural purposes; and permits or authorisations may be required for specific activities, such as irrigation or livestock farming.
• Ecological and protected areas: Mexico has numerous ecological and protected areas, such as:
• • national parks;
  • biosphere reserves; and
  • wildlife sanctuaries.
• These areas are subject to strict regulations aimed at preserving their ecological value and biodiversity. Development and land use within these areas may be highly restricted or prohibited.
• Indigenous lands: In recognition of indigenous rights and cultural preservation, there are special regulations governing land ownership and use in indigenous communities. These regulations aim to protect the ancestral territories of indigenous groups and safeguard their traditional practices and way of life.

Specific regulations and special regimes can vary between different states and municipalities in Mexico.

2 Ownership

2.1 What types of ownership rights exist in your jurisdiction?

There are three types of ownership:

• Public ownership: Public ownership is regulated in Article 27 of the Constitution. The nation:
• • has direct control over all natural resources, minerals, precious stones, oil and hydrogen carbides; and
  • is the owner of waters, territorial seas, inland marine waters, lagoons, estuaries, rivers and so on.
• This form of ownership:
• • is constituted by the goods and rights that are part of the national patrimony; and
  • is integrated with the patrimonies of the federation, the federal entities and the municipalities.
• Private ownership: 'Private ownership' refers to land owned by private parties with limitations as to its extension, in accordance with the provisions of the Constitution. Private ownership exists when a person – whether natural or legal – is attributed real estate, recognised by the first paragraph of Article 27 of the Constitution, and is subject to the modalities dictated by the Mexican Constitution.
• Social ownership: Social ownership is constituted by:
• • ejidos;
  • communities;
  • agricultural colonies; and
  • mercantile companies.
• Taking into account the meaning of social property, the most important figure is the ejido.

2.2 What ownership structures are commonly used in your jurisdiction?

• Fee simple ownership: Fee simple ownership is the most common and straightforward form of property ownership in Mexico. It grants the owner complete control and rights over the property, including possession, use, modification, sale or transfer.
• Fideicomiso (trust): The fideicomiso (real estate trust) is a widely used ownership structure for non-Mexican individuals or entities that acquire property in restricted zones, which include areas near the borders and coastlines. A fideicomiso involves a Mexican bank acting as a trustee to hold legal title to the property on behalf of the beneficiary, which is the non-Mexican owner. The beneficiary retains all ownership rights and can sell, lease or transfer the property within the legal framework.
• Mexican corporation: Establishing a Mexican corporation is another common ownership structure for non-Mexican individuals or entities interested in owning property, particularly in restricted zones. The corporation holds the legal title to the property and the non-Mexican owner(s) hold shares in the corporation, effectively owning the property indirectly through their ownership in the company.
• Ejido land: 'Ejido land' refers to land held collectively by an ejido, which is a traditional Mexican agricultural community. While not as common for private ownership, ejido land can be acquired through a legal process called regularización, where the ejido grants individual use rights or property titles to individuals within the community.
• Condominium ownership: Condominium ownership is widely used for multi-unit residential or commercial properties in Mexico. Each unit owner holds individual ownership rights to its unit and shares joint ownership of common areas and facilities within the condominium complex.

2.3 Are there any restrictions on real estate ownership in your jurisdiction?

Yes, there are certain restrictions on real estate ownership in Mexico, particularly for non-Mexican individuals or entities. These restrictions primarily apply to properties located in 'restricted zones', which include areas within:

• 100 kilometres of Mexico's borders; and
• 50 kilometres of its coastlines.

The restrictions aim to:

• protect national interests; and
• preserve Mexican land for the benefit of the country and its citizens.

The key restrictions are as follows:

• Restricted zone ownership: Non-Mexican individuals or entities cannot directly own property within restricted zones for residential or commercial purposes. However, there are alternative ownership structures available to non-Mexicans, such as the fideicomiso (real estate trust) and the Mexican corporation, which allow for the indirect ownership and use of property within restricted zones.
• Fideicomiso (trust) requirement: Non-Mexican individuals or entities must establish a fideicomiso (real estate trust) with a Mexican bank to acquire and hold residential property within restricted zones. The bank acts as the trustee and holds legal title to the property on behalf of the beneficiary, which is the non-Mexican owner. The beneficiary retains all ownership rights and can sell, lease or transfer the property within the legal framework.
• Trustee selection: When establishing a fideicomiso, the non-Mexican owner has the right to choose the trustee bank. The bank must be authorised by the Ministry of Foreign Affairs to provide trust services to non-Mexican individuals.
• Trust term: The fideicomiso for residential property within restricted zones is typically granted for a maximum term of 50 years, with the possibility of renewal for an additional 50 years. The trust can be transferred or inherited during its term, allowing for continuity of ownership.

2.4 Is ownership of land and buildings constructed thereon legally separable?

The ownership of the land and the ownership of what is built on it are not legally different – although it may seem that they are, because in principle, different people are the owners of each one. However, the right of accession establishes different rules to follow within the Civil Code, which provides that everything that is planted, built or constructed on another's land becomes the property of the owner of the land so that the ownership of both the land and what is built or constructed belongs to only one person.

2.5 What security interests can attach to real estate? How are they prioritised?

In Mexico, several security interests can attach to real estate. The most common security interests that can be established are as follows:

• Mortgage: A mortgage is a common security interest in Mexico. It is created when a property owner (mortgagor) grants a lender (mortgagee) a lien or charge on the property to secure a debt. The mortgage is typically registered with the Public Registry of Property to provide notice to third parties.
• Trust agreement (fideicomiso): In the case of a fideicomiso (real estate trust), the property held in trust can be used as collateral to secure a debt. The trustee – usually a Mexican bank – can grant a lien or charge on the property in favour of a lender. The terms and conditions of the trust agreement outline the rights and obligations of the parties involved.
• Pledge: A pledge is another form of security interest that can attach to real estate. Under a pledge, the property owner (pledgor) grants the lender (pledgee) a security interest in the property to secure a debt. The property remains in the possession of the pledgor, but the lender has the right to take possession of the property in case of default.
• Lien: A lien is a legal claim or encumbrance on a property that secures a debt or obligation. Various types of liens can arise in different situations, such as:
• • tax liens;
  • construction liens; and
  • mechanic's liens.
• Liens can be created by law or by agreement, and are typically prioritised based on the date of registration or creation.

In terms of prioritization, the priority of security interests in Mexico generally follows the principle of 'first in time, first in right'. This means that the security interest registered or established first will have a higher priority over subsequent interests. Priority is often determined by the date and time of registration or creation of the security interest.

3 Registration

3.1 What body administers the land register in your jurisdiction?

The Public Registry of Property is the institution through which the government of the City of Mexico publicises:

• the legal situation of goods and rights; and
• the legal acts that, according to the law, must registered in order to be effective against third parties.

3.2 Is registration of real estate rights, transactions and encumbrances mandatory? What are the consequences of failure to register?

The registration of real state rights, transactions and encumbrances are not mandatory, because the registration of acts or contracts in the Public Registry has declarative effect only; therefore, it does not validate acts or contracts that are null and void under the law.

This notwithstanding, acts or contracts which are granted or entered into by persons that appear in the register as having the right to do so will not be invalidated as to a third party once they have been registered, even if the right of the grantor or of previous holders is later annulled or terminated:

• by virtue of an unregistered title;
• by virtue of a title not registered but valid; or
• for reasons that do not clearly result from the same register.

These provisions will not apply to the last acquirer whose acquisition was made in violation of prohibitive provisions or public policy. Acquirers that acquired the property free of charge will enjoy the same registry protection as that enjoyed by the originator or transferor. Good faith is always presumed; anyone alleging the contrary bears the burden of proof.

3.3 What are the formal and documentary requirements for registration?

The registration procedure begins with the assignment of an entry and processing number to the application submitted.

Receipt may be:

• physical, accompanied by the testimony of the instrument in which the act to be registered is recorded; or
• electronic, accompanied by a pre-encoded format and an electronic certified copy.

In any case, payment of the fees due, where applicable, must be accredited.

3.4 What is the process for registration?

Physical receipt: The interested party must present, at the Office of Parts of the Registry, the testimony or other authentic instrument, and will be subject to the following rules:

• Once the document has been entered, the computer system will assign it an entry number in order of presentation, which will be progressive, date, time and subject to which it corresponds. This will be recorded in the request for entry and processing of each document, a copy of which will be given to the applicant. The numbering follows the calendar year and for no reason whatsoever, it is permitted to use the same number can be used for different documents, except in the case of a single instrument.
• With the request for entry and processing, the testimony or document to be registered will be turned over to the registrar to continue the qualification phase.
• The document presented may be accompanied by the pre-coded form.

Electronic receipt: The notary may send, by telematic means through the computer system, the pre-coded form and an electronic certified copy of the act to be registered, and will be subject to the following rules:

• The pre-coded form must be sent electronically signed together with an electronic certified copy, as well as proof of the corresponding payment of any applicable fees. The computer system will assign the same number of entry by order of presentation, which will be progressive, date, hour and subject matter to which it corresponds. An entry slip will be generated which will have the effect of a request for entry and processing; this will be sent immediately to the notary by telematic means. The numbering follows the calendar year and for no reason whatsoever, it is allowed to use the same number can be used for different documents, except in the case of a single instrument.
• The electronic certified copy must include the 'complementary notes' to the instrument, in which the notary indicates that all fiscal and administrative requirements for registration have been complied with.

3.5 Is registered information publicly accessible?

Registry entries are public. In all cases in which an entry is consulted in any way, the identity of the applicant must be expressly determined.

The Bulletin is published electronically. Reports to the authorities are made by way of an official letter. The appropriate notifications are made through the Bulletin.

4 Commercial leases

4.1 What types of commercial leases exist in your jurisdiction?

• Traditional lease: The traditional lease is the most common type of commercial lease in Mexico. It involves an agreement between the landlord (lessor) and the tenant (lessee) for the use of a commercial property in exchange for rent. The lease can specify:
• • the duration of the lease term;
  • the rent payment terms;
  • maintenance responsibilities; and
  • any other conditions agreed by the parties.
• Build-to-suit lease: A build-to-suit lease is a type of lease where the landlord constructs or modifies the property according to the specific needs and requirements of the tenant. The tenant typically commits to a long-term lease and the landlord customises the property to suit the tenant's business operations. The terms and conditions of the lease, including rent and lease duration, are negotiated between the parties.
• Triple net lease: A triple net lease is a lease structure where the tenant is responsible for paying not only the rent, but also additional expenses related to property taxes, insurance and maintenance costs. Under a triple net lease, the tenant assumes these additional financial obligations, relieving the landlord of these expenses.
• Percentage lease: A percentage lease is commonly used in retail settings. It involves the tenant paying a base rent along with a percentage of its sales revenue to the landlord. The percentage of sales revenue paid as rent is typically negotiated between the parties and can vary based on factors such as the type of business and location.
• Short-term lease: Short-term leases are commonly used for temporary or seasonal commercial arrangements. These leases have a relatively short duration, often ranging from a few months to a year. They provide flexibility for both landlords and tenants and are suitable for businesses with temporary or fluctuating needs.

4.2 Are the terms of a commercial lease regulated or freely negotiable? What do they typically cover (eg, duration; security deposit; rent; sub-letting; termination)?

In Mexico, the terms of a commercial lease are generally freely negotiable between the parties involved, subject to compliance with applicable laws and regulations. While there is no specific legislation governing the content of commercial lease agreements, certain provisions and practices are commonly included and understood in commercial leases. Typical terms that may be covered in a commercial lease agreement in Mexico include the following:

• Duration: The lease agreement will specify the duration of the lease, including the start and end dates.
• Rent: The lease agreement will outline:
• • the rent amount;
  • the payment frequency (eg, monthly, quarterly); and
  • any applicable rent adjustment mechanisms.
• It may also specify the method of rent payment and any penalties for late payment.
• Security deposit: The lease agreement may require the tenant to provide a security deposit as a form of financial guarantee against:
• • unpaid rent;
  • damages; or
  • breach of the lease agreement.
• Use of the premises: The lease agreement will specify the permitted use of the premises by the tenant.
• Subletting and assignment: The lease agreement may address subletting or assignment of the lease. It may specify:
• • whether subletting is allowed;
  • under what conditions; and
  • whether the landlord's consent is required.
• Assignment provisions outline the conditions under which the tenant can transfer the lease to another party.
• Maintenance and repairs: The lease agreement typically outlines the responsibilities of the landlord and tenant regarding maintenance, repairs and upkeep of the leased premises.
• Termination: The lease agreement will specify the conditions and procedures for termination. It may also outline the consequences of early termination, such as penalties or obligations to restore the premises to their original condition.

4.3 What are the formal and documentary requirements for conclusion of a commercial lease?

In Mexico, the formal and documentary requirements for the conclusion of a commercial lease can vary depending on the specific circumstances and the parties involved. Common formal and documentary requirements for the conclusion of a commercial lease in Mexico include the following:

• Offer and acceptance: The parties involved in the lease agreement must reach mutual agreement on the essential terms and conditions of the lease, including:
• • the rent;
  • the duration;
  • the permitted use; and
  • any special provisions.
• Lease agreement: A written lease agreement is commonly prepared and executed by the landlord and tenant. The lease agreement outlines the rights, obligations and responsibilities of both parties.
• Identification documents: The landlord and tenant typically need to provide identification documents as part of the lease process.
• Proof of legal capacity: If the tenant is a legal entity, it may be required to provide documentation demonstrating its legal capacity to enter into the lease agreement.
• Proof of solvency: The tenant may need to provide documentation or financial statements demonstrating its solvency and ability to meet the financial obligations of the lease agreement.
• Guarantees or security: Depending on the agreement between the parties, the tenant may be required to provide guarantees or security in the form of a security deposit, bank guarantee or other financial instruments.
• Notarisation and registration: In some cases, the lease agreement may need to be notarised or registered with the appropriate authorities to provide legal certainty and enforceability. The need for notarisation or registration can vary depending on local laws and regulations.

4.4 What is the process for concluding a commercial lease?

• Initial negotiation: The process begins with the negotiation between the landlord and tenant. The parties discuss and agree upon the key terms and conditions of the lease, such as:
• • rent;
  • duration;
  • permitted use;
  • maintenance responsibilities; and
  • any special provisions.
• Offer and acceptance: Once the negotiation is complete, the landlord may make a formal offer to the tenant, outlining the agreed-upon terms. The tenant then accepts the offer, either in writing or orally. This forms the basis of the lease agreement.
• Drafting of lease agreement: The lease agreement includes all the agreed-upon terms and conditions, as well as any additional clauses or provisions deemed necessary.
• Review and negotiation of lease agreement: The draft lease agreement is reviewed by both parties and their respective legal advisers. Any necessary revisions or modifications are discussed and negotiated until both parties are satisfied with the terms.
• Execution of lease agreement: Once the final lease agreement is agreed upon, both the landlord and tenant sign the document. Depending on the specific requirements of the jurisdiction, the lease agreement may need to be notarised or witnessed by a third party.
• Fulfilment of formalities: After execution, any required formalities are completed. These may include notarisation, registration or other local requirements, depending on the applicable laws and regulations of the jurisdiction where the property is located.
• Payment of security deposit: The tenant typically provides the agreed-upon security deposit to the landlord before or upon commencement of the lease.
• Commencement of lease: Once all necessary steps have been completed, the lease term begins as specified in the lease agreement. The tenant takes possession of the premises and starts fulfilling its obligations, including:
• • the payment of rent; and
  • adherence to the terms of the lease agreement.

4.5 What are the respective obligations and liabilities of landlord and tenant under a commercial lease, and what are the consequences of any breach?

Under a commercial lease in Mexico, the landlord and tenant have specific obligations and liabilities that are generally outlined in the lease agreement. While the terms can vary depending on the negotiated terms, the typical obligations and liabilities for each party usually include the following:

• Landlord's obligations:
• • Providing possession: The landlord is responsible for:
  • • delivering the premises to the tenant in a suitable condition; and
    • ensuring that the tenant can take possession as agreed.
  • Maintenance and repairs: The landlord is typically responsible for maintaining the common areas and structural elements of the premises, including repairs necessary to keep it in a habitable condition.
  • Property tax and utilities: The landlord generally bears the responsibility for paying property taxes and providing basic utilities to the premises, unless otherwise agreed in the lease agreement.
  • Compliance with laws: The landlord must comply with applicable laws, regulations and building codes that pertain to the leased premises.
• Tenant's obligations:
• • Payment of rent: The tenant is obliged to pay the rent as specified in the lease agreement, typically in a timely manner and according to the agreed-upon payment schedule.
  • Proper use and maintenance: The tenant is responsible for:
  • • using the premises for the permitted use stated in the lease agreement; and
    • maintaining it in a reasonable condition.
  • Compliance with laws: The tenant must comply with all applicable laws, regulations, and building codes related to the use and occupation of the premises.
  • Repair and restoration: The tenant may be responsible for minor repairs and any damages caused by their use or negligence, subject to the terms of the lease agreement.

If either party breaches the lease agreement, the consequences can vary depending on the specific terms of the agreement and applicable laws. Consequences may include the following:

• Termination of the lease: The non-breaching party may have the right to terminate the lease agreement if the breach is material and cannot be remedied.
• Damages: The non-breaching party may seek monetary damages resulting from the breach, such as unpaid rent or costs for repairs.
• Remedial actions: Depending on the nature of the breach, the non-breaching party may have the right to request specific performance, such as requiring the breaching party to fulfil its obligations or make necessary repairs.

4.6 How are rent variations typically effected throughout the term of the lease?

In Mexico, rent variations throughout the term of a commercial lease are typically negotiated and agreed upon between the landlord and tenant during the lease agreement's initial negotiation and drafting phase. Common ways in which rent variations can be effected include the following:

• Fixed percentage increases: The lease agreement may specify fixed percentage increases in rent at certain intervals throughout the lease term. These predetermined increases are often based on inflation rates or other factors agreed upon by the parties.
• Consumer Price Index (CPI) adjustments: The rent may be tied to changes in the CPI or another relevant inflation index.
• Market rent review: The lease agreement may include a provision for a periodic market rent review. This review allows for the rent to be adjusted based on the prevailing market conditions at specific intervals, such as every three or five years. The review may involve comparing the current rent to the prevailing market rates and adjusting it accordingly.
• Negotiated rent modifications: In some cases, the landlord and tenant may negotiate rent modifications on an ad hoc basis during the lease term.

The specific rent variation mechanisms and their frequency are subject to negotiation and agreement between the parties. The terms regarding rent variations should be clearly specified in the lease agreement to avoid any confusion or disputes during the lease term.

4.7 What taxes are levied on rental income?

In Mexico, rental income is subject to certain taxes that landlords must consider. The specific taxes applicable to rental income include the following:

• Income tax: Rental income obtained from leasing properties is generally considered taxable income in Mexico. Landlords must report and pay income tax on the net rental income earned after deducting eligible expenses and deductions. The applicable income tax rates can vary based on the level of income and the legal status of the landlord (individual or legal entity).
• Value-added tax (VAT): VAT is generally not levied on residential rental income in Mexico. However, it may apply to commercial properties or when additional services are provided along with the rental, such as furnishing, maintenance or utilities. The applicable VAT rate is currently 16% but can be subject to changes.
• Property tax: Property tax is levied by municipal authorities and is based on the assessed value of the property. The property tax rates can vary across different municipalities in Mexico. Landlords are responsible for paying property tax on the rental property.

It is important for landlords to keep accurate records of rental income and expenses to determine the taxable income and comply with tax obligations.

4.8 Can a commercial lease be triple net?

Yes, a commercial lease can be structured as a triple net lease in Mexico. In a triple net lease, the tenant is responsible for paying not only the base rent, but also additional expenses associated with the property, such as:

• property taxes;
• insurance; and
• maintenance costs.

The exact terms and conditions of a triple net lease, including the allocation of expenses, can be negotiated between the landlord and the tenant.

While triple net leases are permissible in Mexico, the specific provisions and requirements may vary depending on the lease agreement and local regulations. It is recommended to consult with legal professionals who are knowledgeable about Mexican real estate law to ensure that the lease agreement complies with the applicable laws and meets the needs of both parties.

4.9 How are landlord and tenant disputes typically resolved?

Landlord and tenant disputes in Mexico are typically resolved through a combination of negotiation, mediation and legal proceedings. Common methods of resolving landlord and tenant disputes in Mexico include the following:

• Negotiation and mediation: In many cases, landlord and tenant disputes can be resolved through negotiation and mediation. The parties involved, with or without the assistance of legal representatives, can try to reach a mutually satisfactory resolution through discussion and compromise. Mediation can also be facilitated by a neutral third party who helps facilitate communication and agreement between the parties.
• Legal proceedings: If the parties are unable to reach a resolution through negotiation or mediation, they may resort to legal proceedings. This typically involves filing a lawsuit in the appropriate court, which may be a civil or administrative court, depending on the specific nature of the dispute.
• Arbitration: In some cases, the parties may have included an arbitration clause in their lease agreement, which stipulates that any disputes will be resolved through arbitration rather than going to court. Arbitration is a private process where an impartial arbitrator or panel of arbitrators is appointed to hear the dispute and make a binding decision. The arbitration process and rules are agreed upon by the parties or may be administered by a recognised arbitration institution.

The specific process and procedures for resolving landlord and tenant disputes may vary depending on the jurisdiction and the terms of the lease agreement.

4.10 What types of guarantees are market practice and required by landlords to secure the tenant's obligations

In Mexico, landlords commonly require tenants to provide guarantees to secure their obligations under a lease agreement. These provide the landlord with a form of financial security in case the tenant fails to fulfil its obligations. The types of guarantees that are market practice and are commonly required by landlords in Mexico include the following:

• Security deposit: This is typically a cash deposit made by the tenant to the landlord at the beginning of the lease term. The security deposit is returned to the tenant at the end of the lease term, after deductions for any outstanding obligations or damages.
• Joint and several liability: In this arrangement, a third party (individual or entity) guarantees the tenant's obligations under the lease agreement. If the tenant fails to fulfil its obligations, the landlord can pursue the guarantor for payment. This guarantee provides additional security to the landlord by extending liability beyond the tenant.
• Bank guarantees: A bank guarantee is a guarantee provided by a financial institution on behalf of the tenant. The bank guarantees the payment of rent or other obligations up to a specified amount in case the tenant defaults. Bank guarantees provide an assurance to the landlord that a reputable financial institution will cover any financial losses resulting from the tenant's non-compliance.
• Insurance policies: Some landlords may require tenants to obtain insurance policies to secure their obligations. Insurance policies can provide financial protection to both the tenant and the landlord in the event of unforeseen circumstances or accidents.

The specific type of guarantee required by a landlord can vary depending on various factors such as:

• the nature of the lease;
• the tenant's financial strength; and
• the market practices in a particular location.

5 Real estate transactions

5.1 What form do real estate transactions typically take in your jurisdiction?

Real estate transactions in Mexico can take various forms, depending on:

• the nature of the transaction; and
• the parties involved.

Common forms of real estate transactions in Mexico include the following:

• Sale and purchase agreement: This agreement outlines the terms and conditions of the sale, including:
• • the purchase price;
  • a description of the property;
  • the payment terms; and
  • any other relevant provisions.
• The agreement is typically executed between the buyer and seller or their legal representatives.
• Promissory agreements: Promissory agreements are often used in real estate transactions in Mexico. Promissory agreements provide security for both parties before the final sale and purchase agreement is executed.
• Lease agreements: These agreements establish the terms and conditions of the lease, including:
• • the rental amount;
  • the lease term;
  • the rights and obligations of the landlord and tenant; and
  • any other relevant provisions.
• Lease agreements can be used for residential, commercial or industrial properties.
• Mortgage agreements: These are used when a borrower obtains financing to purchase a property and pledges the property as collateral for the loan. These agreements establish the terms of the mortgage, including:
• • the loan amount;
  • the interest rate;
  • the repayment terms; and
  • the rights and obligations of the borrower and lender.
• Development agreements: These govern the rights and responsibilities of the developer and the landowner, outlining:
• • the terms for the development of the property;
  • profit-sharing arrangements; and
  • other relevant provisions.
• Joint venture agreements: These are used when multiple parties collaborate on a real estate project. These agreements:
• • outline the contributions, rights and responsibilities of each party; and
  • establish the terms for sharing profits or losses from the venture.

5.2 Which players are typically involved in a real estate transaction in your jurisdiction?

Several players are typically involved in a real estate transaction in Mexico. The specific parties involved may vary depending on:

• the transaction type;
• the complexity of the transaction; and
• the roles assumed by each participant.

Common players in a real estate transaction in Mexico include the following:

• Buyer: The buyer is the party seeking to acquire the property. The buyer may be:
• • an individual;
  • a corporation;
  • a real estate investment fund; or
  • any other entity with the intention to purchase the property.
• Seller: The seller is the party looking to sell the property.
• Notary public: In Mexico, notaries public play a vital role in real estate transactions. They:
• • ensure that the transaction complies with legal requirements;
  • verify the parties' identities; and
  • prepare the necessary deeds and contracts.
• Lender: In cases where financing is involved, a lender or financial institution provides the funds for the purchase of the property. The lender may:
• • require additional documentation;
  • conduct its own due diligence; and
  • set the terms and conditions of the loan.
• Government authorities: Various government authorities and agencies may be involved in a real estate transaction. These can include:
• • municipal or state planning departments;
  • tax authorities;
  • land registry offices; and
  • environmental agencies.
• These entities may:
• • review and approve permits;
  • conduct inspections; and
  • ensure compliance with applicable regulations.
• Escrow agent: In some cases, an escrow agent – often a trusted third party – may be involved to hold and disburse funds during the transaction. The escrow agent ensures that the funds are released to the appropriate parties as per the agreed terms and conditions.

The specific players involved may vary depending on the transaction and the parties' preferences.

5.3 Is the seller bound by a duty to disclose? What representations and warranties will it typically make?

In Mexico, the seller of real estate generally has a duty to disclose certain information to the buyer. The duty to disclose is rooted in the principle of good faith, which is a fundamental principle of Mexican contract law.

The representations and warranties made by the seller in a real estate transaction in Mexico can vary depending on the negotiations between the parties and the specific terms of the agreement. However, typical representations and warranties made by the seller may include the following:

• Legal ownership: The seller represents and warrants that it is the legal owner of the property and has the right to sell it. This includes providing a clear and marketable title to the property, free from any liens, encumbrances or claims by third parties.
• Legal compliance: The seller represents and warrants that the property complies with all applicable laws, regulations, zoning requirements and permits. This includes ensuring that the property has the necessary permits and approvals for its current use or any planned development.
• Physical condition: The seller may make representations and warranties regarding the physical condition of the property. This may include disclosing any known defects, structural issues or environmental concerns that may affect the property's value or use.
• Financial and tax matters: The seller may represent and warrant that there are no outstanding taxes, assessments or other financial obligations related to the property. It may also provide information on:
• • the property's income-generating potential;
  • existing leases; and
  • any ongoing litigation or disputes related to the property.

The specific representations and warranties made by the seller can be negotiated and tailored to the circumstances of each transaction. The buyer should conduct due diligence, including property inspections and legal research, to independently verify the information provided by the seller.

5.4 What due diligence is typically conducted in a real estate transaction?

The specific scope of due diligence may vary depending on the nature of the transaction and the parties involved. However, common due diligence steps carried out in real estate transactions in Mexico include the following:

• Title search: A comprehensive title search is conducted to:
• • verify the ownership history of the property;
  • identify any existing liens, encumbrances or restrictions on the title; and
  • ensure that the seller has the legal right to transfer ownership.
• Survey and physical inspection: A survey of the property is often conducted to verify its boundaries, dimensions and any potential encroachments. A physical inspection is also performed to assess the condition of the property, including its:
• • structures;
  • infrastructure;
  • utilities; and
  • compliance with building codes and regulations.
• Zoning and land use compliance: Due diligence includes verifying that the property:
• • is zoned appropriately for the intended use; and
  • complies with applicable land use regulations and zoning restrictions.
• Environmental assessment: Depending on the nature of the property and its potential environmental impact, an environmental assessment may be conducted.
• Legal and regulatory compliance: Due diligence involves reviewing the property's compliance with legal and regulatory requirements. This includes examining permits, licences and authorisations necessary for the property's operation, such as:
• • construction permits;
  • occupancy certificates; and
  • utility connections.
• Tax and financial considerations: Financial due diligence involves reviewing the property's tax status, including:
• • property taxes;
  • any outstanding tax liabilities; and
  • potential tax incentives or exemptions.
• Contracts and agreements: Any existing contracts, leases or agreements related to the property are reviewed to assess their terms, conditions and potential liabilities that may affect the transaction.

Due diligence may also include other specific inquiries based on the nature of the property, such as:

• easements;
• access rights;
• water rights;
• mineral rights; or
• any pending litigation or disputes involving the property.

5.5 What are the formal and documentary requirements for conclusion of a real estate transaction?

The formal and documentary requirements for the conclusion of a real estate transaction in Mexico can vary depending on:

• the specific circumstances;
• the type of transaction; and
• the parties involved.

The key requirements are as follows:

• Purchase agreement or contract: A written purchase agreement is typically required to formalise the agreement between the buyer and the seller. This document outlines the terms and conditions of the transaction, including:
• • the purchase price;
  • a description of the property;
  • the payment terms;
  • representations and warranties; and
  • any other relevant provisions.
• Legal identification and capacity: Both the buyer and the seller must provide legal identification documents to verify their identities and legal capacity to enter into the transaction.
• Proof of ownership: The seller is required to provide proof of ownership of the property, typically in the form of a property title deed.
• Property descriptions and plans: The transaction may require detailed property descriptions and plans, including surveys, plot maps, floor plans and any other relevant documents that accurately describe the boundaries, dimensions and layout of the property.
• Tax clearance certificates: The seller may be required to obtain tax clearance certificates to confirm that all applicable taxes, such as property taxes and capital gains taxes, have been paid up to the date of the transaction.
• Powers of attorney: If the buyer or seller is represented by a legal representative or attorney-in-fact, a valid power of attorney document may be required to authorise the representative to act on behalf of the party in the transaction.
• Notarisation and registration: In Mexico, real estate transactions often require notarisation by a notary public. The notary public is responsible for:
• • authenticating the transaction;
  • verifying the identities of the parties;
  • ensuring compliance with legal requirements; and
  • preparing the necessary deeds and documents.
• After notarisation, the transaction documents – including the purchase agreement and property title deed – are registered with the Public Registry of Property to ensure public notice and legal certainty.

These requirements may vary depending on:

• the specific jurisdiction within Mexico; and
• the nature of the transaction.

5.6 What is the process for concluding a real estate transaction? How long does this take? What costs are incurred?

The process for concluding a real estate transaction in Mexico typically involves several steps, as follows:

• Negotiation: The buyer and seller negotiate the terms and conditions of the transaction.
• Due diligence: The buyer conducts due diligence on the property. The purpose of due diligence is to assess:
• • the property's condition;
  • ownership;
  • legal compliance; and
  • any potential risks or issues.
• Contract preparation: Once the negotiations and due diligence are completed, a purchase agreement or contract is prepared. This document outlines the agreed-upon terms and conditions of the transaction.
• Closing: The closing is the final stage of the transaction, when the transfer of ownership takes place. The parties meet to sign the contract and complete the necessary paperwork. At this stage, the buyer typically pays the agreed-upon purchase price and the seller transfers the property to the buyer.
• Registration: After closing, the transaction documents, including the purchase agreement and property title deed, are registered with the Public Registry of Property. Registration provides public notice of the ownership transfer and helps to establish legal certainty.

The timeline for concluding a real estate transaction in Mexico can vary depending on various factors. Simple transactions without complications can be completed within a few weeks, while more complex transactions may take several months.

Regarding costs, the buyer and seller are responsible for different expenses associated with the transaction. Common costs incurred in a real estate transaction in Mexico may include the following:

• Notary fees: Notary fees are based on the property's value and are regulated by local laws. They can vary but are typically a percentage of the purchase price.
• Transfer taxes: The buyer is typically responsible for paying transfer taxes, known as 'impuesto sobre adquisición de inmuebles' (ISAI).
• Legal fees: Engaging a real estate attorney for legal advice and assistance in the transaction will incur legal fees. The fees can vary depending on the complexity of the transaction and the services provided.
• Registration fees: Registering the transaction documents with the Public Registry of Property will involve registration fees, which are based on the property's value.

5.7 What are the respective obligations and liabilities of buyer and seller, and what are the consequences of any breach?

In a real estate transaction in Mexico, the buyer and seller have respective obligations and liabilities as outlined in the purchase agreement or contract. These obligations and liabilities can vary depending on the negotiated terms and conditions. Some general obligations and consequences of breach for both the buyer and seller are as follows:

Buyer's obligations:

• Payment of purchase price: The buyer is obliged to pay the agreed-upon purchase price as specified in the purchase agreement.
• Due diligence: The buyer is responsible for conducting due diligence on the property to verify its:
• • condition;
  • legal status; and
  • compliance with applicable laws and regulations.
• Timely performance: The buyer is generally expected to fulfil their obligations within the agreed-upon timeframe.

If the buyer breaches the purchase agreement, the seller may have various legal remedies available, such as the following:

• Rescission: The seller may have the right to:
• • terminate the contract;
  • cancel the transaction; and
  • retain any payments made by the buyer.
• Specific performance: The seller may seek a court order to compel the buyer to fulfil its obligations under the contract, including payment of the purchase price.
• Damages: The seller may be entitled to seek compensation for any financial loss or damages incurred as a result of the buyer's breach.

Seller's obligations:

• Transfer of ownership: The seller is obliged to transfer legal ownership of the property to the buyer as specified in the purchase agreement.
• Disclosure: The seller has a duty to disclose relevant information about the property, including any known defects, encumbrances or legal issues that may affect the buyer's decision to proceed with the transaction.
• Timely performance: The seller is generally expected to fulfil its obligations within the agreed-upon timeframe.

If the seller breaches the purchase agreement, the buyer may have legal remedies available, such as the following:

• Rescission: The buyer may have the right to rescind the contract and seek a refund of any payments made, including any costs incurred in connection with the transaction.
• Specific performance: The buyer may seek a court order to compel the seller to transfer the property and fulfil its obligations under the contract.
• Damages: The buyer may be entitled to seek compensation for any financial loss or damages incurred as a result of the seller's breach.

5.8 What taxes are payable on a real estate transaction?

In Mexico, various taxes are payable on a real estate transaction. The specific taxes and their rates may vary depending on the location and nature of the transaction. The main taxes typically applicable to real estate transactions in Mexico are as follows:

• Value-added tax (VAT): VAT, known as "Impuesto al Valor Agregado" (IVA), is a federal tax applied to the sale of new residential properties and commercial properties. The standard VAT rate is 16% of the sale price.
• Transfer Tax: Transfer tax, known as "Impuesto sobre Transmisiones Patrimoniales" (ISAI) or "Impuesto de Adquisición de Inmuebles" (IAI),: ISAI is a state-level tax applied to the transfer of ownership of real estate properties. The rates vary by state but typically range from 2% to 6% of the property's value.
• Capital gains tax: Capital gains tax, known as "Impuesto sobre la Renta" (ISR), is a federal tax imposed on the gain derived from the sale of real estate properties. The tax rate varies depending on the nature of the property and the length of ownership:
• • For individuals, the tax rate ranges from 1.92% to 35%; and
  • For corporations, the rate is generally 30%.
• Property tax: Property tax, known as "Impuesto Predial" or "Impuesto sobre Bienes Inmuebles" (ISBI), is an annual tax levied by local municipalities on the ownership of real estate properties. The tax rate is determined based on the assessed value of the property and can vary from one municipality to another.

The above list is not exhaustive and there may be other local or regional taxes and fees applicable to real estate transactions in specific locations. Additionally, certain exemptions, deductions or incentives may be available depending on the circumstances, such as:

• the type of property;
• its value; and
• the intended use.

6 Real estate finance

6.1 Who are the most common providers of real estate finance in your jurisdiction? Do any restrictions apply in this regard?

In Mexico, the most common providers of real estate finance in Mexico are as

follows:

• Banks: Commercial banks in Mexico play a significant role in providing real estate financing. They offer mortgage loans, construction loans and commercial real estate loans to individuals, developers and businesses. Major banks in Mexico, both domestic and international, have real estate financing divisions that cater to different types of real estate transactions.
• Government agencies: The Mexican government operates several programmes and agencies that facilitate real estate financing. The National Housing Commission (CONAVI) and the National Workers' Housing Fund Institute (INFONAVIT) provide financing options for affordable housing projects and mortgage loans to eligible individuals. The Mexican Institute of Housing (IMUVI) also supports social housing initiatives and provides financing for low-income families.
• Development banks: Development banks, such as Nacional Financiera (NAFIN) and Banco Nacional de Obras y Servicios Públicos (BANOBRAS),, offer financing for infrastructure projects, including real estate development. These institutions provide:
• • long-term loans;
  • construction financing; and
  • funding for public-private partnership projects.
• Private lenders: Private lenders and non-banking financial institutions also participate in real estate financing in Mexico. These entities offer alternative financing options, including:
• • bridge loans;
  • mezzanine financing; and
  • equity investments.
• They can provide flexible terms and faster approvals compared to traditional banks, but often at higher interest rates.

Restrictions on real estate finance in Mexico primarily revolve around legal and regulatory requirements. Restrictions and considerations include the following:

• Foreign investment restrictions: Foreign investors may face limitations on obtaining financing for real estate transactions in restricted zones or sectors deemed sensitive due to national security issues or the national interest. These restrictions are aimed at protecting Mexico's land and resources.
• Regulatory compliance: Lenders must comply with regulations set by the National Banking and Securities Commission (CNBV) and other relevant authorities. These regulations ensure transparency, risk management and consumer protection in lending practices.
• Loan-to-: Banks and financial institutions may have restrictions on the LTV ratio, which determines the maximum loan amount relative to the appraised value or purchase price of the property. LTV ratios vary depending on:
• • the type of property; and
  • the borrower's financial profile.
• Creditworthiness and documentation: Lenders assess borrowers' creditworthiness and may require documentation such as income verification, credit history and property appraisals to determine the loan terms and conditions.

It is important for borrowers to evaluate the terms, interest rates, repayment schedules and requirements associated with different financing options.

6.2 What forms of real estate finance are available in your jurisdiction?

In Mexico, various forms of real estate finance are available to cater to different types of real estate transactions and financing needs. Common forms of real estate finance in Mexico include the following:

• Mortgage loans: Mortgage loans are the most common form of real estate finance in Mexico. They are used for residential, commercial and industrial properties. Mortgage loans allow borrowers to secure financing for property purchases by using the property itself as collateral. Banks and financial institutions offer mortgage loans with fixed or variable interest rates, and borrowers repay the loan through regular instalment payments over a specified term.
• Construction loans: Construction loans are used to finance the construction or development of real estate projects. These loans provide funds to cover the costs associated with:
• • land acquisition;
  • architectural plans;
  • construction materials;
  • labour; and
  • other expenses.
• Construction loans typically have a short-term duration and are disbursed in stages based on the project's progress.
• Bridge loans: Bridge loans, also known as interim financing, are short-term loans used to bridge the gap between the purchase of a new property and the sale of an existing property. They provide temporary financing to facilitate smooth property transitions. Bridge loans are typically repaid when the borrower sells the existing property or secures long-term financing.
• Mezzanine financing: Mezzanine financing is a form of real estate finance that combines debt and equity components. It provides additional capital to fill the gap between the borrower's equity investment and the senior debt from traditional lenders. Mezzanine financing is often used in larger real estate projects and can be subordinated to senior debt but carries a higher interest rate.
• Real estate investment trusts (REITs): REITs offer a form of real estate finance for both investors and developers. Investors can invest in REITs, which pool funds to invest in a diversified portfolio of income-generating real estate properties. Developers can access financing by creating a REIT structure to raise capital from investors for specific real estate projects.
• Seller financing: Seller financing, also known as owner financing or vendor financing, occurs when the property seller provides financing to the buyer instead of the buyer obtaining a traditional bank loan. In seller financing, the buyer makes payments directly to the seller, usually with an agreed-upon interest rate and repayment schedule.
• Equity financing: Equity financing involves raising capital for real estate projects through the sale of ownership shares or equity stakes to investors. Equity investors provide capital in exchange for a share in the project's ownership and potential profits. Equity financing is commonly used in large-scale real estate development projects.

These are some of the forms of real estate finance available in Mexico. The availability and terms of these financing options may vary depending on factors such as:

• the type of property;
• the borrower's financial profile;
• the project size; and
• the lender's requirements.

6.3 What formal, documentary and other requirements do lenders typically require of borrowers?

Lenders in Mexico typically have specific requirements that borrowers must fulfil when seeking real estate finance. These requirements may vary depending on:

• the type of financing;
• the lender's policies; and
• the specific circumstances of the borrower.

Common formal, documentary and other requirements that lenders in Mexico may ask borrowers to provide include the following:

• Application and identification: Borrowers are generally required to complete a loan application form provided by the lender. This form collects information about the borrower's personal details, contact information and financial situation. Borrowers must also provide valid identification documents, such as passports or national identification cards.
• Financial documents: Lenders typically request financial documents to assess the borrower's creditworthiness and ability to repay the loan. These documents may include the following:
• • Income verification: Borrowers may need to provide recent pay stubs, employment contracts or income tax returns to verify their income.
  • Bank statements: Lenders may request bank statements for a specified period to assess the borrower's financial stability and cash flow.
  • Financial statements: For businesses or commercial loans, lenders may require financial statements such as balance sheets, income statements and cash-flow statements.
• Property documents: Depending on the type of financing, lenders may require specific property-related documents, including the following:
• • Title deed: Borrowers may need to provide the property's title deed or other proof of ownership.
  • Appraisal: Lenders often require a professional property appraisal to determine its value and assess LTV ratios.
  • Property insurance: Lenders typically require proof of property insurance coverage to protect their investment.
• Legal and regulatory compliance: Lenders may have additional requirements to ensure legal and regulatory compliance. These may include the following:
• • Credit history: Lenders typically review the borrower's credit history and may request a credit report from a credit bureau.
  • Tax identification: Borrowers may need to provide their tax identification number or taxpayer registration certificate.
  • Legal documentation: Lenders may require legal documents such as:
  • • power of attorney;
    • corporate documents (if applicable); and
    • any necessary permits or licences related to the property.
• Down-payment or equity: Lenders often require borrowers to contribute a down-payment or equity investment, which represents a percentage of the property's purchase price. The specific amount may vary depending on the type of financing and the lender's policies.

It is important for borrowers to:

• carefully review the requirements of individual lenders; and
• ensure that they provide accurate and complete information and documentation.

6.4 What type of security interests are typically required by lenders?

Lenders in Mexico typically require borrowers to provide security interests to secure real estate financing. These security interests help to protect the lender's investment and provide recourse in case of borrower default. The specific type of security interest required may vary depending on the nature of the financing and the lender's policies. Common types of security interests required by lenders in Mexico include the following:

• Mortgage: A mortgage is a legal agreement between the borrower (mortgagor) and the lender (mortgagee) that grants the lender a security interest in the property being financed. The property acts as collateral; and if the borrower fails to repay the loan, the lender has the right to foreclose on the property and sell it to recover the outstanding debt.
• Trust agreement (fideicomiso): In certain cases – especially for properties located in restricted zones near the coastline or borders – lenders may require the property to be held in a trust agreement or fideicomiso. A fideicomiso is a real estate trust established with a Mexican bank acting as the trustee. The trust agreement grants the lender a security interest in the property, allowing the trustee to act on behalf of the lender in case of default.
• Pledge: Lenders may also require borrowers to provide a pledge as security. A pledge is a form of collateral where the borrower pledges specific assets – such as shares of stock, bonds or other valuable assets – to secure the loan. If the borrower defaults, the lender has the right to take possession of and sell the pledged assets to recover the outstanding debt.
• Personal guarantees: In addition to security interests in the property, lenders may require personal guarantees from borrowers or other individuals or entities with sufficient financial capacity. A personal guarantee is a commitment by a third party to repay the debt if the borrower defaults. Personal guarantees provide an additional layer of security for lenders and enhance the likelihood of loan repayment.

6.5 What is the process for obtaining real estate finance? What costs are payable?

The process for obtaining real estate finance in Mexico typically involves several steps. While the specific process may vary depending on the lender and the type of financing, it may be summarised as follows:

• Preparation of financial documentation: Gather all the necessary financial documents, such as:
• • income verification;
  • bank statements;
  • tax returns; and
  • property-related documents (eg, title deed, appraisal).
• Ensure that the documents are accurate and up to date.
• Identification of lenders: Research and identify potential lenders that offer real estate finance in Mexico. Compare their:
• • interest rates;
  • loan terms;
  • requirements; and
  • reputations.
• Consider consulting with a mortgage broker or financial adviser to help identify suitable lenders.
• Loan application: Complete the loan application provided by the chosen lender. Provide all the required information, including:
• • personal details;
  • financial information; and
  • property details.
• Creditworthiness assessment: The lender will assess your creditworthiness based on your financial documents, credit history and other factors. It may obtain a credit report from a credit bureau to evaluate your creditworthiness.
• Property valuation: If the financing involves a property purchase, the lender may conduct an appraisal to determine the value of the property. This helps it to assess the LTV ratio and determine the maximum loan amount.
• Loan approval and offer: If your loan application is approved, the lender will provide you with a loan offer that outlines the terms and conditions, including:
• • the loan amount;
  • the interest rate;
  • the repayment schedule; and
  • any applicable fees.
• Acceptance and signing: Review the loan offer carefully and ensure that you understand all the terms and conditions. If you accept the offer, you will need to sign the loan agreement and other relevant documents.
• Closing and disbursement: Prior to closing, you may need to pay certain costs, including:
• • loan origination fees;
  • appraisal fees;
  • legal fees; and
  • taxes.
• Once the closing process is completed, the lender will disburse the funds and you will receive the financing.

The costs associated with obtaining real estate finance in Mexico can vary. Some common costs payable may include the following:

• Loan origination fees: These are fees charged by the lender for processing and underwriting the loan.
• Appraisal fees: These are the costs incurred in having a professional appraisal conducted to determine the value of the property.
• Legal fees: Legal fees may be incurred for document preparation, title search and other legal services.
• Notary fees: In Mexico, real estate transactions typically require the involvement of a notary public, whose fees will then be payable.
• Taxes and registration fees: Depending on the type of transaction and the jurisdiction, taxes and registration fees may apply to the real estate transaction.

6.6 How is security enforced in case of any breach?

The specific process may vary depending on the type of security interest and the terms outlined in the loan agreement. General steps involved in enforcing security in Mexico include the following:

• Default: A breach of the loan agreement occurs when the borrower fails to meet the agreed-upon terms, such as:
• • non-payment of loan instalments; or
  • violation of other contractual obligations.
• Notice of default: The lender will typically provide a notice of default to the borrower:
• • notifying it of the breach; and
  • giving it an opportunity to cure the default within a specified period.
• Remedial measures: If the borrower fails to cure the default within the specified period, the lender may take remedial measures as outlined in the loan agreement. The specific measures will depend on the type of security interest involved:
• • Mortgage foreclosure: In the case of a mortgage, the lender can initiate foreclosure proceedings. This involves filing a lawsuit in the appropriate court to obtain a judgment allowing the lender to sell the property through a public auction or private sale to recover the outstanding debt. The proceeds from the sale are used to repay the debt and any surplus may be returned to the borrower.
  • Trust agreement (fideicomiso): If the property is held in a trust agreement (fideicomiso), the trustee can act on behalf of the lender to enforce the security interest. The trustee may proceed with the sale of the property as outlined in the trust agreement and use the proceeds to satisfy the debt.
  • Pledge enforcement: In the case of a pledge, the lender can take possession of and sell the pledged assets to recover the outstanding debt.
• Legal proceedings: To enforce the security interest, the lender may need to file a lawsuit or initiate legal proceedings in the appropriate court. The court will:
• • evaluate the evidence;
  • review the loan agreement; and
  • determine whether the breach has occurred and the appropriate remedy.
• Sale of collateral: Once the court has granted a judgment or order allowing the enforcement of the security interest, the lender can proceed with the sale of the collateral. The sale may be conducted through a public auction or private sale, depending on the specific circumstances and legal requirements.
• Debt recovery: The proceeds from the sale of the collateral are used to satisfy the outstanding debt. If the proceeds are insufficient to cover the full debt, the lender may pursue further legal action to recover the remaining amount from the borrower.

7 Real estate investment

7.1 Who are the most common investors in real estate in your jurisdiction? Do any restrictions apply in this regard?

The real estate market in Mexico attracts a diverse range of investors, both domestic and foreign. The most common investors in real estate in Mexico include the following:

• Domestic investors: Domestic investors in Mexican real estate include:
• • individuals;
  • families;
  • corporations;
  • real estate development companies; and
  • institutional investors such as pension funds and insurance companies.
• Foreign investors: Foreign investors also play a significant role in the Mexican real estate market. Foreign investors are attracted to Mexico due to factors such as:
• • the country's growing economy;
  • its favourable investment climate;
  • its proximity to their home countries; and
  • the potential for high returns on investment.

While there are no specific restrictions on foreign investment in Mexican real estate, there are limitations and regulations in certain areas to protect national interests and sensitive sectors. Examples include the following:

• Restricted zones: Mexico designates certain areas near the borders and coastlines as restricted zones or 'restricted areas for foreigners' (Zonas Restringidas). These zones include properties locate:
• • within 100 kilometres of the borders; or
  • within 50 kilometres of the coastline.
• Foreign individuals or entities may need to establish a real estate trust to hold the title to properties in these restricted zones.
• Agrarian land: Foreign ownership of agricultural and rural land in Mexico is restricted under the Constitution. To acquire such land, foreign investors must:
• • establish a fideicomiso; or
  • obtain special authorisation from the Ministry of Agrarian, Territorial, and Urban Development.
• Coastal and ecological zones: Some coastal and ecological zones have specific regulations that govern development and ownership rights to protect sensitive ecosystems and natural resources. Compliance with these regulations may be required for foreign investors.

7.2 What investment vehicles are typically used in your jurisdiction? What are the benefits and drawbacks of each?

• Direct ownership:
• • Benefits: Direct ownership provides full control and ownership of the property, allowing investors to make decisions regarding management, operations and potential appreciation. It offers potential tax advantages and the flexibility to customise the investment strategy.
  • Drawbacks: Direct ownership requires significant capital investment and entails direct responsibility for property management, maintenance and associated costs. Investors also bear the risks and liabilities associated with property ownership.
• Real estate investment trusts (REITs):
• • Benefits: REITs are publicly traded investment vehicles that pool funds from multiple investors to invest in income-generating real estate properties. They offer diversification, liquidity and professional management. REITs provide regular income distribution and the potential for capital appreciation.
  • Drawbacks: Investors have less direct control over property management decisions as they rely on the REIT's management team. Market volatility and changes in interest rates can impact the value of REIT shares.
• Real estate development funds:
• • Benefits: Real estate development funds pool investor capital to finance real estate development projects. They offer the potential for high returns and diversification across multiple projects. Investors can participate in large-scale projects that may be challenging to pursue individually.
  • Drawbacks: Development funds are typically illiquid and have longer investment horizons. They involve higher risks associated with project delays, cost overruns and market conditions. Investors have limited control over specific project decisions.
• Real estate syndications:
• • Benefits: Real estate syndications allow multiple investors to pool funds to acquire or develop properties. They offer the potential for shared ownership, risk sharing and professional management. Syndications enable smaller investors to access larger-scale real estate opportunities.
  • Drawbacks: Syndications may have limited liquidity and the investment duration is typically longer. Investors have limited control over property management decisions and rely on the syndicator's expertise.
• Private equity real estate funds:
• • Benefits: Private equity real estate funds raise capital from institutional and high-net-worth investors to invest in real estate assets. They offer potential high returns, diversification and professional management. Private equity funds can access a broader range of investment opportunities and strategies
  • Drawbacks: Private equity funds often have high minimum investment requirements and longer lock-up periods. They are typically available to accredited investors only. Investors have limited control over specific investment decisions and rely on the fund manager's expertise.

7.3 How are these vehicles established and administered in your jurisdiction?

The establishment and administration of these investment vehicles in Mexico are subject to legal and regulatory requirements. The specific process varies depending on the type of investment vehicle. Generally, the establishment involves legal documentation such as articles of incorporation, partnership agreements or fund prospectuses which outline the purpose, structure, governance and rights of the investors. The administration of these vehicles typically involves compliance with:

• financial reporting;
• tax obligations; and
• regulatory filings.

8 Planning and zoning

8.1 How is land use regulated in your jurisdiction?

Land use in Mexico is regulated through a combination of federal, state and municipal laws and regulations. The regulation of land use aims to:

• ensure orderly development;
• protect the environment;
• promote sustainable growth; and
• meet the needs of communities.

Key aspects of land use regulation in Mexico include the following:

• Land use planning: Land use planning is typically carried out at the municipal and state levels. Municipalities create land use plans known as:
• • urban development programmes; or
  • territorial land use plans.
• These designate areas for residential, commercial, industrial, agricultural and other specific uses.
• Zoning regulations: Zoning regulations establish specific rules and guidelines for land use within designated zones. These regulations determine what activities are allowed or restricted in different areas, such as residential, commercial, industrial or conservation zones. Zoning regulations cover aspects such as:
• • building height;
  • density;
  • setbacks;
  • parking requirements; and
  • other factors that govern the use and development of land.
• Building codes and permits: Construction and development projects in Mexico must:
• • comply with building codes; and
  • obtain the necessary permits and licences.
• These codes and permits regulate aspects such as structural integrity, safety standards, fire protection, accessibility and other requirements to ensure the proper development of buildings and infrastructure.
• Federal restrictions: There may be specific restrictions and regulations related to land use in certain areas, such as:
• • coastal zones;
  • border areas; and
  • protected natural areas.
• These restrictions are intended to preserve and protect:
• • sensitive ecosystems;
  • cultural heritage; and
  • national security interests.

Land use regulation can vary between different states and municipalities in Mexico.

8.2 What is the process for obtaining planning permission? How long does this take? What costs are incurred?

The process for obtaining planning permission in Mexico can vary depending on the specific municipality or state where the property is located. However, there are some general steps involved in the process, as follows:

• Preliminary consultation: It is advisable to start with a preliminary consultation with the local planning authority or municipal government to understand the requirements, regulations and procedures for obtaining planning permission.
• Documentation preparation: The property owner or its representative must prepare the necessary documentation, which typically includes:
• • the application form;
  • the land survey or cadastral map;
  • architectural plans;
  • a project description;
  • an environmental impact assessment (EIA) (if required); and
  • any other supporting documents specified by the local planning authority.
• Submission of application: The completed application and supporting documentation are submitted to the local planning authority or relevant municipal department responsible for land use and planning.
• Review and evaluation: The local planning authority reviews the application, architectural plans and supporting documentation to assess compliance with:
• • zoning regulations;
  • building codes; and
  • other relevant criteria.
• This evaluation process may involve consultations with different departments or agencies, such as environmental authorities or utilities providers.
• Public notification and consultation: Depending on the nature and scale of the project, there may be a requirement for public notification and consultation. This typically involves publishing notices in local newspapers or posting them at the project site to inform the public and allow for comments or objections within a specified period.
• Decision and approval: Once the evaluation process is completed, the local planning authority makes a decision regarding the planning permission application. If approved, a formal permit or authorisation is issued to the applicant. In some cases, there may be conditions or modifications imposed on the project, which must be complied with.

The duration of the planning permission process can vary significantly from a few weeks to several months or even longer, depending on factors such as:

• the complexity of the project;
• the efficiency of the local authority; and
• any public consultation requirements.

There are several potential expenses involved in obtaining planning permission in Mexico. These can include:

• application fees;
• administrative fees;
• charges for technical evaluations or assessments;
• public notification costs; and
• any fees associated with EIAs or other specialised studies required for the project.

8.3 Can a planning decision be appealed?

Yes, in Mexico, it is generally possible to appeal a planning decision. The specific procedures for appealing a planning decision may vary depending on:

• the state or municipality where the decision was made; and
• the applicable local regulations and administrative processes.

General points to consider regarding the appeals process for planning decisions in Mexico include the following:

• Administrative appeals: In many cases, the first step in challenging a planning decision is to file an administrative appeal with the relevant administrative authority responsible for the decision. The specific timeframe and requirements for filing an appeal may vary, so it is important to review the local regulations and procedures.
• Review by higher authorities: If the administrative appeal is unsuccessful or the decision maker is not satisfied with the outcome, it may be possible to further appeal the decision to higher administrative authorities. This may involve presenting additional evidence, arguments or legal grounds to support the appeal.
• Judicial review: If all administrative remedies have been exhausted or if the administrative appeal process does not provide a satisfactory resolution, it may be possible to pursue a judicial review through the courts. This typically involves filing a lawsuit challenging the legality or validity of the planning decision.

The specific procedures, timelines and requirements for appealing planning decisions can vary between different states and municipalities in Mexico.

8.4 What are the consequences of failure to obtain planning permission or to comply with a planning condition?

Failure to obtain planning permission or comply with a planning condition in Mexico can have various consequences, which may include legal, financial and operational implications. Potential consequences include the following:

• Legal consequences: Operating without proper planning permission or failing to comply with planning conditions can lead to legal action by the authorities or affected parties. This may result in fines, penalties and legal disputes. The specific legal consequences can vary depending on:
• • the nature and severity of the violation; and
  • the applicable laws and regulations in the specific jurisdiction.
• Administrative sanctions: The local planning authority may impose administrative sanctions for non-compliance with planning regulations. These sanctions can include:
• • fines;
  • orders to cease operations or modify the property; and
  • revocation of permits or licences.
• The severity of the sanctions can vary depending on:
• • the specific violation; and
  • the applicable regulations.
• Demolition or closure orders: In some cases, if a property or development is found to be in substantial violation of planning regulations or to pose a significant risk to public safety or the environment, the authorities may issue demolition or closure orders. This means that the property may need to be demolished or operations halted until the necessary permits and compliance are obtained.
• Invalidation of transactions: Transactions related to properties or developments without proper planning permission or in violation of planning conditions may be subject to legal challenges or invalidated. This can impact the transferability or marketability of the property and can result in financial losses for the parties involved.
• Reputation and public relations: Non-compliance with planning regulations can damage the reputation of individuals or entities involved in real estate development. Negative publicity, community opposition and strained relationships with stakeholders can affect future business opportunities and partnerships.
• Financial implications: Non-compliance with planning regulations can result in financial losses, including:
• • fines;
  • penalties;
  • legal fees;
  • the costs of rectifying the violation; and
  • potential loss of income or investment if operations are halted or property transactions are invalidated.

It is essential to understand and comply with the planning regulations and conditions applicable to real estate projects in Mexico to mitigate the potential consequences of non-compliance.

8.5 Is expropriation of land possible in your jurisdiction?

Yes, expropriation of land is possible in Mexico under certain circumstances. The legal basis for expropriation in Mexico is primarily derived from the Mexican Constitution and other relevant laws. Key points regarding expropriation in Mexico include the following:

• Public interest: Expropriation is typically carried out when it serves a public interest or necessity. The government may expropriate land for purposes such as:
• • infrastructure development;
  • public utilities;
  • conservation; and
  • social programmes.
• Legal framework: The Mexican Constitution and federal laws, such as the Federal Expropriation Law, provide the legal framework for expropriation in Mexico. These laws outline the procedures, criteria and compensation mechanisms for expropriation.
• Compensation: When land is expropriated, the property owner is entitled to receive fair compensation. The compensation is determined based on:
• • the market value of the property at the time of expropriation; or
  • negotiations between the owner and the government.
• The compensation should be prompt, just and prior to taking possession of the property.
• Due process: Expropriation in Mexico involves a legal process that includes:
• • notifying the affected property owners;
  • assessing the property's value; and
  • providing an opportunity for the owner to contest the compensation offered.
• The owner has the right to challenge the expropriation in court if:
• • it believes this is not in the public interest; or
  • it is not satisfied with the compensation offered.
• Social interest land: In certain cases – such as agrarian reform and land redistribution programmes – the Mexican government may also expropriate land for social interest purposes. These cases may involve the creation of ejidos (agricultural communities) or communal land for indigenous communities.

Expropriation is a significant power of the government and is subject to legal limitations and protections for property owners. The process must:

• adhere to constitutional principles; and
• provide fair compensation to affected landowners.

8.6 Is confiscation of land possible in your jurisdiction?

Confiscation of land, also known as outright seizure without compensation, is not a legal method of acquiring land in Mexico. The Constitution and laws:

• provide protection against confiscation; and
• ensure that private property cannot be taken by the government without just compensation.

The right to property is recognised and protected under Article 27 of the Constitution and other relevant laws.

Confiscation implies the seizure of property without any compensation to the owner and is not permitted under Mexican law.

9 Environmental

9.1 What main environmental legal provisions apply to the development, use and occupation of real estate?

In Mexico, several environmental legal provisions apply to the development, use and occupation of real estate. These provisions are designed to:

• promote sustainable practices;
• protect natural resources; and
• mitigate environmental impacts.

The main environmental legal provisions that apply to real estate in Mexico include the following:

• Federal Environmental Law: This is the primary federal law governing environmental protection and conservation in Mexico. It sets forth the general principles, guidelines and obligations relating to:
• • environmental management;
  • environmental impact assessments (EIAs); and
  • licensing for development projects.
• It establishes the framework for environmental regulation and enforcement in the country.
• EIA: The Federal Environmental Law requires the submission of an EIA for certain development projects that may have significant environmental effects. The EIA process:
• • involves evaluating and mitigating potential environmental impacts; and
  • includes public participation and consultation with relevant authorities.
• Protected natural areas: Mexico has designated numerous protected natural areas, including:
• • biosphere reserves;
  • national parks; and
  • ecological reserves.
• These areas have specific regulations to protect their unique ecosystems, biodiversity and cultural heritage. Development and activities within these protected areas are subject to restrictions and permitting requirements.
• Water resources: Mexico's water resources are governed by the National Waters Law and other related regulations. These laws establish the legal framework for the sustainable use, conservation and protection of water resources. Permits and authorisations are typically required for activities that involve:
• • water extraction;
  • discharge; or
  • use.
• Hazardous substances and waste management: The Federal Environmental Law includes provisions for the management, storage, handling, transportation and disposal of hazardous substances and waste. Real estate developers and occupiers must comply with specific regulations related to the proper handling and disposal of hazardous materials and waste generated during construction or operation.
• Coastal and marine areas: The General Law of Sustainable Coastal and Marine Development regulates activities in coastal and marine areas. It aims to:
• • protect and manage coastal ecosystems;
  • preserve biodiversity; and
  • ensure sustainable development along the coastline.

These are some of the main environmental legal provisions that apply to real estate development, use and occupation in Mexico. Real estate developers, owners and occupiers must understand and comply with these regulations to ensure environmental sustainability and legal compliance.

9.2 Who can be held liable for environmental contamination and how are clean-ups effected?

In Mexico, liability for environmental contamination can extend to various parties involved in the contamination, including individuals, companies and governmental entities. The specific liability and clean-up processes will depend on:

• the nature and extent of the contamination; and
• the applicable environmental laws and regulations.

Key aspects relating to liability and clean-up of environmental contamination in Mexico include the following:

• Primary liability: The primary liability for environmental contamination typically lies with the party responsible for causing or contributing to the contamination. Such parties can include:
• • industrial operators;
  • property owners;
  • waste generators; and
  • other entities that are directly involved in activities that resulted in environmental harm.
• Joint and several liability: In Mexico, liability for environmental contamination can be joint and several, meaning that multiple parties:
• • can be held jointly responsible for the entire clean-up; and
  • can be pursued individually or collectively for the costs associated with remediation.
• Strict liability: Mexico follows a principle of strict liability for environmental contamination, which means that liability can be established regardless of fault or negligence. If a party's activities cause environmental harm, they can be held liable for the damages, clean-up and restoration efforts.
• Environmental authorities and agencies: The environmental authorities in Mexico – such as the Ministry of Environment and Natural Resources and the National Water Commission – play a crucial role in identifying and addressing environmental contamination. These authorities have the power to:
• • conduct investigations;
  • enforce regulations; and
  • order clean-up actions to remediate the contamination.
• Clean-up processes: The clean-up of environmental contamination in Mexico is typically carried out under the supervision and direction of the environmental authorities. The responsible party or parties may be required to develop and implement a remediation plan, which outlines the specific measures and techniques to be used for the clean-up and restoration of the affected area. The remediation plan is subject to approval by the environmental authorities.
• Cost recovery: The party or parties held liable for environmental contamination may be responsible for the costs associated with the clean-up. These can include the expenses relating to investigation, assessment, remediation, monitoring and restoration efforts. The environmental authorities may seek reimbursement or recover the costs through legal action or administrative processes.

The specific processes, procedures and regulations for the determination of liability and the clean-up of environmental contamination can vary depending on:

• the nature and location of the contamination; and
• the applicable federal, state and local laws.

9.3 What environmental provisions and considerations should be factored into real estate transactions?

In Mexico, several environmental provisions and considerations should be factored into real estate transactions to ensure compliance with environmental regulations and mitigate potential environmental risks. Key environmental provisions and considerations to consider in real estate transactions in Mexico include the following:

• Environmental due diligence: Conducting environmental due diligence is essential to assess the environmental risks and liabilities associated with a property. This may involve conducting Phase I and Phase II environmental site assessments to evaluate the historical and current environmental conditions of the property, including:
• • potential soil and groundwater contamination;
  • the presence of hazardous materials; and
  • compliance with environmental permits and regulations.
• Regulatory compliance: Ensure that the property and any existing or planned activities on the site comply with applicable environmental laws and regulations. This includes verifying permits, licences and authorisations required for the property's use and operation, such as:
• • EIAs;
  • water use permits;
  • waste management permits; and
  • air emissions permits.
• Contamination and remediation: Assess the property for potential contamination issues, such as:
• • soil or groundwater pollution;
  • hazardous materials; or
  • previous industrial uses.
• Consider the potential costs, responsibilities and liabilities associated with environmental remediation, if necessary.
• Protected areas and ecosystems: Determine whether the property is located in or near protected areas, including:
• • coastal zones;
  • wetlands;
  • forests; or
  • other ecologically sensitive areas.
• Understand the specific regulations and restrictions that may apply to development or use in these areas.
• Natural resources: Consider the property's access to and rights related to natural resources, such as:
• • water sources;
  • mineral deposits; or
  • timber.
• Ensure compliance with regulations governing the extraction or use of these resources.
• Environmental permits and compliance obligations: Identify any existing environmental permits, licences or compliance obligations associated with the property, such as:
• • reporting requirements;
  • monitoring obligations; or
  • waste management practices.
• Understand the transferability of these permits and any ongoing compliance obligations that will be assumed by the new owner.
• Environmental liability and indemnification: Address environmental liabilities and potential indemnification in the purchase or lease agreement. Clearly define the responsibilities and liabilities relating to:
• • existing or potential environmental contamination;
  • remediation costs; and
  • regulatory compliance.
• Sustainable development and green building: Consider incorporating sustainability principles and green building practices into the development or renovation of the property. This may include:
• • energy efficiency;
  • water conservation;
  • waste management; and
  • environmentally friendly design and construction.

9.4 What initiatives are in place to promote green buildings and energy efficiency in your jurisdiction?

Mexico has implemented several initiatives to promote green buildings and energy efficiency in the country. These initiatives aim to encourage sustainable practices, reduce greenhouse gas emissions and increase energy efficiency in the built environment. Key initiatives in Mexico include the following:

• Leadership in Energy and Environmental Design (LEED): LEED is an internationally recognised green building certification programme. In Mexico, LEED certification is promoted by the Mexican Green Building Council (CMIC) and the Mexican Green Building Council (CMVB),, which provide guidance and support to promote sustainable building practices.
• Green mortgages: The National Housing Commission (CONAVI) and the National Housing Fund for Workers (INFONAVIT) offer green mortgage programmes that incentivise the construction and purchase of energy-efficient homes. These programmes provide preferential financing terms and lower interest rates for properties that meet specific energy-efficiency standards.
• Energy-efficiency codes and regulations: Mexico has implemented energy-efficiency codes and regulations for buildings. The General Law on Climate Change (LGCC) and the Energy Transition Law establish requirements for energy efficiency in buildings, including standards for lighting, heating, ventilation and air-conditioning systems.
• Energy performance certification: Mexico has implemented an energy performance certification programme for buildings. This programme assesses and certifies the energy efficiency of buildings, providing a standardised framework to evaluate and compare energy performance.
• Energy-efficiency programmes and incentives: The National Commission for the Efficient Use of Energy (CONUEE) and the Federal Electricity Commission (CFE) offer energy-efficiency programmes and incentives to promote the adoption of energy-efficient technologies in buildings. These programmes include financial incentives, grants and technical assistance to encourage energy-saving measures.
• Green building councils and associations: Various green building councils and associations operate in Mexico, promoting sustainable building practices and providing resources, education and networking opportunities for professionals in the industry. These organisations include:
• • the Mexican Green Building Council; and
  • the World Green Building Council Mexico Network.
• Public procurement policies: The Mexican government has implemented public procurement policies that prioritise the acquisition of energy-efficient and environmentally friendly buildings. This encourages the development of sustainable buildings and stimulates the market for green building materials and technologies.

These initiatives reflect Mexico's commitment to sustainable development and reducing the environmental impact of the built environment. They provide incentives, guidelines and support for the construction, renovation and operation of green buildings with a focus on energy efficiency and environmental performance.

9.5 What types of environmental certifications apply in your jurisdiction?

In Mexico, several environmental certifications and labels apply to various sectors and industries. These certifications aim to:

• promote sustainable practices;
• reduce environmental impact; and
• provide assurance to consumers and stakeholders.

The environmental certifications that apply in Mexico include the following:

• LEED: LEED is an internationally recognised green building certification system that assesses the sustainability and energy efficiency of buildings. LEED certification is managed by the US Green Building Council (USGBC) and is widely used in Mexico for commercial, residential and institutional buildings.
• Green Globe: Green Globe is a global certification programme for sustainable tourism and travel. It evaluates the environmental, social and economic sustainability of hotels, resorts and tourism-related businesses. Green Globe certification is applicable to various destinations and properties in Mexico's tourism industry.
• ISO 14001: ISO 14001 is an internationally recognised standard for environmental management systems. It provides a framework for organisations to effectively manage their environmental responsibilities. Many companies in Mexico seek ISO 14001 certification to demonstrate their commitment to environmental stewardship.
• Carbon-neutral certification: Carbon-neutral certification verifies that an organisation has taken measurable steps to measure, reduce and offset its greenhouse gas emissions. This certification demonstrates a commitment to addressing climate change. Several companies and products in Mexico have obtained carbon-neutral certification.

These are just a few examples of environmental certifications applicable in Mexico. The specific certifications applicable to a particular industry or product may vary. Organisations and producers should:

• research and identify the most relevant certification programmes for their sector; and
• align their practices with the corresponding standards to demonstrate their commitment to sustainability and environmental responsibility.

10 Trends and predictions

10.1 How would you describe the current real estate market and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

As the economy reopens after the COVID-19 pandemic, the housing market has posted positive figures and there is hope that inflation – which was one of the main factors affecting the real estate market – will fall; although this is by no means certain. It is nonetheless likely that the value of the national housing market will increase. For 56% of real estate managers in Mexico, the sector's performance was better than the previous year such as 2021 and 2022.

It is agreed that inflation was the main factor that impacted the real estate sector, followed by the public policies of the last administration, as well as the increase in and interest rates. During 2023, rate increases have also left a mark on the market. However, inflation is expected to fall in 2023. Since the beginning of the current federal administration, the real estate sector has faced challenges such as the cancellation of the Texcoco Airport project, which was originally initiated by a previous administration. The current government chose to terminate the contracts prematurely, resulting in cancellation and the payment of substantial compensation to construction companies. These decisions have, in turn, had a discouraging impact on the real estate industry. Additionally, the sector has also grappled with the adverse effects of the COVID pandemic, further exacerbating the challenges faced by the real estate market. Nonetheless, there is an expectation that the square footage under development will grow in order to cater to the rising demand, aimed at influencing potential customers based on their location by offering various services and benefits.

The trends predicted for 2023 are as follows:

• Interest rates may come down slightly, although they are expected to remain comparatively high;
• There will be adjustments upwards in housing prices
• More rentals and fewer purchases are anticipated;
• There will be an emphasis on sustainable and responsible investments; and
• The second-hand housing market will increase.

11 Tips and traps

11.1 What are your top tips for the smooth conclusion of a real estate transaction and what potential sticking points would you highlight?

Our top tips are as follows:

• Engage experienced advisers: It is crucial to involve experienced legal and professional advisers who specialise in real estate transactions in Mexico.
• Conduct comprehensive due diligence: Thoroughly examine all aspects of the property, including:
• • legal status;
  • ownership;
  • permits;
  • environmental considerations;
  • zoning regulations; and
  • any existing encumbrances or liabilities.
• Negotiate and review the purchase agreement: Carefully negotiate and review the terms and conditions of the purchase agreement. Pay close attention to important provisions such as:
• • price;
  • payment terms;
  • warranties;
  • representations;
  • contingencies; and
  • dispute resolution mechanisms.
• Verify title and ownership: Verify the property's title and ownership history by conducting a thorough title search.
• Secure proper financing: If financing is involved, ensure that appropriate financing arrangements are in place, including mortgage agreements or other forms of financing documentation.
• Comply with regulatory and legal requirements: Understand and comply with all applicable regulatory and legal requirements throughout the transaction process.

Potential sticking points to be aware of include the following:

• Title issues: Disputes or discrepancies regarding property ownership, unrecorded liens or conflicting claims to the property's title can cause delays or complications.
• Financing challenges: Difficulties in obtaining financing, discrepancies in financing terms or issues with appraisals can hinder the smooth conclusion of a transaction.
• Environmental considerations: Environmental contamination, inadequate environmental assessments and non-compliance with environmental regulations can present challenges and impact the transaction process.
• Regulatory changes: Changes in laws, regulations and government policies relating to real estate transactions can affect the timing and requirements of the transaction.
• Contractual disputes: Disagreements over contract terms, breach of contractual obligations and interpretation issues can lead to disputes that may delay or complicate the transaction.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.