The Restricted Zone in Mexico, previously known as the “Prohibited Zone,” refers to special protected areas of land close to Mexico’s borders and coasts. The Restricted Zone has been defined in the Mexican Federal Constitution as
- The land area within 100 kilometers of Mexico’s international land borders with the U.S., Belize and Guatemala; and
- The land area within 50 kilometers of Mexico’s ocean front areas (the coast line of Mexico).
In the Restricted Zone, foreigners cannot legally own direct title to real estate. In the U.S., this direct ownership is known as fee simple ownership. Foreigners can hold title to property in the Restricted Zone by acquiring a fideicomiso, which is a long-term irrevocable bank title transfer trust. In a fideicomiso, a Mexican fiduciary bank holds the title for a foreigner and performs all acts considered real rights, per the instructions of the trust’s beneficiary (in this case, the foreign buyer). The beneficiary of the trust can exercise the personal rights regarding the trust and the property placed in the trust.
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When a property is acquired for non-business use such as use as a residence, an irrevocable trust is the only way to hold title in the Restricted Zone. If purchase of the property is commercial in nature, then the foreign individual or entity may hold the title to the property through a fideicomiso trust or through a Mexican corporation. Foreigners are allowed to hold direct ownership in Mexican corporations, within certain legal limitations.