Commercial real estate in Mexico: overview

A Q&A guide to corporate real estate law in Mexico.

The Q&A gives a high level overview of the corporate real estate market trends; real estate investment structures, including REITs; legislation; title and public registers of title; confidential information; state guarantee of title; tenure; sale of real estate; seller's liability; due diligence; warranties; cost; taxes and mitigation, including VAT and stamp duty/transfer tax; climate change targets; third party outsourcing; restrictions on foreign ownership or occupation; finance; leases; planning law and consents; and proposals for reform.

To compare answers across multiple jurisdictions, visit the Corporate Real Estate Country Q&A tool.

This Q&A is part of the multi-jurisdictional guide to corporate real estate law. For a full list of jurisdictional Q&As visit

The Real Estate practice group*, Creel, García-Cuéllar, Aiza y Enríquez, S.C.

The corporate real estate market

1. What have been the main trends in the real estate market in your jurisdiction over the last 12 months? What have been the most significant deals?

Recent trends

FIBRAs (fideicomisos de infraestructura y bienes raíces). Several FIBRAs (that is, the Mexican equivalent of real estate investment trusts (REITs), see Question 2, REITs) were launched during the past 18 months and have become a very attractive investment vehicle for real estate developers.

In addition, FIBRAs of different nature (such as in relation to industry, hospitality and retail) were recently launched and have been very active in acquiring large portfolios of real estate assets to increase their estates. The public has reacted positively to these investment vehicles.

Office space. Mexico City has the largest inventory of modern, quality office space in Latin America. As of the third quarter of 2012, the total Class A office space available is 3.9 million square metres and the vacancy rate is approximately 10.4%.

Since the beginning of 2010 through to the end of 2012, Mexico City developers have delivered approximately 1.1 million square metres of new office space, which is a 37% increase in the total inventory in just three years. Fortunately, net demand for quality office space has almost kept pace. Therefore, despite an unprecedented surge in new construction, the overall market has retained a healthy balance between supply and demand and rental rates have generally remained stable.

Another 400,000 square metres is currently under construction for delivery before the end of 2014. With approximately half of that space already pre-committed, it is anticipated that the market will continue to be stable in the immediate future.

One notable change in conditions is that over the past several years, demand for office space has demonstrated a notable geographic shift away from the popular western suburban markets back to more central locations closer to white collar residential neighbourhoods and with better access to public transportation. Therefore the market is experiencing growing vacancy rates and lower prices in the suburbs, with lower vacancy rates and slightly rising rental rates in the central business districts.

Construction financing. For the past 20 years, 95% of Mexico City office space has been constructed by domestic developers, a trend that prevails today. Construction financing has always been difficult to obtain and interest rates on project financing are high, so the vast majority of office space has been built with equity or with important components of equity. However, since the early 1990s, Mexico office buildings with long-term, quality tenants, unique to Latin America, have been able to attract non-recourse, US dollar, fixed-rate, long-term permanent mortgage financing, supplied by an array of foreign institutional lenders. Therefore, many owners have been able to partially re-finance with comparatively low-cost dollar mortgages with lengthy amortisation periods.

Foreign ownership. Foreign institutional ownership of Mexico office buildings has been less popular than for industrial real estate, however there is evidence of growing interest. Today, less than 10% of office ownership is held by foreign institutions but industry experts believe that figure may double over the next five years. Recent changes to Mexican law allowing government-regulated pension funds (called AFORES) to invest in real estate have given rise to the creation of local real estate investment funds set up to access this new money (see Question 2, Common structures).

Significant deals

The most significant deals (that is, deals involving real estate space of more than 10,000 square metres) in the past twelve months have included:

  • Banco Compartamos: 18,000 square metres in Insurgentes.

  • ICA Fluor Daniel: 18,000 square metres in Insurgentes.

  • Colgate-Palmolive: 15,000 square metres in Polanco.

  • Zurich Seguros: 11,000 square metres in Polanco.


Real estate investment

2. How is real estate investment carried out in your jurisdiction and what structures do investors use?

Common structures

The structures most commonly used by private investors are:

  • Stock companies (sociedades anónimas).

  • Limited liability companies (sociedades de responsabilidad limitada).

  • Trust agreements.

A few years ago, the investment promotion stock company (Sociedad Anónima Promotora de Inversión) (SAPI) was introduced, which is a sociedad anónima commonly used among real estate private investors as it is an excellent vehicle to structure joint ventures for the development of projects in all areas of industry and commerce (including real estate projects).

Another structure used to invest in real estate is for a trust to issue certificados de capital de desarrollo (CECADES) under a trust agreement. The CECADES are designed to be acquired by public offer by Mexican pension funds (AFORES) and other institutional investors. The trust issues CECADES which are acquired by investors through the Mexican Stock Exchange (Bolsa Mexicana de Valores). The proceeds are then considered part of the trust estate to invest in promoted companies.


The Mexican equivalent of REITs are FIBRAs, introduced in 2004 through a reform of the Income Tax Law. FIBRAs grant tax benefits to real estate developers who construct or purchase real estate. A FIBRA structure can be implemented through a trust or a Mexican stock company, in the latter case it is called a Sociedad de Inversion en Bienes Raices (SIBRA). The first FIBRA was launched on the Mexican Stock Exchange in 2011.

Institutional investors

Institutional investors, such as banks or insurance companies, mainly invest through the Mexican Stock Exchange or securities like CECADES, and other public securities.

Private investors

Foreign investors and private equity funds are investing passively in some real estate projects by associating (through different forms of partnership) with domestic participants, who own substantial portions of undeveloped land, have important expertise in the local market or in developing real estate projects. Instead of voting restrictions, the investment vehicles are subject to negative controls (alienation) and accountability schemes.


Real estate legislation

3. What is the main real estate legislation that applies in your jurisdiction?

The main sources of real estate law are the:

  • Constitution of 1917.

  • Federal and State Civil Codes.

  • Foreign Investment Law.

  • Agrarian Law.

  • National Estate Assets Law.

  • General Law of Ecological Equilibrium and Environmental Protection.

  • General Law for the Prevention and Integral Management of Waste and its Regulations (Waste Law).

  • Local Urban Development Laws.

  • Local Condominium Regime Laws.

  • Local Construction Regulations.


Title to real estate

Title and registers

4. What constitutes real estate in your jurisdiction? Is land and any buildings on it (owned by the same entity) registered together in the same title, or do they have separate titles set out in different registers?

Real estate comprises land, buildings and other structures attached to it (structures that if removed damage the property or construction).

Traditional civil law elements of land ownership include a right to use (ius utendi), to dispose of (ius abutendi) and to enjoy (ius fruendi) the real estate. Normally, title to land and buildings on it are recorded together, by means of a public deed registered at the corresponding public land registry where the real estate is located. Under Mexican law, ownership of land entitles the owner to everything that the land produces, or that is adjoined to or incorporated into the land, whether naturally or artificially (accession right). However, it is always advisable to confirm that the landowner owns the structures/improvements located on the land. Facilities constructed after a parcel of land is acquired do not form part of the title deed and other means of evidence or elements to help evidence title to the facilities must be used (for example, construction invoices and a construction licence).

Evidencing title

5. How is title to real estate evidenced?

Title to land and buildings (subject to subsequent facilities (see Question 4)) is evidenced by a public deed, granted before a notary public and registered at the public registry of property.

Title to land can also be evidenced by:

  • Judicial resolutions.

  • Agrarian certificates. These are only used for certain transactions involving land that was formerly subject to the ejido regime. The ejido is a population nucleus with its own legal identity and estate the same as that assigned to local inhabitants for farmland purposes by the government. The ejido is the owner of the real estate that has been granted to it, or that it acquired through other means and subsequently incorporated into existing ejido lands.

Each public registry of property is managed by the local government authority.

Information in the public register

6. What are the main information and documents registered in the public register of title?

There is a public registry of real estate in every state, which records:

  • Transfers of real estate.

  • Liens and encumbrances.

  • Condominium, time-share and fractional ownership regimes.

  • Long-term leases.

  • Other relevant notes on the title of the property.

Generally, the registered owner of the property or a real estate lien holder can make an entry on the registry or on the title.

In most states, registration of a public deed in the registry has a declarative effect (that is, the registration makes the transfer enforceable against third parties). However, between the contracting parties, the transfer is effected by execution of the sale contract. The only exception relates to transfers and encumbrances made in the state of Quintana Roo, where registration has a constitutive effect (that is, the registration of a public deed in the registry is a condition for the transfer of property or of the creation of liens).

Protection from disclosure

7. Can confidential information or documents be protected from disclosure in the public register of title?

There is no way of protecting the information from disclosure. All documents subject to registration in the corresponding public registry (see Question 6) are available to the public. Depending on the state, public registry records can be reviewed through a real estate file number or a certificate of background information recorded for the property. The fees vary, depending on the state. The trend is for public registries to computerise information (although the process has been slow).

State guarantee of title

8. Is there a state guarantee of title? Is title insurance available? If so, is it commonly used?

There is no specific state guarantee of title. A buyer can file a claim for damages and compensation for loss of profit from the state, for an error made by the state in the registry. However, the state is not liable for mistakes made by others (such as the notary public in charge of drawing up the relevant public deed).

In addition, buyers are protected with a statutory indemnity (saneamiento para el caso de evicción) under civil law. If the buyer is evicted from the land because of a judicial decision arising from a claim made by a third party with a superior or better right over the land, then the buyer is entitled to receive damages and compensation for loss of profit from the seller.

Title insurance is available to buyers and lenders. Title insurance companies are regulated under the Insurance Companies Law. Their clients are mostly US companies and their Mexican subsidiaries.


9. How can real estate be held (that is, what types of tenure exist)?

Real estate tenure is based on either:

  • Rights in rem, including:

    • fee simple rights over real estate (that is, land held in perpetuity); and

    • rights which limit ownership of real estate, for example mortgages, easements or usufruct (that is, the right to use and enjoy the benefits of something belonging to another as long as the property is not damaged or altered).

    Foreign persons have restrictions on their tenure of rights in rem (see Question 22).

  • Rights in personam, which are rights derived from a contract that creates personal rights, including:

    • leases; and

    • bailment agreements known as commodatums (that is, the act of delivering goods or personal property in use to another for no specific consideration).


Sale of real estate

Main stages and documents

10. What are the main stages and documents in the sale of real estate?


Marketing of real estate is usually carried out through real estate brokers, acting either as individuals or entities, which charge a percentage of the value of the transaction on completion.

Commercial negotiation

In many cases real estate brokers or the sellers directly conduct initial negotiations. It is advisable to involve legal counsel from the early stages of the transaction, to provide legal advice on aspects such as:

  • Review and investigation of title.

  • The activities that will be carried out at the property by the new owner (such as a regulated industry or business).

  • Due diligence on certain material aspects in addition to title (for example, urban development, construction and condominium regimes).

  • Negotiation of the final purchase agreement.

  • Possible environmental concerns.

Legal counsel may also be involved at this stage if the buyer requires a binding obligation from the seller, for example, a promise of sale contract (see below, When legally binding).

Pre-contractual arrangements

A typical real estate transaction involves the following stages and documents, including pre-contractual arrangements:

  • A letter of intent.

  • A promise of sale contract, or a sale contract subject to conditions precedent (such as Federal Competition Commission (FCC) clearance for certain major transactions).

  • Loan documentation, such as a term sheet and a loan agreement.

  • A mortgage or guarantee to secure payment of any outstanding obligations under the loan agreement.

Sale contract

Depending on the structure of the transaction, the sale contract can be executed in different ways, for example, with a limitation of ownership (Reserva de Dominio) (where title is not transferred until the purchase price is paid in full or in instalments, or where the property is immediately transferred but the contract can be rescinded if default in payment occurs). The sale contract can be either:

  • Ad corpus, that is, based on the boundaries and total area of the property. Therefore, if the verifiable boundaries of the property do not match the total identified area, as they may exceed or be less than the area identified, the price cannot be changed.

  • Ad mesuram, that is, the price is based on the actual area located within the boundaries (price per square metre).

When legally binding

Except for in the State of Quintana Roo, both promises of sale contracts and sale contracts are binding on execution. The laws of Quintana Roo specifically require a sale contract to be registered at the public registry before becoming a valid and enforceable document.

The Consumers Protection Bureau (CPB) has issued certain forms of agreements for major housing and commercial developments that developers must follow. These forms contain certain obligations concerning formalities and disclosure information to protect consumers.


On completion, the real estate transfer document must be registered in the corresponding public registry of property.

When title transfers

While promise of sale contracts that are subject to conditions precedent are binding, title generally passes when the parties execute the transfer agreement (final agreement), unless subject to a condition precedent or to retention of title (see above, Sale contract). Real estate transactions whereby title is transferred must be completed before a notary public.

The final agreement is the same document as the sale contract, but in the form of a public deed and is granted before a notary public. This may require authorisation from the FCC if certain monetary thresholds are met. Even if none of the thresholds are met, the FCC can investigate and challenge the transfer agreement if it deems that it is anti-competitive. The FCC can start an investigation up to one year from completion of the transaction (that is, when the public deed has been registered in the public registry of property).

Seller's liability to the buyer

11. Does a seller have any statutory or other liability to the buyer in a disposal of real estate?

Unless expressly agreed otherwise in the sale contract, the seller is statutorily liable to the buyer for:

  • Hidden defects that exist before the date of execution of the sale contract.

  • Eviction (see Questions 8 and 15).

Due diligence

12. What real estate due diligence is typically carried out before an acquisition?

Real estate due diligence is always recommended when purchasing real estate. The extent of the due diligence depends on the characteristics of the transaction (for example, rural or urban property and agreed price). Although there is no specific rule, buyers generally require between 30 and 90 days to perform due diligence, involving title investigation (including investigating any agricultural background) as well as zoning and environmental studies.

Sellers' warranties

13. What real estate warranties are typically given by a seller to a buyer in the sale of corporate real estate and what areas do they cover?

Warranties usually given by a seller include:

  • Legitimate ownership and title over the real estate.

  • No liens, ownership reserves, limitation or claims affecting the real estate.

  • No arrears of tax in relation to the real estate.

  • No environmental liabilities.

  • Adequate zoning.

  • No agrarian background (if this were the case).

Inheriting liability

14. Can an owner or occupier inherit liability for matters relating to the real estate even if they occurred before it bought or occupied it?

In the past, the remediation of soil contamination was solely the responsibility of the responsible party that generated hazardous waste and polluted soil with it. However, since 6 January 2004, the Waste Law and its subsequently enacted regulations provide that owners and/or possessors of real estate with contaminated soil are jointly and severally liable for its clean up. This is irrespective of any claim owners and/or occupiers may have against the polluter.

The Waste Law does not expressly require a seller to determine whether the site is contaminated or not. Therefore, depending on the transaction, a buyer may have to undertake a comprehensive environmental audit of the site's environmental condition before completing the transaction, because if soil contamination exists at the site the buyer is liable for clean-up after the acquisition.

Again, depending on the characteristics of the sale, it is highly advisable for the buyer to, among other things:

  • Conduct a search of contaminated sites that are registered with the public registry of property. Once a site is deemed contaminated, the relevant authority can record this in the public registry of property, although there are still many states that are unwilling to make such registrations. These searches have been introduced by the Waste Law and its regulations, but are not yet fully implemented.

  • Conduct a legal environmental due diligence process, which includes a review of, among other documents, all environmental permits, licences, concession titles and authorisations.

  • Depending on the type of property, conduct an environmental site assessment (either Phase I or Phase II surface investigation studies).

  • Negotiate a sale or lease agreement that contains comprehensive environmental representations, warranties and indemnities, including an obligation on the seller or landlord to clean up soil contamination found after the acquisition. Any claims relating to the breach of representations and warranties are only enforceable against the seller of a contaminated site.

For leased premises, unless otherwise agreed, an assignee of a lease must remedy defaults of the previous tenant (for example, for repair of the property). The transfer of a lease implies the assignment of the rights and obligations of the previous tenant.

Under applicable Mexican environmental laws and regulations, owners and possessors of sites whose soils are affected by contamination are jointly and severally liable for their remediation, regardless of any actions the owners and possessors may have against the contaminating party and aside from any liability the contaminating party may have. The environmental liability arises for the buyer of a contaminated real property if and when the buyer takes title to or possession of the land, and cannot prove to the Ministry of the Environment and Natural Resources (Secretaría de Medio Ambiente y Recursos Naturales) (SEMARNAT) (see box, Real estate organisations) that the seller assumed liability for pre-existing contamination on transfer.

Although the buyer and seller can contractually agree indemnification in relation to contamination existing before the transaction, governmental agencies are entitled to bring actions against the buyer for remediation of the site (regardless of the actions they may also bring against the party that contaminated the site (for example, the seller or previous tenant)).

Retention of liability after disposal

15. Does a seller or occupier retain any liabilities relating to the real estate after it has disposed of it?

A seller is liable (that is, it must indemnify and compensate the buyer) for:

  • Eviction of the buyer, if a third party has superior title.

  • Hidden defects in the property for up to six months from the transfer. However, the parties can agree otherwise under the relevant state Civil Code.

The Waste Law and its regulations prohibit the transfer of any site contaminated with hazardous waste without the prior authorisation of SEMARNAT. If no responsible party is determined at the time of the transfer, the seller is deemed responsible for contamination. In addition to obtaining authorisation, the seller of a contaminated site must inform the buyer of any contamination or the presence of any hazardous materials.

Under Mexican law a person or entity may attract environmental liability if its actions or omissions either:

  • Breach Mexican environmental laws, regulations or standards.

  • Generate contamination or damage to the environment, natural resources or human health. 

The party causing soil contamination is ultimately responsible for carrying out or paying for remedial actions to clean up contaminated sites (polluter pays principle) (General Law on Ecological Equilibrium and Environmental Protection and General Law on the Prevention and Comprehensive Management of Waste and its Regulations). Therefore, a seller of land that may have contaminated the land may remain liable for carrying out remedial works, to the extent it is proved to the government that the seller caused the contamination, irrespective of any contractual arrangements.

Seller and buyer costs

16. What costs are usually paid by the buyer? What costs are usually paid by the seller?

Costs involved in the acquisition of real estate usually include:

  • Broker fees.

  • Notary public fees.

  • Government registration fees.

  • Appraiser fees.

  • Real estate transfer taxes.

  • Value added tax, in case of constructions.

Buyer's costs

In practice, the buyer pays all of the costs listed above, although many state Civil Codes allow a 50:50 split between the buyer and seller. Real estate transfer taxes are always payable by the buyer (see Question 18).

Seller's costs

See above, Buyer's costs. The seller is responsible for the payment of IETU (see Question 17) and income tax.

Non-Mexican residents are subject to a 25% income tax on the purchase price, or alternatively to a 30% income tax on the gain (however, due to a recent tax reform proposed by the current government, the tax rates may change).

Gain is determined between the sale price and the tax basis (that is, the acquisition price plus adjustment over inflation basis, less amortisation of constructions). No flat tax is payable by seller when it is a non-Mexican resident.

When the seller is a Mexican resident (legal entity) the gain is subject to the 30% income tax rate or a 17.5% flat tax, whichever is higher. Flat tax basis is determined in the same way as income tax, except where the real estate was acquired before 2008, in which case there is no tax basis and the 17.5% applies to the sale price.


Real estate taxes and mitigation

17. Is value added tax (VAT) (or equivalent) payable on the sale or purchase of real estate?

The seller or landlord must charge VAT to the buyer (over constructions/improvements only) or tenant and deliver the VAT to the relevant tax authority.

In most cases, VAT is charged at the rate of 16%. The following exceptions apply:

  • Tenants who lease property in border areas are charged VAT at 11%.

  • Purchases and leases of residential premises and all purchases of land are exempt from VAT.

As a result of the flat tax (Impuesto Empresarial a Tasa Única) (IETU), implemented in Mexico in 2008, the seller or landlord of real estate must pay a flat tax on income received from the sale, purchase, or lease of real estate at the rate of 17.5%. Taxpayers can offset payment of federal income tax against the flat tax.

18. Is stamp duty/transfer tax (or equivalent) payable on the sale or purchase and who pays?

Real estate transfer tax is imposed on any acquisition of real estate in Mexico. For these purposes, the acquisition of real estate is any act that transfers ownership, including:

  • Gifts.

  • Inheritance transfers.

  • Business transfers.

This tax is generally 2% of the value of the property.

Following the Fiscal Law of the Federal District (Mexico City), real estate transfer tax is triggered on execution of an agreement for:

  • The sale of property in Mexico City where the title is retained until payment is fully made (Reserva de Dominio).

  • The transfer of property in Mexico City, either as a sale or donation.

Real estate transfer tax is generally charged on the highest of the:

  • Transaction value.

  • Value used for property tax purposes (cadastral).

  • Value determined by an independent valuation carried out by an authorised appraiser.

In some states, certain incentive programmes allow buyers or developers of land to obtain reductions of up to 100% of real estate transfer tax or property taxes.

19. Are any methods commonly used to mitigate real estate tax liability on acquisitions of large real estate portfolios?

Before the execution of a sale contract, a notary public must obtain certificates of no liens and no indebtedness of property tax or other local contributions. If at the request of the parties these certificates are not obtained, completion can still take place, but the public registry of property will not record any transfer of property if it becomes aware that all local property taxes and contributions have not been fully paid.


Holding business premises

Climate change targets

20. Are there targets to reduce greenhouse gas emissions from buildings in your jurisdiction? Is there legislation requiring buildings to meet certain minimum energy efficiency criteria?

There are currently no targets to reduce greenhouse gas emissions from buildings in Mexico.

On 14 January 2010, the Protocol of Activities for Implementing Energy Efficient Actions in Real Estate Properties, Premises and Vehicle Fleets of the Federal Public Administration (Protocolo de Actividades para la Implementación de Acciones de Eficiencia Energética en Inmuebles, Flotas Vehiculares e Instalaciones de la Administración Pública Federal) (Protocol) was published in the Official Gazette of the Federation. The Protocol aims to set out a continuous improvement process for promoting energy efficiency in assets of the federal public administration, through the implementation of good practices and technological innovation. The Protocol obliges federal public administration entities to deliver, for approval, their programmes with their respective energy saving objectives.

In the short term, the objective is mainly the implementation of good practices, while mid- and long-term objectives include investment in high efficiency and innovative technologies. The Protocol applies to real estate properties owned or leased by entities of the federal public administration with a surface area of over 1,000 square metres, for office or any other use.

In addition, certain Official Mexican Norms currently in force set out the guidelines for energy efficiency of different kinds of equipment or machinery that may be used in buildings, for example, certain types of air conditioners or lighting systems.

Third party outsourcing

21. Is it common for companies to manage their real estate portfolios and their accommodation needs by using third parties through outsourcing transactions?

Outsourcing transactions are typically carried out for efficiency purposes and professional reasons. As real estate developments continue to grow and become more sophisticated, demand for more specialised outsourcing services by independent third parties has also increased.

Restrictions on foreign ownership or occupation

22. Are there restrictions on foreign ownership or occupation of real estate, or on foreign guarantees or security for ownership or occupation?

Subject to obtaining a permit from the Ministry of Foreign Affairs (see box, Real estate organisations), foreign nationals can own any real estate located outside the restricted zone. The restricted zone is a strip of 100 kilometres along national borders and 50 kilometres along the coast. Foreign persons who want to acquire rights in connection with property in the restricted zone can either:

  • Lease the property.

  • Acquire a beneficial interest through a trust agreement. A Mexican bank is the trustee of the property and the foreign person holds the right to use and enjoy the property. The foreign person can instruct the Mexican bank to encumber or transfer title to a person identified by the foreign person and receive the proceeds of the sale of the property.

Mexican companies that are wholly-owned by foreign persons can acquire non-residential properties located within the restricted zone.

Issues on change of control

23. Does change of control of a company affect its holdings of real estate?

Change of control does not usually affect a company's holding of real estate, unless a foreign investor (that is, either a foreign individual or company, or a Mexican company controlled by foreign nationals) acquires control or a participation in a Mexican company, in which case certain restrictions apply (see Question 22).

The states' Civil Codes do not contain limitations on change of control provisions in leases, although the parties can freely agree limitations.

Compulsory purchases

24. In what circumstances can local or state authorities purchase business premises compulsorily? Is the purchase price market value?

Federal or state authorities can only compulsorily purchase business premises through expropriation for public policy reasons, for example, when land is required for the construction of highways or energy plants. The government must always indemnify the owners at market value determined by an appraisal/valuation entity.

A compulsory sale can occur to cover the tax debt resulting from tax evasion. The relevant authorities must follow the applicable legal procedure, which concludes with a bidding and an auction sale.

Municipal taxes

25. Are municipal taxes paid on the occupation of business premises? Are there any exemptions?

There are no specific municipal, state or federal taxes payable on the occupation of business premises. However, under certain local state tax laws, the landlord of leased properties must pay local real estate property tax on a higher tax basis than for other properties, because leased real estate properties produce a regular income. This tax accrues every two months, but can be paid annually, for which the local authorities usually grant a special discount.

Certain government fees (derechos) are payable to the municipality when it issues an operating licence or permit to conduct business. The fees are determined annually and are published in the relevant Revenue Law.

There are currently no incentives or exemptions.


Real estate finance

26. How are acquisitions of large real estate portfolios or companies holding real estate generally financed?

Acquisitions are generally financed by cash and/or secured debt finance. Depending on the types of guarantees sought, financing can also be structured through equity schemes.

27. How is real estate commonly used to raise finance?

Finance is commonly raised by granting real estate as collateral through a security trust agreement (fideicomiso de garantía) and/or a mortgage (hipoteca).

Under a security trust agreement, the settlor (borrower or guarantor) (fideicomitente) transfers title to real property in favour of a trustee (typically a Mexican banking institution), to secure payment of secured obligations in favour of the lender as beneficiary. The settlor, however, retains a secondary beneficial interest in the collateral so that on satisfaction of the secured obligations, legal title to the collateral reverts back to it.

The security trust agreement has certain unique advantages, such as the ability to agree and provide for an extra-judicial foreclosure procedure and certain insolvency benefits. Legal title to the collateral is transferred to the trustee as trust property (propiedad fiduciaria). Therefore, as a general rule, in the event of insolvency of the settlor (assuming it is a Mexican entity), the collateral held by the trustee under the security trust agreement should not be consolidated with the assets of the settlor.

Sale and leaseback transactions are also commonly used.

28. What are the most common forms of security granted over real estate to raise finance? How are they created and perfected (that is, made valid and enforceable)?

The most common forms of security granted over real estate to raise finance are the security trust agreement (fideicomiso de garantía) and the mortgage (hipoteca) (see Question 27). Both securities are:

  • Created by execution in public deed form before a notary public. For a security trust, the deed must be executed by the settlor, trustee and beneficiary.

  • Perfected by registration with the public registry of property of the jurisdiction where the real estate is located.

29. Is real estate securitisation common in your jurisdiction?

The first public mortgage-backed securitisation took place in 2003. Although the first mortgage-backed securitisation transactions were structured as simple securitisations of discreet pools of mortgage loans, the Mexican securitisation market began to become more sophisticated and mortgage securitisation structures became more complex. Early mortgage-backed securitisations typically included a mortgage guarantee from Mexico's mortgage development bank, the Sociedad Hipotecaria Federal (SHF). Reforms to Mexican insurance laws and regulations in 2004 allowed Mexican private insurance companies to grant financial guarantees and mortgage insurance in relation to mortgage-backed securitisation structures which soon replaced SHF's guarantee. In addition, the active role of multilateral institutions such as the Inter-American Development Bank and the Overseas Private Investment Corporation in the Mexican mortgage-backed securities market speeded up the development of mortgage-backed securitisations.

Until the financial crisis of 2008, mortgage-backed securitisations continued to flourish and to become more sophisticated. In addition, although the securitisation of mortgage loans gave way to the securitisation of other asset classes, mortgage-backed securities continued to dominate the Mexican structured products market. Although the 2008 crisis brought about a sudden halt in the continued development of the Mexican mortgage-backed securities market, the revival of the Mexican economy continues.

In 2010 and 2011, the Mexican capital markets saw several significant transactions, some of which were asset securitisation transactions.


Real estate leases

Negotiation and execution of leases

30. Are contractual lease provisions regulated or freely negotiable?

Depending on the location of the real estate asset in question, the relevant Civil Codes can apply to commercial leases. The Civil Codes set out the basic general rights and obligations of the parties, most of which apply unless the parties agree otherwise. Rent is not regulated, but must meet certain criteria of rent set out in the Civil Codes. For example, under the Civil Code for the Federal District, the rent in leases for residential use must be agreed upon in Mexican pesos and can only be increased annually. Also, most Civil Codes establish a maximum term for leases depending on the use to be given to the premises (for example, residential, commercial and industrial).

Usually, landlords require a guarantee that the tenant will comply with the lease, including timely payment of rent. The tenant provides this by delivering a surety bond issued by a third party (such as a parent company), or by an authorised institution that issues bonds. Some landlords require corporate guarantees from parent companies.

Unforeseen circumstances that affect the equity of contracted obligations enable a modification in the contractual terms and conditions in favour of the negatively affected party, subject to the agreement of the parties or the decision of the competent judicial authority (Law on Public Sector's Acquisitions, Leases and Services (Ley de Adquisiciones, Arrendamientos y Servicios del Sector Público)).

31. What are the formal legal requirements to execute a lease?

Generally, there are no formal legal requirements to execute a lease, except that leases must be in writing. However certain states such as Durango, require that the lease is formalised in a public deed before a notary public when the rent exceeds a certain nominal amount. In most states, leases executed for more than six years must be executed or ratified before a notary public and registered in the corresponding public registry of property.

Rent levels and reviews

32. How are rent levels usually reviewed and are there restrictions on this? Is VAT (or equivalent) payable on rent?

Due to inflation, leases usually contain escalation provisions under which rent can be adjusted annually according to the Consumers Price Index, published by the Mexican Central Bank (downward rent adjustments are uncommon).

The landlord must charge the tenant VAT at 16% of the rent, except for leased properties in border areas where VAT is 11%. The landlord is responsible to the tax authorities for delivering the tax (see Question 17).

Similarly, the landlord must directly pay IETU (flat tax) at 17.5% on the income received from rent (see Question 17).

These tax provisions may change as of 2014, as the Mexican Congress and Executive branch are currently discussing substantial amendments to a variety of relevant tax laws.

Length of term and security of occupation

33. Is there a typical length of lease term and are there restrictions on it? Do tenants of business premises have security of occupation or rights to renew the lease at the end of the contractual lease term?

Certain statutory limits apply to the length of the lease depending on:

  • The state in which the real estate is located.

  • The type of leased property (for example, commercial leases generally range from ten to 20 years and industrial leases from 15 to 20 years).

Unless otherwise agreed, the tenant has no right to renew the lease without the landlord's consent. In most states, if a tenant continues to use a property after the lease term has expired, without opposition from the landlord, the lease is extended indefinitely, depending on if the property is rural or urban. Either party can terminate the lease in these circumstances, subject to the terms of the lease or by providing prior written notice within certain specific terms which vary from state to state.

Restrictions on disposal

34. What restrictions typically apply to the disposal of the lease by the tenant?

Unless otherwise agreed, a tenant cannot sub-lease the property in whole or in part, or assign its rights and obligations under the lease without the landlord's prior consent.

Use of premises within a corporate group

35. Can tenants usually share their business premises with companies in the same corporate group?

Tenants can only share their business premises with the landlord's permission, through a sub-lease or bailment agreement (see Question 9).

Repair and insurance responsibilities

36. Who is usually responsible for keeping the leased premises in good repair?

Unless otherwise agreed, the landlord must carry out all repairs that are necessary for the leased property to be used for the agreed purposes. The tenant must usually repair minor damage resulting from its day-to-day use of the leased property, according to the lease.

37. Who is usually responsible for insuring the leased premises?

The tenant usually obtains insurance in connection with the activities it is to perform and the property itself is usually insured by the owner. Most Civil Codes require the tenant to obtain insurance if a dangerous industry is to be carried out in the leased premises. The Civil Codes do not define this term, but it can include "highly risky" activities defined in applicable environmental laws, such as in relation to nuclear power, explosives, chemicals and so on.

Grounds for termination

38. On what grounds can the landlord usually terminate the lease? Can the tenant terminate the lease in certain circumstances?


The landlord can terminate the lease if the tenant does not pay the rent as agreed in the lease, typically if the rent is not paid by tenant for two consecutive months (depending on applicable state civil legislation).

In addition, the landlord can terminate the lease if the tenant breaches other statutory obligations, including if the tenant:

  • Uses the leased premises for a use other than that authorised in the lease.

  • Damages the leased premises beyond ordinary wear and tear.

  • Makes alterations to the leased property without the landlord's consent.

  • Does not allow the landlord to make the necessary improvements.


The tenant can terminate the lease if the landlord does not grant use and enjoyment of the leased premises as agreed in the lease. Other statutory provisions allow the tenant to terminate the lease, including if the tenant's use of the leased premises is impossible due to eviction by the landlord.

Following the latest reforms of the Civil Code of the Federal District, if extraordinary unforeseen circumstances result in the obligations of a party being more onerous, that party can request the amendment of the contract to restore equity between the parties. If a court resolves in favour of the requesting party, the other party must either accept amendments or terminate the contract.

Tenant's insolvency

39. What is the effect of the tenant's insolvency under general contract terms and insolvency legislation?

If the tenant is declared insolvent, the lease is not automatically terminated (Bankruptcy Law). However, a court-appointed conciliator in insolvency proceedings can rescind the lease. If he does, the tenant must pay the landlord the indemnity provided for in the lease. If the lease does not provide for an indemnity, the tenant must pay the landlord the equivalent of three months' rent (Bankruptcy Law).


Planning law

40. What authorities regulate planning control and which legislation applies?

The General Law on Human Settlements contains provisions concerning planning control. Similar rules and principles apply to the planning regime of the local states.

Each state and the Federal District have local statutes that regulate planning, covering use of land, zoning and construction. For the Federal District, these include the:

  • Law of Urban Development for the Federal District 2010 (Urban Development Law).

  • Regulations to the Urban Development Law for the Federal District 2004 (Urban Development Regulations).

  • Environmental Law for the Federal District 2000.

  • Construction Regulations for the Federal District 2004 (Construction Regulations).

Detailed planning rules, based on the Urban Development Law and the Urban Development Regulations, are contained in urban development programmes. For the Federal District these are:

  • The General Urban Development Programme. This sets out the planning strategies, policies, actions and rules to be followed in the Federal District. It is the basis of the other two programmes (see below), and of the general planning and urban development objectives for the Federal District. It must be interpreted according to applicable federal or local statutes, such as the:

    • National Development Plan;

    • National Urban Development Programme; and

    • General Urban Development Programme of the Federal District.

  • Political subdivisions' programmes (programas delegacionales). The territory of the Federal District is divided into 16 political subdivisions and the territory of each state is divided into municipalities or political subdivisions. These programmes provide the urban development, planning and territorial regulations for a political subdivision (delegación política) of the Federal District (or the municipal programmes, in the case of a state). Each programme applies the policies of the General Urban Development Programme of the Federal District (some states have their own municipal urban development programmes).

  • Partial programmes. These provide urban development and planning for specific areas that, due to their rapid growth and urban development, require special attention and regulation.

In addition to the above, there are "ecological ordinance programmes" at federal, state and municipal level. These programmes include ecological, conservational and general environmental restrictions and limitations on planning, zoning and development, which are binding and must be respected in any development or construction project. These programmes derive from a variety of federal, state and municipal environmental laws and regulations. For further details, see Environmental law and practice in Mexico: overview.

41. What planning consents are required and for which types of development?

Planning permission consisting of a zoning certificate is required for every construction project. A zoning certificate is an official document that typically regulates, for an individual property, the:

  • Use of land.

  • Permitted construction levels (governing matters such as the intensity and density of construction).

  • Restrictions on construction.

There are different types of zoning certificates (Urban Development Regulations):

  • A zoning certificate for permitted uses of land for a particular property. These are determined by the zone where the property is situated. This certificate can be used for up to two years from the date it is issued.

  • A master zoning certificate of specific use of land and amenities. This is used for:

    • housing projects of up to 200 homes or with an area of up to 10,000 square metres; or

    • commercial, industrial or services premises with an area of up to 5,000 square metres, except if an urban impact study is required.

    This certificate can be used for up to one year from the date it is issued and sets out:

    • whether a property can be supplied with services such as water and drainage;

    • the urban impact of construction;

    • the layout of the local roads; and

    • the permitted use of land.

  • A zoning certificate for the specific use of land. This allows or prohibits a specific use of land for a particular property, according to the urban development programmes. It can be used for up to two years from the date of issue.

  • A zoning certificate of evidenced use of land by means of vested rights. This document acknowledges the rights of the owner or occupier and their successors to have a specific use for a particular property, provided that this use of land was permitted before the current urban development programme had effect. This certificate is permanent.

The Registry of Urban Development Plans and Programmes (Urban Registry) issues the zoning certificates.

For every construction project, the interested party must file a preliminary report (which must include the zoning certificate) with the Ministry of Urban Development of the Federal District (Ministry). The Ministry determines whether an urban impact study is required.

Construction licences are required for the construction, expansion, modification, repair or demolition of a building or installation, or for performing construction, repair or maintenance work on underground facilities (Construction Regulations). A construction licence is not required in several specific cases (for example, urgent repair works to avoid accidents). Each political subdivision issues construction licences.

In addition to the above, the applicable federal, state and/or municipal environmental laws typically require environmental impact approvals to be obtained (among other things) prior to initiating construction of almost any project.

42. What are the main authorisation and consultation procedures in relation to planning consents?

Initial consents

In the Federal District, for example, the Ministry of Urban Development, through the Urban Registry, grants the initial planning consents.

Third party rights

Third parties do not have the right to object to the issuance of zoning certificates.

Public inquiries

Neighbourhood consultation is required when any of the urban development programmes (see Question 40) are created or amended at the request of any individual or company. Consultation is not required for amendments to partial programmes.

Initial decision

The Urban Registry must issue a zoning certificate within the following time limits, calculated from the date on which the application is filed (provided the application is correct and complete):

  • A zoning certificate for permitted uses of land: five days.

  • A master zoning certificate of specific use of land and feasibilities of the proposed planning application: 30 days.

  • A zoning certificate for the specific use of land: ten days.

  • A zoning certificate of evidenced use of land by means of vested rights: 30 days.

A construction licence must be issued within 24 hours from the business day following the day the application is filed, assuming the application is correct and complete. In specific cases (for example, when applications relate to the construction, repair or maintenance of underground facilities), the licence must be issued within 30 business days of the date of filing, provided the application is correct and complete.

In practice, zoning certificates usually take longer to be issued, depending on the type to be issued. In practice, construction licences are usually issued within two to three months.


If a licence is denied or an interested party does not agree with the content of a zoning certificate, an appeal (recurso de inconformidad) can be filed with the same authority that issued or denied the licence, and the appeal is decided by a higher authority. The appeal must, by law, be resolved within 15 business days of being filed, although in practice it can take longer.



43. Are there any proposals to reform real estate law in your jurisdiction?

There are proposals to amend the various real estate laws, to relax the limitations on foreign nationals in relation to direct ownership of land (see Question 22).

A separate proposal is intended to regulate real estate ownership and development activities in coastal areas, which will amend applicable laws (such as the National Estate Assets Law) governing this subject.

In addition, the federal tax bill may amend a variety of taxes and therefore have an impact on the various types of real estate transactions (including VAT and income tax) from 2014. The bill is currently being discussed in Congress.

There are currently no other substantial proposals for reform.


*The authors would like to thank Henry McDonald and Carlos Ordoñez of CB Richard Ellis for their help in the preparation of Question 1.


Real estate organisations

Ministry of Foreign Affairs (Secretaría de Relaciones Exteriores)

Main activities. This body grants permits for the acquisition of real property by foreigners outside the restricted zone and the incorporation of property trusts, and receives notices of purchases of Mexican properties by foreign individuals and other legal entities.


Ministry of the Environment and Natural Resources (Secretaría de Medio Ambiente y Recursos Naturales)

Main activities. This body regulates all matters relating to the preservation of the environment, orders the registration of contaminated sites on the public registry of property and approves the transfer of contaminated land.


Ministry of Urban Development of the Federal District (Secretaría de Desarrollo Urbano y Vivienda)

Main activities. The Ministry regulates urban construction projects and the use of land within the Federal District.


Association of Real Estate Developers (Asociación de Desarrolladores Inmobiliarios)

Main activities. This is currently one of the strongest associations of real estate developers in the country. Its members contribute around 80% of the real estate development in Mexico City, and more than half of the real estate development nationwide.


Mexican Association of Professional Realtors (Asociación Mexicana de Profesionales Inmobiliarios)

Main activities. This is a Mexican association of real estate professionals, which also offers certification and training programmes.


Online resources


Description. Official website of the Ministry of the Interior, which contains up-to-date laws and legislation.


Description. Official website of the Congress, which contains up-to-date laws and legislation.


Description. Official website of the Official Federal Gazette (Diario Oficial de la Federación), which contains up-to-date information of the reforms and modifications to laws and regulations, as well as the publications of new laws and regulations. Every state has its own Official Gazette in which new state laws and reforms to state laws are published.


Description. Unofficial website which provides translations of Mexican law and regulations. PDF document translations have to be purchased via this website. Translations are for guidance only and are potentially out-of-date.

Contributor profiles

The Real Estate practice group

Creel, Garcia-Cuéllar, Aiza y Enríquez, S.C.

Monterrey and Mexico City offices
T +52 55 4748 0600, extension 641 or 656
+52 81 8363 4221, extension 104

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