1. Understanding what is a Land Lease
“A land lease” is a lease agreement that permits the tenant to use a piece of land owned by the landlord in exchange for rent. Most land leases allow the tenant to build a temporary (or in some cases, permanent) structure at his own cost, however, most land leases already have structures for the tenant’s use. Keep in mind that in this case the landlord retains all ownership rights to the land.
2. The Mexican Land Lease
There are laws in Mexico that govern land leases. The most important law is that a land lease has a time limit. An agreement can be written as a right to use the land for a maximum of a ten year period of time, no more. The landlord may also choose to lease his land on a month to month basis as there is no legal minimum.
There is a common misconception about a 99 year land lease being legal in Mexico, however, any Mexican land lease over 10 years is beyond legal boundaries- it is not legal and it has never been. This goes without saying that the 10+10+10 also falls under this category.
There are a lot of cases where people have entered into the “informal” 10+10+10 agreement. Sure it sounds like a good deal but the fact is that if your Mexican landlord, even after your first 10 years, decided to just terminate the agreement- in a whim or out of thin air-HE CAN. The fact that this system is not within court boundaries means that no legal power and no attorney can swoop in and save the day. The Mexican landlord can simply opt to not recognize the next 10 years of the so-called deal.
3. Is Leasing Land an Option?
Leased land is still available for a foreigner to acquire. Because prices of leased land homes are more affordable than those with bank trusts, land leases are attractive to foreigners who wish to keep their Mexican investment at a minimum.
There are no closing fees, permits or taxes to pay in order to acquire or maintain a land lease. In some cases utilities such as garbage disposal or water are included in the monthly charges for the lease. What needs to be understood when buying a home on leased land is that they are really purchasing the replacement value of the structure and its accompanying improvements.
There is one good alternative for those that want to lease land. I recommend using a time period of 9 years and 11 months. This is perfectly legal in both the Mexican court systems and with the landowner. At the end of the first contract, simply ask the landlord to renew for another 9 years and 11 months.
This Lease Land arrangement is BEST SUITED if:
A) You prefer to minimize the investment in your second home to get a much reduced total purchase amount instead of using a Bank Trust.
B) The owner actually agrees to give a 9 years and 11 months scheme