Beware: Restrictions to Use Your Mexican Home as AirBnB
As the online Vacation Rental market grows worldwide, governments adapt and enforce regulations that could impact your business. If you own a Mexican property through a Trust (in Spanish: "Fideicomiso"), and you are interested in listing the property as a vacation rental, you should consider keeping this article at hand.
Through this article, we would like to explain the legal obligations that may arise from your vacation rental activities.
According to the Mexican Foreign Investment Law (the "law"), when a property is owned through a Mexican Trust and its beneficiaries are not Mexican citizens, only the use and enjoyment of such property is permitted. Mexican Trusts are commonly used by foreign individuals to hold title to property located within the territory that is considered the Restricted Zone (one hundred kilometers along the Mexican borders and fifty kilometers along the Mexican beaches).
In this sense, deriving a profit from commercial activities should be performed through an intermediary or the Trustee. In other words, a foreign person is not authorized to earn income on their own, they must use a third party, like traders who can be Mexican individuals or entities and foreign entities which practice business operations in Mexico.
By the same token, the land use determines which activities may be conducted on a property. There are mainly three types of uses a land may adopt: residential land use, commercial land use and mixed land use. Residential land use means that any real property or portion thereof must be used for housing purposes only. Commercial land use means that the land may be used for the retail or wholesale of goods or services. Meanwhile a mixed land use is both.
Considering that stated above, the following statements would apply:
- A property held in a Mexican Trust is intended for the use and enjoyment of its beneficiaries and could be used to perform business activities through a third party;
- The vacation rental business should be operated by an individual or entity other than the beneficiary of the Trust, with legal capacity to do so in Mexico;
- The land use can be residential, commercial or both (mixed);
- No restriction exists within the law to prevent land held in a Trust from receiving the mixed land use status. Rather, the law stipulates that property held into a Trust can be used for residential or commercial purposes. Any provisions contradicting this would be considered as against the law and further limit the object of the Trust.
Thus, modifying the land use purpose of a property held in a Mexican Trust to a mixed land use (residential and commercial) should be possible. Once the land has obtained the mixed land use status, you may perform vacation rental activities through the services of a third party provider.
In our following blogs, we will share more information about the specific requirements that Quintana Roo imposes on vacation rental operations and why it may be better for you to instead, create a Mexican entity to purchase your property.