Real Estate

Title: what the Public Registry and the agrarian history say

Due diligence on an industrial site starts with two registries that do not talk to each other. The Public Registry of Property of the state shows the chain of title, liens, easements and annotations of litigation over the parcel, and we read the full history, not only the certificate of freedom from liens. The National Agrarian Registry shows whether the land was ever ejido or communal property, and if so whether it was properly converted to full private ownership (dominio pleno). Land that left the agrarian regime through a defective procedure is the classic trap behind a suspiciously cheap site, and no notary or title insurance repairs it afterwards.

We then confirm that the seller’s documents match the physical reality: cadastral records, surveyed boundaries, property-tax and water accounts, and possession. A discrepancy between the deed’s measurements and the fence is a negotiation to have before the price is committed, not after.

Zoning and permits: can this process run here?

The second truth lives in the municipality. The land-use license has to admit the specific industrial activity the client will run, including its intensity, its emissions and its logistics; the construction license, the alignment and official number, civil-protection approvals, and where applicable a traffic-impact study and a state environmental-impact resolution follow. Inside an industrial park the zoning question is usually resolved, but the park’s internal regulations and the covenants recorded against the lots bind the tenant as much as the law does, and they are read too.

We ask one question of every site before anything is signed: is the client’s process permittable here, in this classification, with these neighbors, and at this scale in five years? The answer is a document, not an assurance from the broker.

Utilities as due diligence: CFE, CONAGUA and the park

A site without power and water feasibility is an expensive warehouse. Grid capacity at the nearest substation, the availability of water in the aquifer or the district, and the industrial park’s actually committed infrastructure are verified in parallel with the title review, before CFE and CONAGUA and with the developer, because these lead times are routinely longer than construction. The permitting side of that work is described in our Energy practice; the real-estate side is turning what the developer or seller promised into an enforceable obligation.

That is done in the contract: conditions precedent tied to feasibility results, delivery obligations with dates and penalties, and exit rights if the infrastructure does not arrive. The client should never own or rent a site its process cannot run on.

Leases in industrial parks: build-to-suit, triple net and what courts enforce

Industrial leases in Mexico are governed by the civil code of the state where the property lies, and each code has its own formalities and maximum terms. A long-term lease should be granted before a notary and recorded at the Public Registry, because that is what makes it bind a new owner of the building. Rents denominated in dollars are valid, with the tenant entitled to pay in pesos at the exchange rate of the day of payment; rent on industrial premises carries value-added tax; and liquidated damages clauses are enforceable but cannot exceed the value of the principal obligation, which is why guarantees matter more than penalties.

Build-to-suit and triple-net structures are standard in the market, and the negotiation is about the details the standard forms leave open: the delivery condition and the consequences of delay, who maintains the structure and the roof, how operating expenses are audited, expansion and renewal options, and how the tenant exits if the plant is relocated. We negotiate against the standard a Mexican court or arbitral tribunal will actually apply, not against the form the developer’s foreign lender approved.

Closing: the notary, the taxes and the trust

Transfers of real property in Mexico are formalized before a notary public and recorded at the Public Registry; the notary also calculates and withholds the taxes the transaction triggers. The buyer pays the state or municipal acquisition tax, whose rate varies by location; the seller faces income tax on the gain; and value-added tax applies to constructions used for industrial purposes, while land is exempt. Those amounts belong in the model before the offer, not in the closing statement.

The trust (fideicomiso) appears in two roles: as the mandatory vehicle for foreigners holding residential property in the restricted zone, and as a voluntary structure in developments, joint ventures and financed acquisitions, where a Mexican bank as trustee holds title and executes the parties’ instructions. We structure it when the deal or the location requires it, and we do not recommend it when a plain acquisition by the Mexican operating company does the job.

Where the site has an industrial history, environmental due diligence runs alongside the title review: under Mexican waste law the owner and the possessor of a contaminated site are responsible for remediation, so the contract must allocate that risk before the keys change hands.

Frequently asked questions

Can a foreign-owned Mexican company buy industrial land near the US border?

Yes. The restricted zone rule of one hundred kilometers from the borders and fifty from the coasts prohibits direct ownership by foreigners, but a Mexican company with foreign shareholders may acquire property there for non-residential use, such as a plant or a warehouse, by giving notice to the Ministry of Foreign Affairs. Only residential property in that zone requires a trust.

What does legal due diligence on an industrial site cover, and how long does it take?

Title and liens at the Public Registry of Property, agrarian history at the National Agrarian Registry, cadastral and survey consistency, land-use and permit status with the municipality and the state, utility feasibility before CFE, CONAGUA and the park, environmental condition of the soil where the history warrants it, and the seller’s own standing. The time depends on how fast the registries and the municipality answer, which varies by state; the discipline is not to commit the price until the answers are in.

Should we lease or buy the plant?

It is a financial and operational decision more than a legal one, and we do not pretend otherwise. Leasing preserves capital and shortens the time to operation, especially in parks with built inventory, and the legal work concentrates on the lease terms. Buying gives control over the asset and its expansions, and the legal work concentrates on title, zoning and taxes. What we insist on in both cases is the same: utility feasibility and permittability confirmed before signing.

Is rent denominated in US dollars enforceable in Mexico?

Yes. Obligations denominated in foreign currency are valid, and Mexican monetary law entitles the debtor to discharge them in pesos at the exchange rate published for the date of payment. Industrial leases in Mexico are commonly denominated in dollars; the clause to negotiate is the exchange-rate mechanism and the indexation of rent, not the currency itself.

What if the land was ejido land in the past?

Then the file must show a complete and valid conversion to full private ownership, recorded at both the National Agrarian Registry and the Public Registry of Property, before any money moves. A large share of Mexico’s land was agrarian at some point, so an ejido past is not by itself a problem; a defective exit from the agrarian regime is, and it is not curable by the buyer after closing.