The History of Ejido
In 1920 the concept of the Ejido was adopted by Mexican President Álvaro Obregón, in the form of the "Ley de Ejidos" (Ejido Act). The government ceded land to local inhabitants, as a community, mostly of Indian origin, for use as farmland. The Ejidos were then passed down from generation to generation and could not be sold to ensure that the local farmers would never be stripped of their land again.
Understanding what an Ejido is
A very large part of Mexican real estate is classified as Ejido land. Granting of Ejido land was initiated during a period when vast areas of Mexico were sparsely populated and there was no concept of individual land ownership.
The new farming community or "Ejido" could decide whether they wanted to hold all of the land public for the use of every member of the community as a collective, or it could decide whether they wanted to permanently distribute it individually to its members.
Today, Ejidos still manage much of the collective ownership of land in Mexico. Since the constitutional reforms of 1992 Ejido land can be converted into private property and sold to third parties.
Buying Ejido Land
Ejido land is not private property and cannot be bought and sold. A foreigner cannot buy Ejido land; it can only be sold to Mexicans. A Mexican citizen wishing to purchase Ejido land must have the agreement of the whole community that 'owns' the land and it is not often clear who the owners (or their ancestors) are. If an Ejido is sold without the agreement of all (potential) owners, the buyer can risk a legal battle after the purchase which, in the worst-case scenario, can lead to a loss of the land.
The safest way to acquire Ejido Land is to go through a privatization process that transfers the property to a Mexican Citizen by means of an escritura (a fee simple title). Transferring ejido land into private ownership is a time-consuming process that requires in-depth knowledge of Mexican estate law, or the services of a company, or an attorney that is experienced in this field.
Until an Ejido has been transferred to private ownership, foreigners cannot acquire "ownership" of Ejido land. However, once the property has been privatized, it can then be sold to a foreigner through a Fideicomiso (bank trust).
Settling in Ejido Land
Since Ejido land is much less expensive than regular land, many foreigners have elected to take the risk and attempt to buy Ejido property. This is done through a private contract to buy the land.
Ejido landowners have the legal ability to enter into usage contracts with prospective buyers with an agreement often called a “Usufruct Purchase Contract” that provides use and occupancy rights to the parcel for an extended period, however, they should recognize that they have absolutely no rights, until they are able to legally obtain title through a Fideicomiso (bank trust).