fideicomiso
Translation: fee-day-koe-mee-so.
BUYING A HOME AND LAND IN MEXICO IS POSSIBLE NOW
The Mexican Constitution and the 1973 Foreign Investment Law prohibited “direct” foreign ownership of land or water within those border and coastal areas known as the restricted zone except through a title holding “fideicomiso” – a bank trust.
If you are ready to buy or build your dream home south of the border, you can safely own a piece of heaven in the coastal zone of this beautiful country.
The Fideicomiso is a Mexican Title transaction that allows foreigners to buy land on the coasts of Mexico. The Mexican Government issues a permit to a Mexican Bank of your choice, allowing the bank to act as the purchaser of the property. The bank becomes the “Trustee” and you become the “Beneficiary”. Beneficiary rights are very similar to Living Wills or Estate Trusts in the United States (thus the term Bank Trust). When properly executed the Fideicomiso is recorded by the Mexican Government in Mexico City and becomes legally binding.
Becoming a homeowner in any foreign land requires care, caution and just plain common sense. Mexico is a foreign country with different rules and procedures from those of the United States and Canada. Like in your own country, the procedures must be followed precisely to safely and securely purchase property. Properly armed with knowledge and the right guidance you can have the home of your dreams at an amazing price. We can help you have a truly safe and secure buying experience.
A fideicomiso is an ordinance where the title is placed in the trust. It acts as and is registered as the legal owner. This ordinance is virtually identical to trusts established in the US to avoid probate. Until recently, a fideicomiso for restricted zone property could last not more than 30 years. After that, the trustee had to sell the property to a “qualified” buyer (a Mexican citizen or another trust). Indirect ownership through a Mexican company owned by foreign investors also was prohibited. In 1989, Mexico promulgated new regulations to allow the 30-year trust term to be renewed at least once. As a result of further reforms in 1993, the term of the trust may now extend to 50 years, and the trust may be renewed indefinitely for additional periods of up to 50 years each. The 1993 new foreign investment law also allows ownership of “non-residential” real estate within the restricted zone through a foreign-owned Mexican corporation, provided that formal approval is obtained from the Secretariat de Relationes Exteriores (SRE). Otherwise, all foreign individuals and foreign corporations as well as Mexican corporations which include any foreign investment may hold title to property within the restricted zone only “indirectly” through a bank trust arrangement known as a “fideicomiso”.
How does a Fideicomiso (Trust) work?
The bank (know as the trustee) holds the trust deed for the person or persons purchasing the property (know as the beneficiaries) This property is not part of the bank’s assets and cannot be subject to any lien or attachment for any bank obligations The beneficiaries has all ownership rights to the property and may sell, lease, mortgage or pass on to their heirs as desired under law. A bank trust is not a lease.
The Mexican government established the trust agreement as a way of protecting foreigners interested in owning property in Mexico. The reasoning was that by making ownership pass through the trust process, there would be an automatic review of the transaction to ensure it was legal and unencumbered. The bank is required to check ownership, insurance and indebtedness of the property, providing further protection to the foreign owner. In the past numerous foreigners have purchased property, illegally and with liens unknowingly. At that time there was no way to protect the foreigners because there was no check and balance system.
With the new laws and the influx of professional real estate agents your transactions are now safe and protected. Please do not purchase property without a professional agent. Many people are lured into “cheap beach front property”, remember anything that seems too good to be true probably is.
A trust may be granted and extended in 50-year periods. If you purchase property currently held in a trust deed, a new 50-year period can be established or the existing trust deed may be assigned to the purchaser. Trusts are renewable at any time by simple application with the bank. It was never the intent that these properties pass back to the government at the end of the trust period.
This is a common misconception and fear of most buyers. In fact at the end of the 50-year period the owner has an additional 10 years to renew the trust with the bank.
As a homeowner, you have complete and total control over the trust and can sell, will, rent or transfer the property at any time. The fideicomiso has a trustee, such as Citibank-Bancomex. which acts as a fiduciary on behalf of the homeowner who is the beneficiary of the trust. This is the same as as a trust in the US. In addition, the SEC has rules that the Fideicomiso is equivalent to a “fee simple” title in the US. This is how billions of dollars of property in Mexico is owned by foreigners.
Trustee Fees
There is a fee of approximately $550.00 US dollars to open your trust account and an annual fee as long as you have the trust. You need to check with your Real Estate Agent on actual fees to set up the trust as they can vary from bank to bank.
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Non-Mexicans CAN securely hold title to property in Mexico. Land that is located along Mexico’s coasts and within 50 miles of the border and other restricted areas can be owned by foreigners via a Real Estate Trust, or “Fideicomiso”. Essentially, the foreign buyer creates a Trust, through a Mexican bank, which holds the property title. In creating the trust, the bank requires proof of title before purchase, and in this way you are protected from future land disputes. This is what foreigner’s did not do in past land transactions; they bought land with out seeing the owner’s clear title. Later they lost it because the person they bought it from did not have the legal right to sell it. With a fideocomiso, this problem has been eliminated. The bank will not accept your trust unless the purchase is legal. The bank, regulated by governmental agencies, acts as trustee on behalf of the beneficiary – you. These Trusts are established for up to 50 years and then renewed in increments of 50 years. You, the beneficiary of the Trust – and no one else – have all rights of ownership, including selling or leasing the property. The property also becomes part of your estate and can be passed on to heirs without inheritance tax. The Fideocomisio costs about $5,000.00 to set up legally and a qualified broker can guide you to para-legal services to help you through this process. it costs about $500.00 per year to maintain the trust. The “Fideicomiso” trust arrangement should not be confused with the leasing of property. As a lessee, you do not have rights or control over your property.
