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Bank Trust (Fideicomiso)
A fideicomiso is a means by which a foreign person owns a property in the Mexican restricted zone (property located within 64 miles of the border or 32 miles of the Mexican coastline). A fideicomiso is a trust issued by a bank. The owner of the property is, in fact, the bank; however, you, the purchaser, are the beneficiary and have all rights of enjoyment of the property. This includes the ability to remodel, rent, sell, or otherwise use the property as you see fit. While the bank is the technical owner of the property, they have a statutory obligation to follow the beneficiary's instructions concerning the property. Thus, control of your property is in your hands, not the bank's.
A fideicomiso trust exists for a period of 50 years and is virtually automatically renewed, assuming that the beneficiary remains the same and all appropriate laws have been honored with respect to the trust. Under these circumstances, renewals can extend indefinitely in 50-year increments. The common fear of the Mexican government taking back foreign-owned property is simply unfounded: it is nearly impossible.
The fideicomiso trust can even be heired to your family. This is accomplished by naming them as substitute beneficiaries in the event of your death.
The costs to establish a fideicomiso trust vary from bank to bank. The typical range is approximately $500 U.S. for trust set-up and about $500 U.S. each year for maintenance of the trust. These fees are paid directly to the bank that has your trust.
Frequently Asked Questions
Investing in real estate has always been an excellent investment option. Throughout history, great personal wealth has been attained through real property ownership, but for most of us, it has been limited to investment in a primary residence. While Mexico real estate can be a lucrative investment, some foreign investors may feel uneasy about buying "south of the border."
Can a USA or Canadian citizen own real estate in Mexico? Can I own property near or in front of the ocean? Who is involved in a Bank Trust? How much does the Bank Trust cost? Are there additional fees for the Bank Trust? How does the Trust function? What are my rights as a buyer? Is the Trust renewable? Who is involved in Real Estate transactions in Mexico? What role does a Public Notary play? What are these official documents? If at a later date I decide to sell my property, can anyone buy it? If the buyer is a foreigner, is his interest limited to the balance of my 50-year period? When buying or selling a property in Mexico, who pays the closing costs? How much is the transfer tax? How much are closing costs?
Q: Can a USA or Canadian citizen own real estate in Mexico?
A: Yes, by placing the property in a bank trust. (Fideicomiso)Top of Page
Q: Can I own property near or in front of the ocean?
A: Yes, laws passed in 1973 and 1993 have made it possible for foreigners, foreign firms, and Mexican firms with foreign participation to acquire interests in coastal real estate through a bank trust.Top of Page
Q: Who is involved in a bank trust?
A: Three parties. The seller of the property is the Trustor, the bank is the Trustee (Fiduciario), and the buyer is the Beneficiary (Fideicomisario.)Top of Page
Q: How much does the Bank Trust cost?
A: Based on the current tariff, the bank charges the person desiring the Fideicomiso an initial fee of approximately $500 USD for drawing up the agreement and establishing the Trust plus a percentage based on the value of the property.Top of Page
Q: Are there additional fees for the Bank Trust?
A: Yes. The bank charges an annual fee to cover its services as a Trustee. This fee is based on the value of the property.Top of Page
Q: How does the trust function?
A: Title of the property is transferred to a trust with a Mexican bank acting as Trustee. The Trust Agreement is formalized by the issuance of a permit from the Mexican Ministry of Foreign Affairs. The lot or home buyer is designated as Beneficiary in the Trust and the beneficiary rights are recorded in the public record by a Notary Public.Top of Page
Q: What are my rights as a buyer?
A: The Trust is a legal substitute for fee simple ownership, but in many cases, the Trustee is the legal holder of the property. As Beneficiary, you have the right to sell your property without restriction. You may also transfer your rights to a third party or pass it on to named heirs.Top of Page
Q: Is the Trust Renewable?
A: Yes. According to the Foreign Investment Law passed in 1993, trusts can be renewed for an indefinite number of successive 50 year periods. In effect they run in perpetuity.Top of Page
Q: Who is involved in Real Estate transactions in Mexico?
A: Normally there are four players involved in a real estate transaction. These are the real estate company, the buyer, a bank, and a Public Notary.Top of Page
Q: What role does a Public Notary play?
A: A Public Notary is a government-appointed lawyer who processes and certifies all real estate transactions including drawing up and reviewing all official documents to ensure the proper transfer of the property.Top of Page
Q: What are these official documents?
A: The official documents which are required by law in order to transfer the ownership of property in Mexico include a non-lien certificate based on a complete title search from the Public Property Registry, a statement from the municipality regarding property assessments, water bills, and other pertinent taxes that might be due, and an appraisal of the property for tax purposes.Top of Page
Q: If at a later date I decide to sell my property, can anyone buy it?
A: Yes. If the buyer is also a foreigner, you simply assign beneficial rights. If the new buyer is a Mexican National, you can instruct the bank to endorse the title in favor of the buyer.Top of Page
Q: If the buyer is a foreigner, is his interest limited to the balance of my 50-year period?
A: No. Upon application, a foreigner automatically receives his own renewal 50-year permit. However, this is not mandatory.Top of Page
Q: When buying or selling a property in Mexico, who pays the closing costs?
A: It is common practice that the buyer pays the transfer of acquisition tax and all other closing costs, including the Notary's fees and expenses, while the seller pays his capital gains tax and the broker's commission.Top of Page
Q: How much is the transfer tax?
A: The real estate transfer tax ranges between 1% to 4% of the tax appraisal value, which is generally less than the sales value.Top of Page
Q: How much are closing costs?
A: The rest of the closing costs, excluding the transfer taxes, vary from 3% to 5% of the appraised tax value. These percentages are applied to the highest value of the following: 1) the amount for which the property is sold, 2) the value of the official tax appraisal, or 3) the value designated by the property assessment authorities.
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