Fideicomiso or How to own Real Property in the “restricted zone”

An article in the Mexican Constitution of 1917 states that no foreigner can own property in Mexico’s “restricted zone”— land that is within 100 kilometers (about 62 miles) of a border and 50 kilometers (about 31 miles) of a coast. Yet Mexico has fostered billions of dollars in foreign investment along its shores. Are all those people on the wrong side of the law? Certainly not.

In 1973, the government saw the economic wisdom of allowing foreign investment in the “restricted zone” and established the fideicomiso, or bank trust, as an instrument to allow such investment in residential real estate.

Most owners of residential property in “restricted zones”own through a fideicomiso.

This sort of bank trust grants the title for a piece of property to the bank (the trustee), which in turn is obliged to follow any instructions given by the trust’s beneficiary — you, the foreign owner.

Only banking institutions authorized and regulated under Mexican banking laws can serve as fideicomiso trustees.

The foreign owner (beneficiary) has the same rights of full use and economic benefit that a Mexican national with equity ownership of the real estate would have. The beneficiary can treat the property as if it were owned with a direct deed title which means they retain use and control of the trust and make all investment decisions regarding the property, ie: sell it, rent it, build on it, live on it or pass it on to your heirs, allowing Mexico to sell pieces of its coast to foreign nationals without violating its own Constitution.

You can use a bank-deed structure to own property outside the “restricted zone”as well; many people in the colonial cities, for instance, own their property through bank trusts.

Owning property through a trust deed offers several advantages.

First, you can list more than one person as beneficiary, for example: that a husband and wife can be “co-owners”, structuring it in such a way that if one partner should die, the other has immediate, 100% control over the property.

Second, you can list an “heir”. This means that should both co-owners die, a new beneficiary is already in place — a beneficiary who, incidentally, needn’t be related to the original co-owners. Essentially, you write a letter of instruction to the bank naming this heir. When presented with the death certificate(s), the bank immediately and seamlessly passes title to him or her without his having to be in Mexico.

For gay couples, friends who own a property jointly, or for couples in a second marriage with different children, this is a very desirable option.

All this is important because it allows the simple and easy transfer of control over the property and avoids the messiness of sorting out ownership in the Mexican courts. Plus, it allows you to avoid inheritance taxes.

Trusts are issued for renewable 50-year periods. Trusts are renewable at any time by simple application. Maintenance fees for this kind of trust are typically $400-$600 US per year and it will likely cost between $400-$600US for the initial setup. If you are purchasing property currently held in a trust, you can either establish a new trust for the next 50-year period or be assigned the existing trust deed.

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