What is a fideicomiso and why do you need it?
An answer to a very important piece of the purchasing puzzle for foreign buyers.
As a foreign investor in Mexico, it is important to understand what fideicomiso is, what the associated costs are and why it is necessary to purchase one property in restricted zones.
What is a fideicomiso?
A fideicomiso or a bank trust allows foreign buyers to purchase real estate in restricted areas in Mexico. The restricted zone is located 100 kilometers (62 miles) from any state border and within 50 kilometers (31 miles) of the coast. There are three parties involved with a banking trust: the bank, the buyer and the seller. The buyer is the beneficiary of the bank’s trust, it may be an individual, couple, company or group of people. The buyer has all the rights related to the property – he can rent it, remodel it, sell it or leave it to someone as part of his property. Finally, the Mexican bank is a bona fide trustee for the buyer. The bank holds the title, but has no authority to make any decisions about the real estate, and the real estate is not part of the bank’s assets.
What are the costs?
The initial cost of establishing a banking trust is approximately $ 2,000- $ 2,500 * USD, and this fee is part of the closing costs. Your real estate attorney works with the bank to establish a trust prior to closure. An annual fee of USD 500-700 * USD is paid to the bank.
History:
Mexico’s constitution established a restricted zone to reserve this land for Mexican citizens. In 1973, Mexico changed its foreign investment laws to encourage foreign investment. In this restricted area, foreign buyers cannot have direct legal title, but by using fideicomiso, foreign investors can have almost the same rights as Mexican citizens when it comes to purchasing real estate.
Remember that when buying real estate in Mexico and on the Riviera Maya, it is important to be represented by a licensed real estate agent and also work with an attorney to establish a trust, review your property papers and make sure everything is up and down when it comes for the purchase.
* The cost of establishing a trust and annual fees may vary by bank.
