Buy Mexico Real Estate Safely – What is a Fideicomiso?

In this brief article, the idea of a “Fideicomiso,” or “Bank Trust,” is briefly discussed.  This bank trust allows non-Mexicans can buy Mexico real estate in the “restricted zones.”  There are 3 main points to cover:

1. If you are buying in the “restricted zone” a bank trust is obligatory (see definitions below)
2. If you are buying outside of the restricted zone, it is not necessary, but possible.
3. It is a perfectly safe way of owning property in Mexico, and offers the full rights of ownership.

Now, let’s define what these concepts actually mean.

The Restricted Zone

The restricted zone is identified and described in the Mexican Constitution, defined by the following limits:

• 50 kilometers (33 miles) along all of the Mexican coastlines
• 100 kilometers (66 miles) along all Mexican borders (United States and Central American countries of Belize and Guatemala)

If you buy Playa del Carmen real estate, for example, which is directly on the coastline, you need to use a Bank Trust.  If you buy Lake Chapala real estate, which is more than 50 km from the coast and more than 100 km from the U.S. border, you do not need to buy through a Bank Trust, and you can own directly, just like a Mexican citizen.

The Bank Trust

According to the current Mexican Constitution, as established in 1917, foreigners could not own land in the Restricted Zone.  However, during the past few decades, the Mexican government realized that there was great potential for drawing investment to the country by allowing foreign ownership in these areas – especially on the beachfront.  For this reason, the government of Mexico set up the system called a “Fideicomiso” (in Spanish) which allows foreigners to own in this area.  The Bank Trust works as follows:

• the property is held in a trust through a Mexican bank
• the bank is the trustee
• the buyer is the beneficiary
• the Bank Trusts are active for 50 years and are renewable after that – do not be confused, this is NOT a “lease”
• a small annual fee must be paid annually to the bank holding the trust
• the buyer designates a substitute beneficiary, who becomes the beneficiary in the case of death (this actually makes inheritance much easier

Because of this last point, some buyers choose to buy through a Bank Trust even when it is not obligatory.  The process of gaining a Bank Trust has become very common and straight forward; it is a perfectly safe form of ownership and American or Canadian buyers should feel comfortable buying in this way.

Thomas Lloyd graduated from Purdue University Krannert School of Management with a degree in Management/Financial Option Investments. He has been living, investing, and working professionally in Mexico for over 15 years. In the summer of 2009, he received the first federally applied Mexico Real Estate Degree and Mexico Professional Real Estate License S.E.P. #5978657. He is the current president of TOPmexicorealestate, you can contact him at (512) 879-6546

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