The Fideicomiso is a Mexican Bank Trust commonly used for non Mexican nationals, normally U.S. and Canadian citizens, to purchase coastal properties in Mexico. When discussing about Mexican real estate most people use the term bank trust instead of Fideicomiso.
A bank trust is used to acquire property here in Mexico only on land that is within the restricted zone, normally the most desirable amongst buyers. The restricted zone sometimes also called the Prohibitive Zone, is coastal land between 66 feet from the main high-tide line, up to 32 miles inland from the ocean, and up to 64 miles from international borders.
The land is restricted because Mexicos constitution saved it for Mexico. In the year 1977 Mexico changed its laws regarding foreign investment. This was to encourage foreign investment in both real estate and for corporations using the Fideicomisos to acquire land in the restricted zone.
In the Restricted Zone, Mexican nationals have the choice of using either a fideicomiso or an escritura publica to obtain real estate. An escritura publica is a type of deed used by Mexican nationals to buy land. Non-Mexican nationals are banned from acquiring title to land using an escritura publica. Foreigners are allowed to acquire Mexican coastal real estate using a fideicomiso only.
This Restricted Zone is one of four types of land that foreigners will encounter when making a real estate buy in Mexico. The other types are the federal zone , unrestricted zone and ejido land. Knowledge about all of them is advised, since here in Baja California, all four types of land are present and common.
There are three parties that all play a part in the creation of a Mexican bank trust, or fideicomiso: the buyer/beneficiary, the seller, and the Mexican bank. The seller is the grantor. They sell the real estate involved, and transfer all the rights of that property.
The buyer of the Mexican real estate is the beneficiary of the fideicomiso. The buyer can be a individual, a husband and wife or family, any group of people, or a stateside corporation, or LLC This buyer/beneficiary will receive all the rights that go with the property.
A Mexican bank serves as the trustee, and has a legal relationship with the buyer, meaning that the Mexican bank is working for the buyer/beneficiary and in their best interests. The bank holds title to the property and carries out duties related to the property that serve the wants of the beneficiary, the buyer.
Having the title deposited with the bank is all that is needed to satisfy the Mexican constitution in allowing a non-Mexican to hold title to property in the Restricted Zone. Without the bank trust this would be impossible.
The Mexican bank with the title simply means that the property deed is deposited with them, but the bank doesnt own it and its not an asset of the banks. The bank can’t sell, or receive any benefits from the property because they don’t have control of the property; they only have the title, meaning title without benefits. In the event that the bank servicing the bank trust goes bankrupt, then the fideicomiso is transferred to another Mexican bank to continue servicing the trust on behalf of the beneficiary.
The buyer/beneficiary has control of the property, and will count the property as an asset on their records for their accounting purposes. They have the right to occupy it, enjoy it, lease it, improve it, depreciate it, 1031 exchange it, finance it with there IRA, borrow money against it, will it, add beneficiaries to the trust to avoid Mexican probate, lease-option it, sell it, and anything that can be done with Mexican real estate. The life of the trust is 50 years with the option to renew .
If you contact me and I will explain all costs associated with acquiring fideicomiso. Mexican banks do compete with each other on fideicomisos, so we can shop around to get best price. When a fideicomiso is set up, it is transferable and does not have to be redone when the property is sold. This makes the fideicomiso a definite asset. By having a fideicomiso, you have bigger market to sell to, both Mexican and international buyers, making your investment more liquid.