La Ventana beach sunset at Baja Sur

The Mexican Fideicomiso

White ornament

When Mexico found itself in rough times in 1917, the government decided to make it harder to take advantage of their land by naming a “Restricted Zone”. This meant that only Mexicans were allowed to buy land located within 100 km of any Mexican border or 50 km from any Mexican coastline. However, as time passed, and in order to allow foreign investment in these areas, the government then decided to start issuing something called a “Fideicomiso”, which is basically a bank trust.

These trusts are similar to one you may hold in the United States, except that the designated trustee must be an authorized Mexican financial institution such as Citibank, Scotiabank, Bancomer among others. This trust gives the buyer full rights to the property but instead of being called the “owner”, they are named as the first beneficiary.

100 dollars bill

The first beneficiary has all the rights of ownership and can buy and sell without problem or leave the property as an inheritance. First beneficiaries benefit from improving, remodeling, fixing, renting or selling the property without restriction.

Once you purchase a property, your lawyer will work with you to find a bank or financial institution to hold the trust. There is an initial fee to pay for drawing up the agreement, which is usually around $2500 USD, but depends on the property and the financial institution holding the trust. Annual fees of approx. $400 USD are paid to the financial institution holding the trust.

It is essential to remember that although the bank legally acts as the trustee and holds the title, your property is not an asset of the bank. The beneficiary has every legal right to occupy, rent, modify or inherit the property as they wish. The trusts are set up for 50 year periods, which are renewable, allowing the purchaser, or their second beneficiaries, to continue enjoying the benefits from their property.

There are three important parts to the bank trust:

  • The trust settler: This is the Mexican national, current owner of the property.
  • The trustee: This is the government approved financial institution (e.g. Scotiabank) holding the trust.
  • The beneficiaries: This is you, the non-Mexican owner with rights for use and benefits of the property.

So to summarize, all foreign buyers must use a bank trust to hold their title in coastal regions. The bank trust is a very secure instrument and is used by all large and small foreign businesses, large hotel chains, restaurants, factories, etc. In short, by every foreign company or individual that owns property within 50km of the coast.

The trust is renewable forever, every 50 years and costs approximately $2,500 to open and $450 USD a year to maintain, every year after that. These trusts work perfectly and are very stable. They ensure all the rights of an owner and have some excellent benefits such as granting automatic inheritance rights to beneficiaries and ensuring clear title. Many Mexican owners prefer to use the bank trust system as well.

When signing the Trust Agreement, it is important to note if there are any beneficiaries. In case of there being more than one, state the percentages of ownership each one will enjoy. Each first beneficiary must have a second beneficiary who, in the event of death, would inherit (at no cost, or tax) the right of use and benefits from the property.

While many foreigners decide to reside in Mexico with an FM2/Temporary Resident visa, which allows them to work and live in Mexico for certain periods of time, it is important to highlight that these visas do not grant you the right of ownership without a Bank Trust.

The only way to become to own a property without a bank trust – in the restricted zone – is through a Mexican corporation or by becoming a Mexican citizen.

Written by: Heather Bórquez.