What is a fideicomiso and why do you need one? Answering a very important piece of the purchasing puzzle for foreign buyers.
As a foreign investor in Mexico, it’s important to understand what is a fideicomiso, the costs associated with it, and why it is necessary to have one to purchase property in the restricted zones.
What is a fideicomiso?
A fideicomiso or bank trust allows foreign buyers to purchase property in the restricted zones of Mexico. The restricted zone is 100 kilometers (62 miles) from any national border and within 50 kilometers (31 miles) from the coast. There are three parties involved with the bank trust: the bank, the buyer, and the seller. The buyer is the beneficiary of the bank trust, it can be a single person, a couple, a business, or a group of people. The buyer has all the rights that go with the property – they can rent it, remodel the property, sell it, or leave it to someone as part of their estate. And finally, the Mexican bank is the trustee, working in good faith for the buyer. The bank holds the title but does not have the right to make any decisions about the property, and the property is not part of the bank’s assets.
What are the costs?
The initial cost to establish a bank trust is approximately $2000-$2500* USD and this fee is part of your closing costs. Your real estate attorney works with the bank to set up the trust prior to closing. There is a yearly fee of $500-$700* USD that is paid to the bank.
The Mexican Constitution established a restricted zone in order to reserve this land for Mexican citizens. In 1973, Mexico changed their foreign investment laws in order to encourage investment from foreigners. Within this restricted zone, it is not possible for foreign buyers to have a direct title, but with the use of a fideicomiso, foreign investors can have almost all the same rights of a Mexican citizen when it comes to purchasing property.
Remember, when purchasing real estate in Mexico and the Riviera Maya, it’s important to have a licensed real estate agent representing you, as well as working with a real estate attorney to establish the trust, review property documents, and make sure everything is on the up and up when it comes to the purchase.
*Cost to establish a trust and yearly fees can vary depending on the bank.