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Mexican Fideicomiso

Foreigners may obtain direct ownership of property in the interior of Mexico . However, under Mexican law, foreigners cannot own property "outright" within the restricted zone that extends 50 km inland from the coastline.

Outside the Restricted Zone, a foreigner is able to acquire land and be direct owners of the property with all the rights of a Mexican national in compliance with Mexican Law.

Inside the 50 km Restricted Zone, there are two alternatives for foreigners who wish to buy real estate. One is through a Mexican bank trust, known as a Fideicomiso and the other by establishing a Mexican corporation.

A Fideicomiso, essentially a real estate trust, is similar to trusts set up in the United States , but a Mexican bank must be designated as the trustee and, as such, has title to the property and is the owner of record. The Mexican Government created the "fideicomiso" to reconcile the problems involved in developing the restricted zone and to attract foreign capital. This enabled foreigners, as beneficiaries of the trusts, to enjoy unrestricted use of land located in the restricted zone without violating the law.

Within a fideicomiso, the buyer can lease, sell or transfer the property to another family member, and if he dies, his property can be passed to an heir. At the end of the 100 years the property can be sold.

In the trust there are three elements: The trust Settlor (Fideicomitente) which may be a physical or legal Mexican person, who is the owner of the property which is to be placed in trust; the Trustee (Fiduciario) which, by law may be only a credit institution and which holds the raw real estate; and the Beneficiaries (Fideicomisarios) the legal or physical foreign persons who are the beneficiaries of the trust who obtain the use and benefit of the property.

The bank (known as the trustee) holds the trust deed (known as the escritura) for the person or persons purchasing the property (known as the beneficiaries). This property is not part of the bank's assets and cannot be subject to any lien or attachment for any bank obligations. The beneficiary has all ownership rights to the property and may sell, lease, mortgage or pass on to their heirs as desired under law. A bank trust is not a lease.

Trusts are renewable at any time by filling out a simple application with the bank. It was never the intent that these properties pass back to the government at the end of the trust period. This is a common misconception and fear of most buyers. It may help in understanding the Bank Trust to compare it with the Deed of Trust, a type of financing instrument used in the U.S.

People who buy homes, paying the full amount upfront, receive their titles right away. However, this rarely happens. Under a deed of trust the buyer of a house has only "equitable title," or an equity interest, with the right to use but only a restricted right to sell, until the loan is paid off, after which the owner receives the actual fee simple title. Until then it is held by a trustee, usually a bank or title company. In Mexico the Bank Trust is also held by a trustee, but the buyer never receives the actual title. Realistically many homeowners in the U.S. never receive title to their properties either, because they sell or refinance their homes before the 30-year term of their loan is complete.

 

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