Fideicomiso Trust

There is a large misconception that foreigners cannot own Real Estate in Mexico. This used to be true and because of that, many people who wanted a home in Mexico were forced to lease land. This is where the ?ninety-nine year land lease? confusion began. Today, foreigners can purchase land in Mexico through a Fideicomiso or ?Trust?.

The Mexican Fideicomiso has its origins in the American Trust. Dating back to the early 20th century, the Fideicomiso was originally adapted from the American trust and tailored to Mexican regulations. The origin of the term Fideicomiso comes from a Roman contract entitled Pacto de Fuduccia. The Fideicomiso can be applied to any type of contract as long as the purpose of the Fideicomiso is not illegal.

The current Mexican constitution was issued in 1917. Within the constitution, article 27 regulates everything concerning the Mexican Territory, ground, underground, sea, waters, natural recourses and general rules concerning property. Article 27 also establishes the ?restricted area?. The restricted area encompasses 100 kilometers along the border and 50 kilometers along the coast. Article 27 also prevents foreigners from ?direct? ownership of property within the restricted area. For this reason, foreigners are allowed to purchase property in an ?indirect way?. The most common is through a Fideicomiso.

With the North American Free Trade Agreement beginning January 1, 1994, the Foreign Investment Act of 1993 was passed by the Mexican congress to promote foreign investment into Mexico. This law allowed foreigners to own 100% of the shares of a corporation and purchase property. As a foreigner, you can acquire irrevocable and absolute ownership rights to property in Mexico through a 50 year perpetually irrevocable and transferable Fideicomiso Trust. This enabled foreigners, as beneficiaries of the trusts, to legally enjoy unrestricted use of land located in the restricted area.

Fideicomiso is the legal equivalent of deeded ownership (commonly referred to in the U.S. as fee simple). Upon the purchase of land through a Fideicomiso, the Mexican Government issues a permit to a Mexican bank of your choice. Clear, lien-free title to the property is then delivered to that bank. The bank acts as the trustee designating the purchaser as the beneficiary of the trust. The bank acts as an employee of the beneficiary in all transactions involving the property. As the beneficiary, you retain full use and control of the property and make all decisions concerning the property. Title insurance is also available from U.S. title insurance companies. Owning land in Mexico under a Fideicomiso Trust gives you the right to use, enjoy, lease, improve, mortgage, sell, profit, inherit and will the property.

 

HOME ACQUISITION PROCESS

The Fideicomiso - In spite of what you may have heard, foreignors can own property in Mexico.  However, in accordance with Mexican law, foreigners can not acquire direct ownership of residential property 60 miles from the border and 30 miles from the coastline.  This area is known as the restricted zone.

In the restricted zone, however, banks can act as trustees for foreignors interested in purchasing real estate.  The trust is known as the Fedeicomiso.  It works essentially like a trust in the US. The trust has legal ownership of the property and you own the trust. There is an initial fee to set up your trust and an annual maintainence fee.  Generally, the fee to set up this trust is about $550 and annual maintainence fees are about the same.

The seller must cancel the existing trust. Your loan will move quickly, the transfer of title may not.  Don't wait until the last minute! To ensure that your transaction is not held up, make sure that the seller has applied to cancel their existing trust.

Title insurance is not required in Mexico, but it is highly recommended, especially for properties not located in larger developments. We work with and recommend Stewart Title. We work very closely with developers and can help you get a discount on title services as well.

Always record the real purchase price of your home. Don't let anyone try to talk you into recording the sale for less than the amount you agree to pay. This has been a common practice in Mexico but will cost you thousands of dollars in capital gains taxes when you decide to sell. We are happy to explain how the process works...please ask.

If you're buying in Mexico and want to finance it...TALK TO US FIRST! It is extremely important to coordinate your financing at the beginning of the transaction in order to protect your deposit! In addition to important verbiage in the contract, you will also want to set up a loan contingency. This gives you time, usually 21 days, to make sure that your finances are in order and to make sure that you qualify for the loan you want. Of course, contacting us first to get pre-approved for your loan is even better because it gives you the same negotiating power as a cash buyer!

 

Mexico financing, Mexico loans, Mexico mortgage,Mexico mortgages,Mexico, mexico mortgage loans, mexico financing, mexico mortgage loan, GE Money, mortgage in mexico, Cancun, Puerto Vallarta,Playa del Carmen,Cabos san Lucas