In this blog, we’ll break down the Fideicomiso, its role in property ownership, and some important considerations—whether you’re a foreign buyer or a Mexican national interested in acquiring property with an existing Fideicomiso.
What is a Fideicomiso?
A Fideicomiso is a legal trust agreement established through a Mexican bank that allows foreigners to acquire residential property in restricted zones of Mexico. These restricted zones include any land located within 100 kilometers of international borders and 50 kilometers of coastlines, which includes Rocky Point’s prime beachfront properties.
This system was established in 1973 as part of reforms to allow foreigners to invest in Mexican real estate while complying with constitutional restrictions on direct ownership. The Fideicomiso has since become a trusted and common practice for foreign investors across all of Mexico’s popular tourist destinations, such as Cabo San Lucas, Puerto Vallarta, and Cancún, etc… This structure has been successfully used by thousands of foreign buyers over the decades, offering peace of mind and legal security.
By now, many international investors own property through a Fideicomiso, and it has proven to be a secure, long-term solution for foreign ownership. The process is comparable to setting up a living trust in the United States, where the property is managed by a trustee for the beneficiary (the buyer), ensuring all legal requirements are met.
How Does a Fideicomiso Work?
When you purchase a property through a Fideicomiso in Mexico, the title to the land is placed in a trust held by a Mexican bank. You, as the foreign buyer, are the beneficiary of the trust and retain full control of the property. The bank, acting as the trustee, ensures compliance with Mexican law but cannot sell, lease, or transfer the property without your written consent.
You can manage your property as you wish—whether it’s building, renting, or selling—and even pass the property down to heirs. The trust is initially set up for a 50-year period, which is renewable indefinitely. This legal structure ensures that foreigners can enjoy full property rights within restricted zones, offering security and flexibility.
Why a Fideicomiso is Secure
For foreign buyers, the Fideicomiso is one of the most secure and reliable methods of holding real estate in Mexico. The rights granted by the trust are comparable to full ownership rights in other countries. You can sell, mortgage, lease, or improve the property, and the trust ensures that the property is legally protected under Mexican law.
Additionally, the Fideicomiso system is used throughout Mexico’s most prestigious vacation destinations. From Cabo to Cancún, many investors and expatriates comfortably own properties using this legal structure. If you’re new to the process, rest assured that it has been tried and tested for decades by countless buyers, providing long-term security and peace of mind.
Selling a Property with a Fideicomiso
When selling a property held in a Fideicomiso, the process involves transferring the trust’s beneficiary rights to the new owner. If the buyer is another foreigner, they will assume the Fideicomiso or set up a new trust in their name. The bank managing the trust will facilitate this transfer, and the new buyer must also obtain approval from Mexico’s Secretaría de Relaciones Exteriores (SRE).
However, if the buyer is a Mexican national, the process differs slightly. A Mexican buyer has the option to either take ownership through the Fideicomiso or remove the property from the trust and take direct title. Removing the property from the trust is known as extinción de fideicomiso.
What Happens if a Mexican National Buys a Property with a Fideicomiso?
If a Mexican national purchases a property that is under an existing Fideicomiso, they can choose to either:
- Maintain the Fideicomiso: Some Mexican buyers prefer to keep the property within the trust, especially if the Fideicomiso still has many years left, as it offers an easy transition without major legal changes.
- Extinguish the Fideicomiso (Extinción del Fideicomiso): In this case, the buyer would assume direct ownership of the property by canceling the trust agreement. The cancellation process involves additional legal steps and fees.
Who Pays for Extinguishing the Fideicomiso?
In most cases, the buyer (the Mexican national) is responsible for covering the costs associated with extinguishing the Fideicomiso. These fees typically include:
- Notario fees: Required to notarize the extinction process.
- Bank trustee cancellation fees: Usually range from $1,000 to $1,500.
- Registration fees: For updating the title with the Registro Público de la Propiedad (Public Property Registry).
It is essential to discuss these costs upfront with your real estate agent or attorney to avoid any surprises during the transaction.
Conclusion
Understanding the Fideicomiso and the associated costs, responsibilities, and processes is crucial when purchasing property in Rocky Point, whether you’re a foreigner or a Mexican national. By ensuring you have the correct legal structure in place, you can securely own and enjoy your property in this stunning coastal town for years to come.
The Fideicomiso has been in place since 1973 and is commonly used throughout Mexico’s top tourist destinations, offering a secure and reliable method for foreigners to own property. Just like a living trust in the U.S., it provides legal protection, making it a comfortable and trusted process for buyers.
For more information or to explore available properties in Rocky Point, contact us today to discuss your options and take the first step toward owning your dream home in Mexico.