Foreigners purchasing real estate in the “restricted zone” 100 kilometers, (62 miles) of any Mexican border and 50 kilometers, (31 miles) of any Mexican coastline do so by means of a ‘fideicomiso’ or real estate trust with a Mexican Bank, as the Mexican Constitution prohibits direct ownership and by Mexican law, all real estate transactions must be processed by any one of many government approved Public Notaries.
The bank, as the trustee, has a fiduciary obligation to follow the instructions given by the buyer or beneficiary of the trust. At the time the trust is formed, the buyer can and should designate and provide the bank with specified information and personal instructions regarding any sub-beneficiaries he/she wants to include in the trust document (fideicomiso), to safeguard the investment in the event of sudden death or mental incapacity of the beneficiary(fideicomisario) within the duration of the trust.
However, although the bank holds title to the property and is the registered owner, the buyer as beneficiary (fideicomisario), retains all the rights of ownership, including the use, enjoyment, lease or sale of the trusted property, without limitation.
‘Fideicomisos’ or trust agreements are currently issued for a period of 50 years which can be renewed a minimum of six months before they expire. The bank charges for the government permit, its registration with the proper authorities, an initial fee for establishing the trust and a yearly fee to maintain it. It extends the right to the beneficiary (fideicomisario) to make changes or modifications throughout the duration of the trust; however, additional charges do apply and are generally stated in the trust document (fideicomiso).
Once the bank has received all the necessary documentation from buyer, seller and the permit from Foreign Relations, it is presented to the Public Notary. In the Notary’s office, the final document is compiled and signed by the buyer, seller and later by the bank’s legal representative. Notary fees include various payments to government departments for transfer of ownership, registration, as well as office and service fees which are based upon the sale price. Generally, the buyer is responsible to pay all closing costs, which include both the bank and Notary fees and the seller is responsible for payment of any Capital Gains, (Impuesto Sobre la Renta).
Various factures can influence the choice of both the particular bank (trustee or fiduciario) that will execute the trust agreement with the seller (trustor or fideicomitente), purchasing the property on behalf of the foreigner, as well as the Public Notary. Your real estate agent will provide you with assistance and information to simplify the selection process, advise you regarding any additional information or documentation required for the formation of the ‘fideicomiso’ and guide you through the various steps and stages to its completion.
