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August 4, 2021
When a foreigner wants to purchase a home whether for living or renting in Mexico’s restricted zone, they are required to do so through a fideicomiso. A fideicomiso is an escrow or a bank trust, which is associated between the individual looking to purchase and a financial institution in Mexico.
The bank trust is not a mortgage or a lease. It is strictly a contract that lets a Mexican bank hold the title to the property, but it answers only to the beneficiary, which in this case would be the buyer.
The bank trust cedes the rights to the beneficiary to own, sell, live in, rent out, give away, leave to heirs, improve or remodel the property.
In fact, by law, the bank is unable to take any action on the property without the written consent of the beneficiary.
Any market variations, such as equity or loss, affect the beneficiary directly, not the bank.
Trusts are held for terms of 50 years and is renewable every time.
If the beneficiary leaves the property to an heir, the heir will become the new beneficiary and they will have control over the property, and will be able to renew when the 50-year term is over.
In 1973, the Mexican government approved a law called Foreign Investment Law.
This law would recognize the Mexican coastline as a great economic asset and a way to get foreign funding to these regions.
Because of this, foreign legal ownership of property was banned, creating the Restricted Zone.
In 1989, the government modified the law to allow foreigners ownership in the area, through the fideicomiso.
The restricted zone refers to any area within 31 miles of a Mexican shoreline or 62 miles of a bordering country, as stated by Mexican law.
Any property within the Riviera Maya, for example, is located in the restricted zone, and therefore requires a bank trust.
To set up a bank trust, first you must find a Mexican financial institution to hold the trust.
Once you have found your preferred bank, you must draft up an agreement, which specifies the benefits and contractual obligations of the beneficiary (such as paying taxes, amongst others), and you will appoint a second beneficiary to inherit in case of death or physical illness.
Setting up a trust is not free, unfortunately, and requires a fee, which varies amongst institutions. However, be prepared to pay approximately $700 USD, as well as annual fees to hold the trust.
Take into consideration that you must alert the Mexican Foreign Affairs Ministry that you are purchasing real estate.
They will grant you permission to do so through your lawyer or real estate agent.
Depending on where you apply (directly in Mexico City or in the state you are purchasing in), the process can take anywhere between 5 and 30 days.
With the bank set up as the trustee, you are now able to purchase real estate in Mexico’s restricted zones.
The process for the purchase is the same as it would be in any other place, except you are investing through the nominal buyer, a.k.a. the bank.
The process that the three involved parties go through (seller, buyer and nominal buyer) takes around one month and costs around $2,500 USD.
Purchasing property with a bank trust comes with limitations, however.
The land plot must not be larger than 2,000 square meters, and the bank trust can only be used for one single property.
If you are thinking of purchasing a second or third property, you must do so through the Mexican Corporation system or open a bank trust for each property you wish to buy.