Not everybody knows that foreigners can own beachfront real estate in Mexico and that the process is 100% legal and safe. A foreigner can purchase property in two ways: through a bank trust (Fideicomiso), or by registering a company in Mexico. Today we will talk about the bank trust.
Under the Mexican Constitution of 1917, foreigners were not allowed to purchase real estate in Mexico in areas that were considered crucial, which are what we know as the Restricted Zone. The restricted zone is a territory within 100 km from the state border and 50 km from the coastline. However, eventually, the Riviera Maya and other resort towns gained popularity among tourists and investors. Therefore, in 1973, the Mexican government exercised economic prudence, allowing foreign investment in the Restricted Zone through a bank trust (Fideicomiso) or by a Mexican corporation. Since then, foreigners have been purchasing beachfront homes and properties close to the shore using any of these methods, although the bank trust is much more
What is a Bank Trust?
A bank trust is a trust transaction for real estate purchases made by a Mexican bank on behalf of the buyer. Thus, the bank acts as a trustee and the buyer as the beneficiary. In other words, a fideicomiso gives you the right to manage the property. Under the terms of the transaction, the bank holds the title without any benefits. At the same time, the buyer becomes a fully entitled owner of the purchased property, with the right to rent it, sell it, improve it and benefit from it.
There are three parties to the Bank Trust deal: the seller, the buyer, and a duly authorized Mexican bank. Officially, their names sound like:
- Fideicomitente (seller)
- Fiduciario (nominal buyer a.k.a. the bank)
- Fideicomisario (real buyer)
Thus, the buyer, or fideicomisario, invests his money through a bank (fiduciario). The fiduciario is obliged to follow the instructions of the buyer and, at his request, to purchase the property from the seller. The whole process takes up to one month and is supervised by your lawyer or realtor. Additionally, the registration fee is around $2,500 USD.
There are two limitations in the use of a bank trust that should be mentioned. First, to be eligible, the area of the land plot should be 2000 m2 or less. Due to this, the plots of land, houses, and condominiums are projected to comply with these regulations. And second, the bank trust can only be used for a single property. So if you are planning to own more than one property in Mexico, this might not be your best option.
The Rights Of The Beneficiary
As a beneficiary of the bank trust, the owner of the property acquires all the same rights as if he was holding the title. Thus, he can sell, lease, or inherit the property. Upon opening the bank trust, you will have to assign your beneficiaries. The fideicomiso is valid for 50 years and can be renewed for another period indefinitely. If within this time you become a Mexican citizen, the trust is closed, and the title deed is reissued.
The Preliminary Steps To Open A Bank Trust In Mexico
It is necessary to notify the Mexican Foreign Affairs Ministry on your intentions to buy real estate and get permission. Usually, this is done on your behalf by your lawyer or your realtor before the registration of the transaction. You can save a lot of time applying for this permit at the Ministry’s central office in Mexico City, where it is generally issued within five working days. If you apply for it at a branch of the Ministry in Quintana Roo or any other State, the process may take up to 30 days.
As you can see, it is possible to legally own a property at the beach or within the Restricted Zone using a bank trust. Contact us at Top Mexico Master Broker to get more information.