What is a Fideicomiso and how does it work?
A Fideicomiso is a 50-year perpetually renewable and transferable Bank Trust through which foreigners acquire irrevocable and absolute ownership rights to property in Mexico. This Trust is the legal equivalent for fee-simple ownership and is provided specifically for non-nationals to own coastal and border property. Essentially, it is like a Trust in the United States —the bank holds the legal title to the property, with all rights and privileges of ownership, including exclusive use and enjoyment, held by the Trust beneficiary—you. You retain the use and control of the property and make all decisions concerning the property. You have the same "bundle of rights" as owning property with fee simple title. You have the right to use and enjoy, lease, improve, mortgage, sell, inherit and will the property.
Is a Fideicomiso like a lease agreement?
No. A Fideicomiso grants the beneficiary (buyer) all the rights of ownership: the rights to buy, sell, lease, use, bequeath, improve, transfer, and encumber. A lease grants only the right to use. If a lessee makes improvements (such as building a house) on the property, that house belongs to the landlord. Nor can the lessee sell the property or borrow money on it. Before 1971, the bank trust was not available, and leasing was the only option for Americans and other foreign Buyers.
Why does Mexico use a Fideicomsio for foreign ownership?
In 1848, Mexico signed a treaty with the U.S. to end the Mexican War, through which it gave over rights to the land, which then became the western United States. When Mexico formed its federal constitution in 1917, it aimed to protect Mexico's most valuable resource- LAND. Article 27 of the Mexican Constitution prohibited foreigners from owning land or businesses within the restricted zone, which measures 100 Km from the borders and 50 Km from any coast. An amendment to the Mexican Constitution in 1992 and the Foreign Investment Act of 1993 have since made it possible for foreigners to own property in the restricted zone through the Fideicomiso system.
Can the Mexican government take away a foreigner's property at any time?
No. A Fideicomiso is established by the government and gives foreigners the same rights of ownership as Mexican citizens. The only difference is that they never receive the actual fee simple title. A bank holds it in trust for them. The Trust system of ownership is sanctioned by the Mexican government, provided for under the Mexican Constitution, and secured by the Central Bank of Mexico, all exclusively for the purpose and protection of enabling foreign ownership of coastal property in Mexico.
Are there differences in other aspects of property ownership in Mexico?
Closing costs to the buyer tend to be roughly 2 to 4 times higher in Mexico than they are in the U.S. or Canada, averaging 4 to 7 percent of the purchase price. Financing options are limited but it is no longer impossible to mortgage a purchase in Quintana Roo. Escrows are now starting to become a regular practice and may cost from $1,500 to $1,800 per transaction. The buyer and seller need not be present at closing but may be represented by their sales agent via a power of attorney. All legal real estate sales are presided over by a Notario, who serves as the government-licensed agent of record.