Americans & Canadians are familiar with purchasing property through the "fee simple" process of transfer. Because of similarities of real estate transactions in general, it is easy to assume that the basic terms and principles familiar in the United Sates and Canada also hold true in Mexico. This assumption becomes easier to make when United Sates/ Canada real estate terminology is adopted for transactions in Mexico. Much of the paperwork is similar, if not exactly the same, as that used in the U.S./Canada. Although there are many aspects of Mexican real estate transactions that are identical to procedures carried out in the U.S./Canada, there is one rule that is completely different that foreigners must be aware of: the fideicomiso. The Mexican Constitution prohibits direct ownership of real estate by foreigners in what has come to be known as the "restricted zone". The restricted zone encompasses all land located within 100 Kilometers (approx. 62 miles) of any Mexican border, and within 50 Kilometers (approx. 31 miles) of any Mexican coastline. At its widest, Baja California is only 55 miles wide, therefore, the entire Baja peninsula is considered within the restricted zone. In 1970, a presidential resolution to the Mexican Constitution allowed foreign ownership of property in the restricted zone by way of a bank trust called a "Fideicomiso" (FEE-DAY-E-CO-ME-SO), which is, roughly translated, a real estate trust. Essentially, this type of trust is similar to trusts set up in the U.S./Canada, but a Mexican bank must be designated as the trustee and, as such, has title to the property and is the owner of record. For all intents and purposes, the foreigner owns the land. It is not a lease and never reverts to the original owner. A Fideicomiso is renewable in fifty (50 years) as the law now stands. The only requirement is that the permit be renewed with the department of Foreign Affairs. When the property is sold the fideicomiso is simply transferred to the new owner as beneficiary of the trust.
There is a common misconception among foreigners investing in Mexico that once the trust expires, the beneficiary loses all rights and benefits of the sale of the property held in trust. This is not the case. On the contrary, the beneficiary has a contractual right under the trust agreement with the Mexican bank to all benefits that may result from the use or sale of that property. Under Mexican Law, the bank, as trustee, has fiduciary obligations to respect the rights of the beneficiary. The Mexican Government created the "Fideicomiso" to reconcile the problems involved in developing the restricted zone and to attract foreign capital. This enabled foreigners, as beneficiaries of the trusts, to enjoy unrestricted us of land located in the restricted zone without violating the law. The banks act on behalf of the foreign buyer, taking title to real property. The bank, as trustee, buys the property for the foreigner and has a fiduciary obligation to follow instructions given by the foreigner who is the trust beneficiary. The trust beneficiary retains and enjoys all rights of ownership while the bank holds title to the property. Given the changes made in 1997 in Foreign Investment Law within the Mexican Constitution in alliance with NAFTA, a buyer can now apply for and obtain a trust permit in a matter of weeks. There is an annual maintenance fee for the Fideicomiso regulated by Mexican Banks of approximately $450- $550.00 U.S.D
The Bank, as Trustee, must get a permit from the Ministry of Foreign Affairs to establish a real estate trust and acquire rights on real property located within the restricted zone. This is added security for the buyer as all Fideicomiso's are registered in Foreign Affairs in Mexico City, plus registered with the Public Registry in the State of Baja California Sur. A purchaser should pay careful attention to the names that appear on trust and title documentation. At the time of purchase, it is best to name a substitute beneficiary in the event of death or divorce in order to facilitate future transfer of that particular trust. Beneficiaries are easily transferable. It is also suggested that you scrutinize the following: Title deeds; prior history of ownership; copy of registration folio at the Public Registry of Property; certificate of absence of liens; physical identifications of the boundaries and surface; easements and other property rights; compliance of environmental regulations. To commence this procedure, copies of Passport plus current driver license/birth certificates are require