Navigating property acquisition in Mexico’s restricted zones can be complex, especially for foreign investors. Primarily, foreigners have two viable options for owning property in Mexico:
- Establishing a Mexican Bank Trust, known as a Fideicomiso.
- Forming a Mexican Company to hold property assets, offering the flexibility to lease these assets.
However, it’s crucial to discern between buying property and truly owning it. In Mexico, these are distinct concepts. Many individuals purchase property but fail to secure actual ownership. Now, let’s delve into the intricacies of the Fideicomiso and its role in property ownership for foreigners.
Fideicomiso Explained
A Fideicomiso, or a Mexican Trust, is not a land lease agreement; it’s a legal trust structure mandated for foreigners to own property within Mexico’s restricted zones. These zones encompass land within 100 kilometers of the US border and 50 kilometers along the Mexican coastline. The Mexican Constitution restricts direct land ownership by foreigners within these zones. However, legal amendments in 1943 and the establishment of the Mexican bank trust system provide a constitutional workaround for foreigners to own residential property in these zones.
Functioning of a Fideicomiso
A Fideicomiso grants foreigners the right to use and enjoy property within the restricted zones. The property is held in a real estate trust, recorded under a Mexican trustee’s name, typically a Mexican bank’s trust department. This setup adheres to constitutional provisions that prohibit direct foreign ownership. Trustees, in exchange for an initial setup fee and subsequent annual maintenance fees, manage the trust. They cannot transfer property or beneficiary rights without the beneficiary’s written consent.
Safety and Security
The Mexican bank trust is deemed the safest method for foreigners to own real estate within the Constitutionally Restricted Zone. The rights you acquire in a bank trust are akin to those in other countries, encompassing the freedom to improve, build upon, mortgage, sell, or maintain the property as desired.
Selling Your Property
If you choose to sell your property held in a Fideicomiso, the process typically involves notifying the bank to initiate a change of beneficiary in the trust. The new buyer will then seek approval from the federal government for this change. However, if you transfer your trust beneficiary rights to a Mexican national, they can opt to take direct title, keep the property in the trust, or remove the property from the trust and assume direct ownership.
Associated Costs
Owning property via a Fideicomiso involves certain costs:
- Trustee Fees: Expect to pay around $1,000 to establish the trust, with an annual fee of $700 to $1,000 for its maintenance.
- Permit and Registration for Foreign Investments: This fee, payable to the SRE, is approximately $1,600, but it may vary.
- Public Registry: Charges depend on the property’s location, typically ranging from 0.03% to 1.15% of the property’s registered value. Additional lien registration fees may also apply.
- Appraisal Costs: Generally, between $1,000 and $1,500.
- Notario Publico Fees: These vary based on the sales contract’s value.
- City Land Acquisition Tax: Around 2% of the purchase price.
It’s advisable to consult with a local realtor or attorney for precise cost estimations tailored to your specific scenario, as fees can fluctuate based on the property’s transactional or appraisal value.
