Fideicomiso: Fidu...  What? You may be asking yourself...

 

The term Fideicomiso isn’t one you are likely to hear of outside of Mexico, but when it comes to purchasing a property in Mexico as a foreign owner it is of great importance. 

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Here is a brief history of the introduction of a Fideicomiso.

 

Just over a century ago, the 1917 Mexican Constitution banned foreign ownership of any land within 100 kilometers (62 miles) of any national border and within 50 kilometers (31 miles) of any ocean. It was dubbed the restricted zone. 

La Paz, Baja California Sur, falls within this restricted zone.

 

Notaries and other businessmen in Mexico, however, later recognized the huge attraction of Mexico’s coastline and the potential for growth.

 

The influx of US dollars for economic development was hugely important. The evident problem, though, was to make this asset available to foreigners and not violate the Mexican constitution. The key became the fideicomiso, or trust. 

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Former President Luis Echeverria historically passed a law for legal ownership of real estate within the restricted zone. The foreign investment law came about in 1973. 

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The fideicomiso has become such a success that further laws were passed, meaning the trust now lasts for 50 years, with the application for extension and renewal. 

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Fast forward to today, and many banks now offer Fideicomisos at competitive rates. The annual cost is currently around the $400 USD mark.

 

It is important to note that the trust is privately held in a Mexican bank authorized to act as a trustee. The banks are not allowed to take any action without written instruction from the beneficiary of the trust. The bank holds title to the real estate in trust, and the foreigner is designated as the holder of the beneficial rights of the trust, which includes the right to sell, improve, and will to heirs, or exercise any legal right under law.