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| Buying Real Estate in Mexico Through a Bank Trust (Fideicomiso) |
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| Article 27 of the Mexican Constitution, establishes an outright prohibition against foreigners acquiring direct ownership of real estate within 100 kilometers of the national borders and 50 kilometers of the coastline. This zone is now known as the "Restricted Zone". In 1993, Mexico enacted the Foreign Investment Law liberalizing land ownership for foreigners in Mexico. To develop real estate within the Restricted Zone for residential purposes, foreigners may only acquire the rights to use and enjoy the land through a Mexican bank trust known as a “Fideicomiso”. |
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| Fideicomiso |
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| A Fideicomiso is formed by contract between the Purchaser (Beneficiary) and Bank (Trustee) to provide the Beneficiary with use and enjoyment of the real estate purchased for a term of 50 years. The trust may have multiple beneficiaries and can be renewed for additional 50-year terms. The Beneficiary may lease, sell or transfer the real estate at any time. The Bank (Trustee) holds title to the real estate on behalf of the Beneficiary and obtains the required permits from the Mexican Government. The Trustee administers the Fideicomiso and is responsible for carrying out the terms of the agreement. In Mexico, only authorized Mexican financial institutions can act as Trustees. The Trustee cannot encumber or transfer the real estate without the instruction and approval of the Beneficiary. For foreigners accustomed to having direct or “fee simple” title to real estate, this arrangement may seem complicated, but Fideicomisos are common, relatively easy to use and the only legal process available for owning residential land in Mexico. |
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| Notary Publics |
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| In Mexico, notary publics are attorneys who have special commissions from the government to authenticate and register public deeds and other important documents. Notaries are the only Mexican entities authorized to process your right to purchase. While most are professional and detailed in their preparation of public deeds, it is helpful to have someone who can compare the English version of the purchase contract with the Spanish version of the public deed to make sure the deed accurately reflects the agreed terms. Experienced legal counsel can help minimize some of the difficulties with purchasing real estate in Mexico. |
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| Escrow |
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| When your attorney, a neutral third party, closes your purchase, the money is placed in your personal escrow account in La Paz, Mexico. You will sign an Escrow Agreement, which allows your money to be placed in an interest-bearing account, with the interest going to whomever the Buyer and Seller have agreed to in the escrow instruction. These funds are not released to the Seller until you have your title and all other conditions stipulated have been satisfied. Once the deed for the real estate is formalized and filed in the Registry by the Notary, the purchase is complete. |
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| Steps in Purchasing Property: |
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| Other than the fact that the Buyer is purchasing through a Fideicomiso, the purchase transaction is essentially the same as any other real estate transaction in the United States. To secure a purchase, the following steps and verifications will be taken by the attorney representing the Buyer: |
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1) The terms of the sale are evidenced by a written purchase contract;
2) The seller holds valid, unencumbered title to the real estate;
3) Provide an appraisal of the property;
4) Confirm the property tax payments are current;
5) Provide a certificate of no liens;
6) Confirm the Fideicomiso agreement correctly describes the terms negotiated with the Trustee and the Beneficiary;
7) Provide a ‘Letter of Instruction’ to the Trustee stating that the Seller will sign over his/her property rights to the Beneficiary;
8) Confirm the Foreign Relations Department issues a permit for the Fideicomiso;
9) If desired, assist the Buyer to obtain title insurance;
10) Confirm the Escritura (Deed) is registered in the Public Registry of Property.
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| Once all these items have been completed, the funds held in Escrow will be released to the Seller and the Buyer officially becomes the new owner of the property. |
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| Legal Representation |
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| We will assist purchasers in finding the right attorney to will walk you through the procedure, explain the Fideicomiso and Notary fees and act as your Power of Attorney to sign documents in the event you cannot be present at the appropriate times. |
