CAN I OWN PROPERTY IN MEXICO?
One of the first questions often asked by foreigners. The answer is yes! Canadians and Americans are familiar with purchasing property through the process of “Transfer in Fee Simple”. The process of purchasing property in Mexico is similar and yet different. The Mexican Constitution prohibits foreigners from owning property within one hundred kilometers of the border and fifty kilometers from the ocean. These areas are known as the restricted zones. The entire Baja Peninsula is considered a restricted zone.
In 1970, a Presidential Resolution to the Mexican Constitution allowed foreign ownership of property in the restricted zones by way of a Bank Trust of Fideicomiso. Under the Fideicomiso, a foreigner is able to buy property in the restricted zones with the property held in trust by a Mexican bank. Under the Bank Trust Agreement (Fideicomiso), the foreign owner, as a beneficiary under the Trust, is able to enjoy the same rights as a Mexican citizen owning property in Mexico; i.e., they are able to build, rent, sell, etc.
The Mexican government issues a Trust Permit to a Mexican bank. The bank acts as purchaser, has official title of record to the property and is designated as the Fiduciario or Trustee. As beneficiary of that Trust, the purchaser is entitled to enjoy, develop and use the property as he or she so desires. The beneficiary may also instruct the bank to sell the rights of that Trust at market value.
Banks have a statutory responsibility to follow instruction submitted to them by the beneficiary, an obligation that is not to be taken lightly. Banks are highly regulated in Mexico and their fiduciary responsibility is pivotal to the Fideicomiso. They are the cornerstone upon which the entire process functions.
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 divorce or death in order to facilitate future transfer of that particular trust. Beneficiaries are easily transferable.
One big advantage of a Trust is with the Beneficiaries and Substitute Beneficiaries. The Beneficiaries of the Trust are the original purchasers of the property. Often this is a married couple or partners. It the couple or partners split up or one dies, it is a fairly simple procedure to eliminate one from the title without incurring title transfer taxes. If something happens to all of the beneficiaries (like death) then the property passes to the substitute beneficiaries who are the heirs of the original purchasers. Once again, it is a simple procedure, but the added bonus is the property does not have to be probated. No will is needed with a Trust as long as the substitute beneficiary is appointed and mentioned in the title. Saving your heirs from probate is probably one of the best gift of time and money you can give them, especially if they have no expertise in dealing with Mexican law and bureaucracy.
Orignally the trust was set for a thrity year period. However, the government has amened the Trust Law and all new agreements are for a fifty year period with further renewals of the Trust for additional fifty year periods. The property owner has the obligation to pay the annual Trust fees to the bank holding the Trust on their property. Normal fees run between $350 and $500 approximately each year depending upon the bank.