The Mexican Fideicomiso, or Bank Trust

Legal Purpose

This is provided for an overview on Fideicomisos. Before you sign any papers, you will be well served to seek professional advice on this topic. Fideicomiso is pronounced, FEE-day-koh-MEE-soh.

Article 27, Section 1, (archived copy here) of the Constitution of Mexico, dated 1917, prohibits foreign ownership of land within 100 kilometers of Mexico's sovereign borders, or within 50 kilometers of her coast. Lands within these limits are in restricted zones, which refers to the limitation on who may hold them in fee-simple ownership. The fideicomiso effectively enables foreign ownership of real property in restricted zones because it does not convey fee-simple title to the foreigner.

The legal purpose of Article 27 is to preserve Mexico's sovereignty over her territorial boundaries. Lands outside these zones are not restricted; they may be directly owned by foreigners. Non-residential property must be owned by a Mexican corporation, however, there are very few restrictions on a corporation's ownership composition. In most cases, a Mexican corporation may be owned solely by non-Mexicans.

How it Works

Two restrictions are generally placed on foreign owners of property within Mexico. First, they must agree to submit to the laws of Mexico. This is the Calvo Doctrine, further described on Wikipedia, in Immigration to Mexico. Second, they must register non-residential property with Mexico's Secretary of Foreign Affairs. A third restriction applies to foreign-purchased property within the restricted zones. Such property must be held through the fideicomiso, or bank trust. This satisfies Article 27, Section 1, in that legal title is held in the fideicomiso, it is not directly held by a foreigner. Thus, the fideicomiso enables and protects direct foreign investment in Mexico.

A home owned in a fideicomiso; click to features of our home insurance for your Mexico property.

Trustee — Beneficiary

The fideicomiso is a trust. A Mexican bank, the fiduciary, serves as trustee of the fideicomiso; the owner of the property is the beneficiary. The fideicomiso grants the beneficiary substantially the same rights of ownership as fee simple title, but it does so without directly vesting title. The beneficiary may improve the property, may encumber it, may sell it, as though he directly held title.

The fideicomiso typically lasts 50 years, upon which it can be renewed. Property held in this manner can even be willed to another beneficiary, or the beneficiary can nominate additional beneficiaries, possibly sidestepping issues of probate and inheritance tax. Talk to your financial and tax advisors!

Title and Title Insurance in Mexico

A fideicomiso does not guarantee title. It is merely the instrument which enables non-Mexicans to gain virtually the same benefits as holding title to restricted property in Mexico. If you will be the beneficiary of the fideicomiso, it is in your interest to ensure that title is protected with title insurance. Concerns over title are being addressed as the Mexico market for title insurance grows. Some title companies familiar to Americans already do business in Mexico; for instance, First American Title and Stewart Title are here. Be sure to consider title insurance when you make your investment.

Fideicomiso Vocabulary

Here are some words you may see as you consider real estate for your fideicomiso:

fideicomitente

party which sells property to the fideicomiso (seller)

fideicomisario

the beneficiary of the fideicomiso (you)

acta de posesión

an inferior record of ownership typically issued by a local bureau or authority

escritura privada

a slightly better record of ownership registered with a magistrate or judge

escritura publica

the preferred record of title, researched and compiled by a notary public

contrato privado de promesa de compraventa

the purchase agreement, showing particulars of buyer, seller, property

certificado de no gravamen

document obtained by seller asserting property has no liens

A Notary Public?

A Notario Publico in Mexico is not the same thing as a notary public in the United States. The Amigos Trust website compares their roles and qualifications.

Tax Implications

Purchasing land held in a fideicomiso may have USA tax implications. Be sure to consult your tax advisor on your need to file Form 3250, and other tax considerations related to living abroad.