The Mexican Fideicomiso, or Bank Trust
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.
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
Mexico. Second, they must register non-residential property with Mexico's
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
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.
Here are some words you may see as you consider real estate for your fideicomiso:
- party which sells property to the fideicomiso (seller)
- 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 pública
- 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 Público in Mexico is not the same thing as a notary public in the United States. The Amigos Trust website compares their roles and qualifications.
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.