2. What is a Fideicomiso and how does it function for Foreign Real Estate buyers in Mexico?

In Mexico, a “Fideicomiso” (also known as a Mexican bank trust or trust agreement) is a legal instrument that allows non-Mexican individuals or entities to hold and acquire interests in real estate located within the restricted zone, which includes areas within 50 kilometers (about 31 miles) of the coastline or 100 kilometers (about 62 miles) of the borders. This trust mechanism was created to ensure compliance with the Mexican Constitution, which restricts foreign ownership of land in these areas.

Here’s how a Fideicomiso works for real estate buyers in Mexico:

1. Parties Involved: The Fideicomiso involves three key parties: the buyer (who is the beneficiary of the trust), the seller (who transfers the property to the trust), and a Mexican bank (acting as the trustee).
2. Creation of the Trust: The buyer, along with the seller, initiates the creation of the Fideicomiso by entering into a trust agreement with the bank. The buyer is named as the beneficiary of the trust, while the bank holds legal title to the property.
3. Trustee’s Role: As the trustee, the Mexican bank holds the legal title to the property but has no ownership rights or control over the property unless specifically instructed by the beneficiary or as stipulated in the trust agreement. The bank’s role is primarily administrative, ensuring compliance with legal and contractual obligations.
4. Trust Duration: The Fideicomiso has an initial term of 50 years, which can be renewed for an additional 50-year period, allowing for a total of 100 years. During this period, the beneficiary (buyer) has the exclusive right to use, enjoy, lease, improve, or sell the property.
5. Buyer’s Rights: As the beneficiary, the buyer has the right to use, possess, and enjoy the property, including the ability to lease, mortgage, or sell it. The buyer can also designate substitute beneficiaries to inherit the property upon their death.
6. Control and Decision-making: The beneficiary retains full control over the property and can make all decisions regarding its use, development, and disposition. The beneficiary can sell the property at any time, and the proceeds from the sale are disbursed to the buyer.
7. Annual Fees: The buyer is responsible for paying annual trust fees to the bank, which cover administrative costs and trustee services. These fees vary depending on the bank and the value of the property.

It’s important to note that the Fideicomiso is a legal mechanism widely used in Mexico to facilitate real estate transactions involving foreign buyers in the restricted zone. It provides a secure and recognized way for non-Mexican individuals or entities to acquire and hold interests in Mexican coastal or border properties while ensuring compliance with the country’s laws.