Can Foreigners OWN property in Mexico?
by Baja Real Estate Guide
Foreigners can indeed own property in Mexico! The confusion comes into play when foreigners want to buy land that is 50km from the coastline or 100km from the border. In those circumstances, which applies to much of the land in the Baja Peninsula a foreigner might want to purchase, the land is purchased through a Fideicomiso, or a bank trust.
A Fideicomiso (pronounced: fee-day-co-meeso) is different than a regular bank trust in the US. In a Fideicomiso, an authorized Mexican financial institution is the designated trustee, and you are the sole beneficiary of the trust. The bank holds “naked title” without benefits like a fee simple title in the US. This gives you full power to sell, remodel, mortgage, rent, add beneficiaries, and bequeath/will without restriction.
YOU CONTROL THE PROPERTY.
YOU MAKE ALL THE DECISIONS.
In fact, the only time you’ll interact with the bank is to pay the annual fee they charge and at the time of sale.
The history behind the restricted area and the creation of the Fideicomiso are fairly simple. Over a hundred years ago, in 1917, Mexico wrote land restrictions into its constitution as a means of protecting itself from being invaded again. By doing so, unfortunately, Mexico blocked a tremendous amount of foreign investment during some very important decades. Fast forward 54 years, and in 1971, an amendment was added to the constitution that created the Fideicomiso in order to open the door to billions of dollars in foreign investment.
Not only is the trust system of ownership built into the constitution, it is also secured by the Central Bank of Mexico. If one of the financial institutions were to go bankrupt, their Fideicomisos would simply be transferred to another Mexican bank.
Since 1971, the Fideicomiso’s power has grown. Originally trusts were set up for 30 years. In 1998, the constitution was amended further to allow these trusts to offer 50-year, renewable terms. You, as the owner, & any of your beneficiaries, can enjoy your property for as long as you wish. In the event of your death, your beneficiaries inherit the trust directly, with no probate needed. Because of the protection the Fideicomiso offers, many wealthy Mexican nationals elect to put their properties in Fideicomisos as well.
Most banking institutions in Mexico offer Fideicomisos. They compete for this business, and as a result, will offer different rates to set it up, to service it annually, and to close the trust when you sell. Make sure to ask whomever is handling your property closing to see a few options. Ask your Realtor for his/her opinion as well. He/she will have an ear to the ground as to which banks move the most quickly!