Non-residents can buy real estate in Mexico. There is a difference in how to do this near the sea and away from the coast. In the so-called «restricted area» Direct ownership of land by foreigners is prohibited by the constitution. But the legislation itself offers a workaround mechanism — fideicomiso, a banking trust that provided foreigners with effective rights to property without having to acquire Mexican citizenship or register as a company.
The fideicomiso mechanism, in place for decades, remains the basis of overseas investment in residential real estate in coastal and border areas of Mexico.
The restricted area is determined by the Mexican Constitution:
- 50 km from the sea coast,
- 100 km from the state border.
In these territories, foreigners do not have the right to directly own land, for this reason the fideicomiso mechanism is applied, which legally complies with the requirements of Article 27 of the Constitution. Outside the «restricted area» Non-residents can buy real estate on a general basis, just like Mexicans themselves.
Fideicomiso — This is a trust agreement between three parties:
1) Bank (fiduciario, trustee):
- formal owner of real estate in the public register,
- acts on the basis of a notarial escritura pública exclusively within the framework of the fideicomiso agreement,
- does not dispose of the object at his own discretion,
- acts strictly according to the instructions of the beneficiary.
2) Foreign buyer (fideicomisario, beneficiary). In fact, it gets all the key rights:
- reside,
- rent out
- reconstruct,
- sell,
- pass on by inheritance.
3) Founder of the trust (fideicomitente). This is the person who transfers real estate to a trust (usually the seller), who formally serves as the settlor of the fideicomiso, but does not retain any rights or functions after the transaction is completed. After transfer of real estate:
- does not constitute a beneficiary,
- does not participate in management,
- cannot give instructions to the bank,
- does not retain the reverse requirement.
Who is considered the owner of the property in the trust? Legally, the title (escritura pública de propiedad) is recorded on the bank as fiduciario. But the economic owner and full user is a non-resident beneficiary. Transfer of title directly to an individual — buyer is possible after acquiring Mexican citizenship, when the restrictions of the Constitution cease to apply to the former foreigner. In this case, the trust has the right to be canceled, and the title is recorded directly in the Property Register.
Essentially fideicomiso — This is not a lease or a temporary right, but a full-fledged ownership model through trust management.
The property in the trust is not considered an asset of the bank as a financial institution. The Bank has no right to sell, lease or dispose of property at its own discretion. If the bank fails or is nationalized, the property will not be included in the bank's assets during competitive bidding, the property register and legal rights of the beneficiary will continue to operate and the property will be transferred to another authorized bank without loss of rights of the foreign owner, since the actual rights belong to the beneficiary and not the financial institution.
Fideicomiso applies to the purchase by foreigners of all types of real estate located in a “restricted zone”, regardless of whether it is residential or non-residential real estate. These are apartments, individual residential buildings, villas, other forms of private development, and in addition plots of land, including those on which construction has not yet been completed or is just planned. The trust scheme is also used when purchasing objects in projects under construction, if upon completion of construction the foreign buyer must acquire ownership rights. However, the fideicomiso does not set any limits on the area of housing or the size of the plot.
The key legal point is that the trust extends not only to the constructed building itself, but primarily to the land and the registered title of the property. It is the land plot and the right to it that are transferred to the managing bank for trust management, while the building follows as its inseparable part.
In the case of an apartment in an apartment building, the logic does not change. The trust transfers title to the entire condominium unit, including its associated share of the land underlying the home and an interest in the common elements of the structure. Fideicomiso does not transform the apartment into something different from the ordinary unit of the condominium property regime. Its use is still regulated by the association's bylaws and the building's internal rules.
A bank trust is created for a period of 50 years with the possibility of multiple extensions. In this case, every 50 years the owner submits an application to renew the trust, which is considered a formal procedure.
The fideicomiso process involves several stages and requires the participation of several institutions. First — choosing a bank through which the trust will be issued. The process is completed by a notary (notario público), who is authorized to verify the legality of the transaction and register the right in the State Register of Real Estate and the National Register of Foreign Investments. It is necessary to obtain the approval of the Mexican Ministry of Foreign Affairs (SRE), confirming compliance with the Constitution and legislation. All this is done by the bank and the notary themselves. After receiving permission and signing the papers, the trust is officially registered.
Required papers usually include:
- foreign passport of the foreign buyer,
- document confirming legal stay in Mexico: FMM migration form or entry stamp in the passport for a visiting country, temporary or permanent resident card for residents,
- CURP and RFC for residents (optional),
- seller documentation,
- cadastral data and registered title to the property.
The price for opening and further maintenance of a fideicomiso consists of several mandatory elements. The biggest — a one-time bank fee for establishing a trust. Based on the bank and region, it usually ranges from 1,500 to 2,500 US dollars. This includes preparing the trust agreement, opening the trust account and incorporation, and the first year of service.
A permit from the Mexican Ministry of Foreign Affairs (permiso de la Secretaría de Relaciones Exteriores) must be paid separately. The state fee is 19,950 Mexican pesos, however, notaries often add an administrative fee for the preparation and filing of documents (gestoría). In practice, foreign buyers pay the equivalent of approximately US dollars for the entire permitting process, including state fees. The authorization is issued within a period of approximately 5 business days after the submission of documents in relation to a specific trust and is indicated in the notarial deed.
Notary expenses — another essential article. These cover title verification, tax calculations, deed preparation and trust registration. Notary services as such in a fideicomiso transaction usually amount to 1-2% of the value of the property. Notary fees are regulated at the state level. However, in practice, notaries often tell the buyer the total amount of expenses.
If the notary says 5%, it is possible that he included in this amount some taxes and government fees, which he himself administers and transfers. In addition to the trust itself, the buyer, through the notary, pays the real estate acquisition tax (ISAI), which in most states ranges from 2 to 4.5% of the cadastral or contract value, and in addition registration fees in the public register of property (Registro Público de la Propiedad), which depend on local state tariffs and usually amount to approximately 0.5%-1% of the value of the property for the recording of the transfer of title, and for a separate fideicomiso recording — approximately 0.03%-1.15% of cost. In addition to these percentage fees are fixed fees for the preparation of certificates and other administrative activities paid to the notary for subsequent registration.
The annual fee to the bank for administering the trust typically ranges from $500 to $1,000 per year. The amount of payment depends on the bank and the terms of the specific agreement. Over time, this amount can be indexed.
A mortgage when purchasing real estate through fideicomiso is possible, but its conditions depend on the specific bank. In this case, the property located in the trust can be used as collateral. But the presence of a fideicomiso complicates the structure of the transaction. In such cases, both the bank managing the trust and the creditor bank are involved, which requires additional agreements between the parties. Typically, the lender will insist on the inclusion of additional conditions in the trust agreement and on mandatory insurance of the object and the risks associated with securing the obligation.
A trust makes it possible to include multiple beneficiaries, which is especially important when planning an inheritance. This is widely used when purchasing real estate for a family. In a fideicomiso agreement, it is possible to specify primary and alternate beneficiaries, who automatically receive beneficiary rights if the primary person dies. Legally, this is not considered an inheritance in the ordinary sense, but rather a pre-agreed and registered change of beneficiary. In this case, the bank formalizes the transfer of rights directly, without court proceedings and without conducting notarial inheritance proceedings in Mexico.
If the fideicomiso deed does not specify substitute beneficiaries, the standard notarial or judicial probate procedure applies. At the same time, the will does not have the opportunity to change the criteria of an already valid fideicomiso: the bank is guided solely by the provisions of the trust agreement and entries in the register. If beneficiaries are appointed in the trust, the rights of the deceased beneficiary will be transferred to them, and possible disputes between the heirs will be resolved after this in a general manner.
The sale of real estate located in fideicomiso is carried out through a notary and a bank in one of two ways:
- transfer of beneficiary rights to a new buyer with the preparation of relevant documentation from a notary.
This is not a sale of the trust, it is a change in the beneficiary of the trust. A legal change of owner is realized through a notarized assignment of beneficial rights and their registration, without closing the trust and without re-registering the title to the bank. The seller, who is the current beneficiary, registers with a notary the transfer of his rights to the new buyer, with changes made to the public register of real estate. The bank continues to hold title to the property under the same fideicomiso, but in favor of the new beneficiary.
- closing the old trust and opening a new one in the name of the new beneficiary.
In this case, the current fideicomiso agreement is completely terminated, the bank withdraws the object from the trust, and at the same time a new fideicomiso is created at the notary for the same object in favor of the new foreign buyer, with the issuance of a new SRE permit and a new registration in the register.
If the foreign national subsequently acquires Mexican citizenship, the previously established fideicomiso ownership structure does not automatically cease and continues to operate as before. At the same time, from this moment the owner has the right to abandon the trust and re-register the property directly in his name as a citizen of Mexico. In practice, this is done by filing an application for termination of the fideicomiso with payment of the established bank fee, after which the notary draws up a new escritura de propiedad without the participation of the trust. If the property is mortgaged, you must first obtain approval to cancel the trust from the bank issuing the mortgage. The final stage is the registration of the new property title in the public real estate registry, with the payment of notary and registration fees, after which the need for a bank trust completely disappears.