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What You Need to Know About Mexican Bank Trusts (Fideicomiso)

Apr 08 2010
Desire to own a dream house in Mexico? Then you need to learn about Mexican bank trusts (fideicomisos)

Looking to purchase property in Mexico? Do you desire to own a vacation home on a lush tropical beach, or to retire and live comfortably in a quiet Mexican beach community? If you think that owning a vacation home south of the border in some scenic resort such as Mazatlan would be paradise, then you need to know that the process of purchasing real estate in Mexico is quite different than in other countries.

The Mexican Constitution clearly states that no foreigner can own real estate that is within 50 kilometers from any Mexican coastline or within 100 kilometers from any Mexican border. These restricted zones were originally meant to protect Mexico from foreign invaders. However, the Mexican government realized that foreign investment in the country is beneficial to the economy of Mexico, and changed its foreign investment laws in 1997 to encourage foreign ownership of property. The basics of this law are that non-Mexican citizens can own residential property within the restricted zones by utilizing a Mexican bank trust, also known as a fideicomiso.

A bank trust is an agreement between the foreign buyer and a Mexican bank. This bank will represent the buyer and will possess the title to the property, but is required to follow the wishes and directions of the buyer. The foreigner will have full rights to live on the property, rent it out, make improvements, or sell it. The term of this fideicomiso is fifty years, and is renewable for an additional fifty years. Without using a bank trust, foreigners cannot own property in these restricted zones.

In real estate transactions south of the border, there are normally four parties involved: the real estate company, the bank, the buyer, and a public notary. There are also official documents for these transaction which include: a statement from the municipality regarding property assessments, a non-lien certificate based on a complete title search from the Public Property Registry, an appraisal of the property for tax purposes, water bills, and any other pertinent taxes that may be due. The Notary Public is a government appointed attorney who draws up, reviews, and verifies all official documents.

The cost of a bank trust can vary and is subject to change. Expect to pay approximately $1500 for a government permit and another $400 foreign public registry fee. There is also a bank acceptance fees, various closing costs, and a 10% IVA (Value added tax). In addition, an annual fee is charged by the bank that is based on the value of the property. Fess can vary with different banks so it is sometimes best to shop around as your lawyer can sometimes get better rates with a particular bank. The time it takes for the fideicomiso process varies but the best estimate is that it takes from 10 to 20 days after turning in all the proper paperwork. The entire process, from the time you apply to obtain a permit can take six to eight weeks.

To initiate a fideicomiso, a prospective owner should apply to the Mexican Secretary of Foreign relations. Once the process is completed, the bank becomes the legal holder of the bank trust. However, the owner has full control of the real estate and should count it as an asset on their books for accounting purposes. If you so choose, and can afford it, you can legally have multiple trusts in Mexico. When a property is sold, the bank trust can be transferred and the new owner acquires the remaining years of this trust. However, the buyer can instead choose to create a new 50 year trust.

The only way to purchase that lovely vacation home in Mazatlan, or some other resort on the beach in Mexico, is through a bank trust. Make certain to understand the basics of Mexican real estate law, hire an attorney knowledgeable in this area, and then go out and find your dream vacation or retirement house!

Author: Impulsa Real Estate

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