Benefits and Downside of Owning a Mexican Property Through a Fideicomiso (2024)

Before we get into the benefits and downsides of a Fideicomiso, let’s understand it better.

What is a Fideicomiso?

A Fideicomiso, also known as a Mexican trust, is a legal arrangement that permits foreign individuals and entities to own property in Mexico. This trust is usually held through a Mexican bank. This type of trust was established in 1972 by the Mexican government as a way to encourage foreign investment in the country while also protecting Mexican land laws.

A Fideicomiso trust in Mexico can last up to 50 years. This means that they expire and need to be renewed and the process should begin well before the expiration date. As in all trusts it is a serious instrument and so every Fideicomiso document must to be certified by notarios. Notarios are the Mexican equivalent of what we know as public notaries in name, but as noted in previous blogs, are a specialized section of lawyers, to which the government only allows so many.

Why a Fideicomiso is Required?

For foreigners wishing to buy and own Mexican land or property, there are restricted zones (within 50 kilometres of the Mexican coast and within 100 kilometres of any national border). These are very difficult to purchase. It can be done, but you basically need the permission of the ejido and the Mexican government. It’s very hard to get and costly as well. Realistically, if you want to purchase land in restricted zones, you’ll have to become a Mexican citizen, which a whole topic itself. How foreigners can own land indirectly in these restricted zones through the Fideicomiso.

As a side note, a foreigner is permitted to directly own land outside these restricted zones, but it is always advisable to seek local professional and legal advice to ensure all potential issues or concerns are addressed prior to completion of the purchase.

What is the Purpose of a Fideicomiso?

The main purpose of a Fideicomiso is to hold title to real estate in Mexico on behalf of the foreign buyer. The trust is created between the foreign buyer, a Mexican bank, and the Mexican government, with the bank acting as the trustee. The foreign buyer is the beneficiary of the trust and has the right to use, possess, and enjoy the property.

The main idea is that you the foreign buyer/beneficiary have all the rights of real estate ownership while a Mexican bank holds the legal title to it as your trustee. It’s like fee-simple ownership, meaning that the bank cannot place liens on your property or use it in any other way. Representing your interests is the ultimate responsibility of the trustee.

Benefits of a Fideicomiso

Protection

One of the main benefits of owning a Mexican property through a Fideicomiso is the protection it provides for foreign buyers. By holding title to the property through the Fideicomiso trust, the foreign buyer is protected from any potential legal issues that may arise with the property, such as disputes with neighbors or issues with zoning laws. Additionally, the Mexican government recognizes the Fideicomiso as a legal arrangement, providing further protection for foreign buyers.

Ease of Transferring Ownership

Another benefit of owning a Mexican property through a Fideicomiso is the ease of transferring ownership. Since the property is held in a trust, it can be transferred to another individual or entity without any legal difficulties. This makes it a convenient option for those who may want to sell their property in the future.

Keep Decision Making Power

Lastly, as the Fideicomiso trust beneficiary you are entitled to leave your Mexican property to any other alternate beneficiaries of the fideicomiso trust as you see fit but you need approval of the bank. In other words, you decide how to use the property. You can lease, sell, improve, bequeath, or encumber your real estate legally.

Downsides of a Fideicomiso

Costs of Using a Fideicomiso

However, there are also some potential downsides to owning a Mexican property through a Fideicomiso. One of the main drawbacks is the cost associated with creating and maintaining the trust. There are fees associated with the creation of the trust, as well as annual fees for the maintenance of the trust. These fees can add up over time and may make owning a property through a Fideicomiso more expensive than owning it outright.

Lack of Control

Another potential downside of owning a Mexican property through a Fideicomiso is the potential lack of control over the property. Since the property is held in a trust, the foreign buyer may not be able make any changes to the property without the approval of the Mexican bank. This can be a hindrance for those who want to make improvements or renovations to the property, so choosing the Trustee to understand the setup and annual costs and understanding their property alteration restrictions is a very important step in the process.

Difficult to Make Alterations to the Beneficiaries

Another potential downside to the Fideicomiso is making alterations to the beneficiaries after the Fideicomiso has been set up. It can be a very costly and lengthy undertaking. Discuss and learn from your notario what the best alternatives are, and then, based upon your personal situation, have the notario take the best approach to ensure that Fideicomiso is set up correctly from the start to avoid this potential downside.

Side Note

In a future blog discussion there is one point worth mentioning here is that there is an alternative to a Fideicomiso, which is setting up a Mexican corporation. It too has its pros and cons. This option should be discussed with a Mexican CPA and notario to see if this would be a suitable alternative.

Make the Right Choice for You

In closing, owning a Mexican property through a Fideicomiso offers both benefits and drawbacks. On one hand, it provides protection for foreign buyers and makes transferring ownership easier.

On the other hand, it can be more expensive and limit the amount of control the foreign buyer has over the property. It is important for potential buyers to carefully consider these factors before making a decision on whether to own a property through a Fideicomiso.

If you are thinking about buying a property in Mexico I highly recommend that you discuss your plans with your tax and legal professionals in your home country and their equivalents in Mexico so that you have a clearer understanding of the implication both in Mexico and at a home. If you need connections to Mexican professionals, email me with your specific needs at [emailprotected].