Owning Property through Fideicomiso
The Boom in Coastal Real Estate is in large measure the result of reforms made over the last 15 years to laws governing the purchase of coastal properties by foreign owners. The stunning success of the reforms has been felt not only by the people living in these areas, but by property owners, residents and people at all levels of Mexico’s economy.
Many of the most popular location we can show you will fall within the Restricted Area governed by Mexico’s Maritime Law. In these areas Non-Mexicans must buy their property through a fideicomiso or bank trust. All of the “On-the-Ground” weekends that we hold in restricted areas, 50 Kilometers from the coasts and 100 kilometers from Mexico’s national borders, concentrate on fully explaining the process to purchasing property through a bank trust. Below are some general guidelines that will help introduce our speakers and the concept. We hope they’ll help you to answer whatever questions or doubts you may have.
Importantly, Fideicomiso titles are as secure as the title to your American or Canadian home, however the bank holds the fideicomiso, while you, the buyer are the sole beneficiary. Your property, held in trust, is not part of the bank’s assets, and so in the event of a bank failure, the title is simply transferred to another bank with no risk of loss to you. Fideicomiso trusts are valid for up to 50 years as necessary after which time they may be renewed for 25 years or the property may be sold. We generally recommend a 25 year trust due to the lower cost of renewing the trust.
Fideicomiso properties can be leased, sold, given to other family members, or passed on to your designated heirs.
Particularly with properties in these Restricted Areas of Mexico, it is important to consult a lawyer as you start the negotiating process. A lawyer will spot early hang-ups that could make the purchase impossible later on, but they’ll also formalize- or contractualize- the agreement made through the private negotiations that precede the formal property transfer.
The agreed upon price, the time to close, the method of payment (wire or bank transfer) & currency, documentation and down payment are all necessary parts of the private negotiation process, which precedes the public Formalization process.
From there, you’ll go on to the Formalization process. You or your lawyer will get a quote from the Notario Publico. Most lawyers have a Notario that they work with regularly. The quote will include the taxes and fees, appraisal, cost of registering, and fees for the Trustees and permits.
A Notario Publico is a very important, state-appointed public official. Mexican Notario Publicos are lawyers and all official transactions relating to property transfers and sales are done through the Notario. Most real estate agents in Mexico work regularly with a Notario because one of the Notario’s primary functions is to check real estate titles, powers of attorney, bylaws of companies, wills, deeds, and establishments of trusts for any sort of legal inconsistencies. For real estate titles that means the Notario is looking for liens and debts, taxes, fraud, recording errors, encroachments, or misrepresentation. This requires a bit of research but it is important that is be done thoroughly and professionally.
Usually you’ll need to pay all or part of the Notario’s fee up front, before delivering the documents. Documents necessary are needed to prove residency and identity, to prove who holds title, the tax standing of the property being transferred and the details of the beneficiaries (including a substitute) of the trust that’s been set up. The Notario may ask for other documentation, such as residency papers, but by and large, the more difficult task will fall to the seller, as it is the existing title that will need to be researched and documentation there can be more extensive.
The process of compiling the documentation will require the presence of a lawyer who has ensured that the documentation submitted is complete. The Notario must now apply for a permit from the Foreign Affairs Ministry. In general, it takes about 3 weeks to receive the permit.
With that permit in hand, the Notario will collect the documentation, including the fideicomiso details, into one place and all parties get a chance to review and revise the transaction. When the parties agree, the Notario will sign the deed and payment must be made. Then the property is transferred and all other payments must be settled. The actual deed takes 2 to 3 months which is why at this point a notarized copy is issued to the beneficiary so that he or she may take occupancy (and transfer utilities, water, etc).
Essentially 2 deeds are issued by the Notario. The original is held by the owner (the bank) and the other is held by the beneficiary (the buyer). The buyer need not be present at the signing, so long as payment has been been made, since they are beneficiaries. Only the owner (the bank) and the seller are parties to the transfer.
Finally the Notario must communicate the transaction with the public registry and report the closing. The Buyer then gets a Testimonio from the Notario. This is the legal documentation proving that transaction was legal, that the taxes were paid, and that it was registered with the Public Registry.
To ease the process of a future sale of the property, all of the tax records, and electricity, water and telephone should be put into the names of the new owners and/or the name of the bank holding the trust as soon as possible and good records of them should be kept as long as there is any plan to sell.