Frequently Asked Questions

What is Mexico’s “Restricted Zone”?


Defined under the Mexican constitution, the “Restricted Zone” is the land within 100 kilometers (approx. 60 miles) of any Mexican border and 50 kilometers (approx. 30 miles) of any coastline.  In these areas, a non-Mexican may not purchase or hold direct domain over any land, unless done so through a Bank Trust.  Therefore, a FIDEICOMISO is required for any non-Mexican acquiring residential property in these areas.

 

What is a “Fideicomiso”? (pronounced “fee-day-co-miso”)


A Fideicomiso is a legal structure which allows non-Mexicans to purchase real estate within the “Restricted Zone” along the borders and coastlines of Mexico.  Basically, it is a recorded contractual arrangement where a property is held in “Trust” by a bank on behalf of a specific purchaser or beneficiary.  In all material respects, it is similar to the type of Trusts commonly used in the U.S. and Canada to hold property for estate planning purposes.


In order to establish a Trust, a permit from the Secretary of Foreign Relations is required.  This permit in normally issued for a term of fifty years and may be renewed for an additional term of fifty years.  Contrary to the commonly held misconception, a Fideicomiso or Mexican Bank Trust is not a lease.  It is a form of ownership in which real property is transferred into a Trust for the sole purpose of the Beneficiary.  It is not necessarily better or worse than fee simple ownership, only different.

 

Who is involved in the “Fideicomiso”?

 

The Trustor (Seller)

This is the individual or entity that creates the Trust (in most cases, the original Mexican landowner or seller).  The Trust is irrevocable, so once the Trust is incorporated, the Trustor has no power to change any part of the Trust or participate in it.

 

The Trustee

This is a Mexican bank authorized to act in such a capacity under the Mexican General Law of Credit Institutions.  Such banking institutions are strictly regulated and controlled by the Ministry of Finance and Public Credit, The Bank of Mexico, and the National Banking Commission.  A Trustee may not be a beneficiary of the Fideicomiso.  The Trustee receives instructions from the Beneficiary and is empowered with the rights and necessary powers to achieve the objectives set forth in the Trust Agreement and, at the same time, acts on behalf of the foreign Beneficiary in any and all transactions involving the property held in Fideicomiso.

 

Primary Beneficiary (Purchaser)

This is usually the purchaser.  As the Beneficiary of the Trust, one enjoys all attributes of ownership such as: use and enjoyment of the property, the ability to improve the property, the ability to obtain financing using the property as collateral, and selling or renting the property and retaining all resulting net profits.  Essentially, the Beneficiary has the same absolute rights to use, benefit from, and enjoy the property as if it were in fee simple ownership.

 

Substitute Beneficiaries

Substitute Beneficiaries are those who receive the beneficiary rights upon the death of the Primary Beneficiary, the Trust property will revert to the benefits of his designated Substitute Beneficiaries.  Note: It is much easier for one’s heirs if they are listed in the Trust Document than it will be for them to acquire the rights through other legal channels, since the Trust Document can also act as a will regarding one’s Mexican property. What taxes are applicable?

 

Property Tax (Impuesto Predial)

Property taxes in Mexico are extremely low in comparison to the United States or Canada.  The Seller is responsible for paying the property tax up to the closing date.  Thereafter, this will be the Buyer’s responsibility on a yearly basis.  It is customary in Mexico for the property owner to pay his property taxes one year in advance.

 

Property Acquisition Tax

The buyer is responsible for paying the Acquisition Tax (or Transfer Tax).  It is currently 2% of the declared value of the transaction.

 

What is a Certificate of No-Liens (No-Encumbrance)?


This is a document issued by the Public Registry Office that certifies the current status of the property.

 

What is the Foreign Relations Permit?


This permit is obtained from the Secretary of Foreign Relations in order to establish a Trust.  The application for this permit must indicate the proposed usage of the property.  If the property is a vacant lot, the request should include a general development plan, as well as amount of money being invested and the timeframe for the project.  The permit is obtained by the Notary on the buyer’s behalf.

 

What are the Bank Administration Fees?


If the Title is held in a Bank Trust, there will be annual administration fees.  The bank also charges fees to change Primary Beneficiaries or establish a new Trust.  Most banks are now quoting fixed fees of less than $500usd per annum.

 

What is a Public Deed (Escritura Publica)?


This document attests to the transfer of property.  It is formalized upon being recorded at the Property Tax Office and the Public Property Registry Office.  Only a Mexican Notario Publico (Notary Public) can issue this document.

 

What documents will I require?


If you are acquiring property as an individual, you will require the following:

  1. Complete names of the Beneficiaries
  2. Complete names of the Substitute Beneficiaries
  3. Foreign address and telephone numbers for all Beneficiaries
  4. Official picture identification of all Beneficiaries (Passport preferred)

 

If you are acquiring property through your corporation:

  1. Exact corporate name and denomination
  2. Certified copy of the corporate bylaws and articles of incorporation translated into Spanish.

 

Who is the Notario Publico (Notary Public)?


The Mexican Notario Publico is a specialized attorney who has practiced his profession for at least five years and has been appointed by the Governor of the State in which he is practicing.  Notarios are strictly regulated and they represent the public interest as opposed to particular parties.  The Notario performs a very important role in that he is responsible for performing all the correlative recordings and the title search in respect to all real estate transactions.  His duty is to draft the public deed and to confirm validity of signatures.
Prior to closing, the Notario’s additional duties include:

  1. Examining the documents of the selling party to ensure their accuracy and legitimacy
  2. Verifying title
  3. Searching the public records to determine the status of the seller’s title to the property and the existence of liens
  4. Calculating and paying buyer’s and seller’s taxes.

 

How long does the Notario Publico take to perform his duties?


Usually around 15 days, provided all required documents are delivered to him in a timely manner.

 

What is a Title Search?


A Title Search, of Title Investigation, involves an examination of the recorded documents on a particular property.  The title search will reveal any existing liens, history of the property, easements, and any other details pertinent to the property.  Title insurance costs vary according to the company providing the service.  However, they typically run around .065% of the purchase price.