Bank Trust "Fideicomiso"

Bank Trust "Fideicomiso"

Many people have heard that foreigners (non Mexican Citizens) cannot own property in México. This is partially true. The Mexican constitution prohibits foreigners from owning property in a restricted zone which is 50 kilometers from the coastlines and 100 kilometers from the borders. So if this is the case, why do so many U.S. and Canadian citizens have retirement homes and vacation condos in Mazatlán?

The answer to this question is that most of us have a Bank Trust known as a "Fideicomiso". In an effort to increase foreign investment, the Mexican Constitution was amended in 1971 to allow foreigners to purchase residential Real Estate by establishing the Bank Trust. The foreigner becomes the beneficiary of this trust. The original trust permits were for 30 years and may now be extended or renewed. Since 1993, the permits issued are for 50 years. The beneficiary of the trust may sell the property at any time during this period to a foreign or Mexican citizen. I have personally purchased and sold a number of properties in Mazatlán since 1981 and all the properties have been in Bank Trusts.

The negative side of the Bank Trust is the cost and the service. Not all the Banks charge the same amount and some are seriously lacking in service. The trust permit costs about $1,000.00 Dlls. and an average annual fee is about $400.00 US Dollars.

On the positive side, the trust allows you to designate substitute beneficiaries, so in case of death, there is no will to probate.

There are a number of ways to avoid the trust but usually what initially seems easy, gets complicated when you decide to sell. For example, if you have a child who was born in México, you can deed the property in the child's name. Nevertheless, if the child is a minor when you decide to sell, you must get permission from judge. This is a long, drawn out legal process, which take time and money. Another possibility is to form a Mexican Corporation, but this only makes sense if there is a business purpose as the tax issues are more complex. Over the years, many foreigners have used their Mexican friends to appear as the owners of their properties. I know of many cases where this has worked out very well and have heard of a number of bad experiences. This way poses the most risk for obvious reasons.

There has been a persistent rumor for years that the laws regarding foreign ownership are changing and the trust will no longer be required. Lately there has been nothing new on the subject so your best bet is to look for a bank which offers the best price and service for the "Fideicomiso".

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When buying a home in the U.S. and Canada, the "seller" is legally obligated to disclose to the " buyer" any hidden flaws that may exist. In México, this is not the case. Therefore, when you have chosen the home you want to buy, new or old, it is a good idea to have some professionals take a look. There is no such thing as a building inspector so you may need to get some help finding an electrician, a plumber, a painter, a fumigator etc. If it is obvious that the property will need major repairs, your realtor should be able to recommend some tradesmen to give you a "ball park" estimate.

A couple of things may surprise you: The cost of painting is remarkably low and roofs, which are a major concern in other countries, are very economical to fix and maintain here. This is due to the building material, which is primarily cement.

In México we do not make an offer to purchase subject to inspections or financing so your homework has to be done before you start negotiating. Also, don't assume that "the seller" will fix anything at your request.

Tip: Some of our clients brought along a hair dryer to check the electrical outlets and a marble to see the slope of the floors! A look at the latest water bill may tell you if there are any problems with the plumbing.

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