What is a Mexican real estate trust or fideicomiso
What is a Mexican real estate trust or fideicomiso?
A fideicomiso or trust is a contract between its beneficiary and a financial institution in which the parties agree that the bank will, for a yearly fee, be the legal owner and manager of some asset for a determined amount of time, in order to ensure that the beneficiary of the trust can enjoy and use the asset as if they were the asset’s owner.
This means that through a fideicomiso, a specified Mexican bank agrees to be the legal owner of a piece of real estate so that you, the beneficiary, can vacation there, rent the condo to tourists, remodel the kitchen and then, when the time comes to send the youngest to medical school, sell the villa for a healthy profit. All the while, the bank is the legal owner.
Why can’t I, as a foreigner, own real estate in Mexico?
Actually you can. Just not beachfront (or within 50km from the beach). Or within 100km from an international border. You can own lake property, you can own a house in Mexico City, a wide gambit of property in Mexico exists that you can own, but you need permission from the Secretary of Foreign Relations. And you can’t “own” beachfront (this means that in most* of Quintana Roo, non-Mexicans must purchase real estate through a trust).
*There is a part of Quintana Roo west of Felipe Carrillo Puerto that appears to be more than 50km from the cost and more than 100km from the international border.
But, back to the original question, foreigners cannot own property in Mexico’s “Restricted Zone” because it says so in the Constitution. In 1917 when the Constitution came into effect, Mexico was coming off a rough period in its history and the majority of the people were feeling taken advantage of by various foreign factions (the French, the Spanish, The Americans, etc.) and, therefore, decided that limiting what the foreigners could own outright was a good way to protect Mexico’s interests. This protection has stuck, but some brilliant lawyer decided to use the trust to, in a way, circumvent the prohibition of foreigners owning beachfront land.
The fideicomiso, or land trust, gives the foreigner almost all of the privileges that are usually associated with ownership of a piece of property, but legally, the bank owns the property and the foreigner is just the beneficiary of the trust.
How do I get my fideicomiso?
here is the fideicomiso process anyway.
You choose the property you want to buy, make an offer with the owner and decide on terms.
You contact your attorney, who will ask you to put him in touch with the seller or the seller’s real estate agent in order to get the pertinent paperwork. For this transaction, your attorney will need:
Your passport and immigration document(tourist card, FM3, FM2, etc.)
The seller’s identification
A copy of the property’s title, or at least the necessary information to get a copy from the public registry.
The current year’s PAID property tax receipt
Possibly other information, depending on whether or not the seller is a foreigner or Mexican.
Your attorney will need to coordinate with the bank to get the fideicomiso that you need. Basically, all the benefits given by the trusts are the same, with a very few exceptions. The major difference between the banks is the actual cost of the fideicomiso. The trust providers can be divided as follows:
These are the banks that you see with branches scattered around Mexico. With a trust from a traditional bank you can walk into the branch with the bill and your passport and pay your annual dues without much hassle. These banks usually charge a little more and my experiences with the “trust officers” from the traditional banks have been stressful. These banks seem to often forget that they have competition and that you are a valued customer, not a nuisance.
In the last few years a new species of fideicomiso has emerged in the Mexican market: the trust offered by Branchless banks like Banco del Bajio, Interacciones Bank and Monex. Branchless is really a misnomer, because they actually do have branches, but usually you as a consumer don’t ever have to go there. These bank trusts are usually less expensive and they offer, in my experience, much better customer service experiences. The banker from the bank that I prefer to do business with is always available on the phone and usually will rearrange his schedule to meet with me to better serve my clients.
Once the bank has been determined, the attorney sends the necessary paperwork to Mexico City to apply for the permit from the Secretary of Foreign Relations for the foreigner to purchase real estate. This permit costs about $15,000.00 MXN and takes a week or two to obtain. Once the paperwork has been submitted your attorney can continue to the next step.
Due to extensive international efforts to thwart money-laundering, the bank will require that the attorney submit a “Know your client” form, which lists vital information of both the seller and the buyer, as well as contact information in Mexico and abroad.
At this point, the attorney will be in touch with a Public Notary, who will require certain other documents in order to proceed with the registration of the real estate transaction:
The title and property tax information
Proof that all the utilities and taxes have been paid current
A certificate from the Public Registry saying that there are no liens on the property
If the property is a condominium or part of a neighborhood association, a letter from the HOA stating that the property is current with their dues
The final step is paying everyone and signing the deed in the Notary’s office. Signing is easy, paying can be tricky and if you don’t know what you are paying for you might get taken by surprise:
Public Registry fees – For a fideicomiso, you pay registration of the fideicomiso and registration of the actual title, plus a fee for the issuance of a sealed title: In Quintana Roo this ends up being about $10000.00 MXN (I believe that it is less in many other States)
Acquisition Tax – In Quintana Roo there is a 2% tax on the acquisition of Real Estate. This tax varies State by State.
Notary fees – Most Notaries charge between .75% and 2% of the sale price of the property plus IVA. See what your attorney can convince the Notary to charge and also see if the attorney can shop Notaries. I know that some Notary firms are more interested in my business and therefore give me a lower rate because I do lots of business with them.
Other fees/Misc. fees/Registry fees – There are costs involved with getting the sale registered that the Notary/attorney don’t want to absorb, but also may not be able to show you a receipt for, such as messenger fees, copies, buying somebody lunch so that the registration happens quicker, or just coffee for the girl at the desk at the Public Registry who receives the paperwork. Like it or not, all Notaries include “other fees” into the budget for the registration of any property sale transaction.
Attorney’s fees – The going rate for coordination of a trust seems to be between $1500.00 USD and $2000.00 USD.
Initial fee for the trust – Depending on the bank, the fee for the trust is the first year’s annual fee plus anywhere from $100.00 USD to $500.00 USD.
Here is where the selfless promotion comes in, if you got this far, you deserve it. I am offering trust coordination for the following prices (this price is valid until August 31, 2012. It might be valid after that time as well, but I can’t make any commitments on behalf of the bank):
1.5% of the sale price (on sales of at least $100,000.00 USD)
About $10,000.00 MXN, as per state law
$1,950.00 USD (This includes permit, first year’s payment and set up fee
*This does not include the 2% acquisition tax or “Other fees” charged by the notary
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