Frequently Asked Questions
What is a "Fideicomiso"?
A Fideicomiso is a Mexican Bank Trust (a.k.a. Individual Land Trust or Master Trust). You can find more information about how these types of trust work by clicking here.
Do Individual Land Trusts cost anything?
Yes, there is typically a one time set-up fee and a yearly maintenance fee associated with the Individual Land Trust. Both are fairly nominal but you should speak with the actual Mexican bank that will hold your real property rights to find out about their fees.
What is a Master Trust, and how does this affect me if I live in a subdivision?
Sometimes a developer of subdivisions (such as a luxury condominium complex) holds a Master Bank Trust, meaning that one Mexican bank technically owns the property rights (but not the personal rights) to all of the individual properties within the housing development. Homeowners Associations assist in renewing these kinds of "umbrella" trusts at the end of their 30 or 50 year time periods.
Even if you’ve purchased property in a major development, it isn’t mandatory for you to participate in an umbrella trust. You have the right at any time to withdraw from the Master Trust and place your "real" property rights in an individual bank trust. Some Mexican realtors (including the AMPI) feel that Master Trusts do not adequately shield the rights of individual buyers in the event that the developer suddenly declares bankruptcy or dissolves their company after you’ve already purchased your home. Removing your property from an umbrella trust and placing it in an individual land trust can give you greater protection from this type of situation under Mexican law.
That being said, many foreign investors choose to remain in a Master Trust for a variety of reasons.
What is a Notario and why do I need to know?
When you purchase Mexican property through an individual land trust, you will need to work with a government appointed lawyer whose job is to make sure that all transaction documents are filed correctly and that ownership of both the real and personal rights to your property are transferred properly. This kind of lawyer is called a "Notario".
One of the most important jobs your Notario will do is to make sure that the deed for transfer of rights to your property is registered correctly with all appropriate government agencies. For example, it is critical that this deed be recorded in the public registry office of the municipality where your property is located.
This deed for transfer of rights will include:
- Name of beneficiary of property
- A written description of the property
- Special terms or conditions of the sale
- Price agreed upon
It is critical that this documentation be filed correctly; if an error is made, you could end up without legal rights to a property you have already paid for. However before you get nervous about whether your Notario can handle this kind of responsibility, rest assured that the requirements to become a Notario are incredibly strict and very few people achieve this prestigious post. Attorneys interested in applying for the job must have at minimum three years of litigation experience, political connections, three years spent working for another Notario, and high scores on a written exam.
Is there anything else I need to do to protect my personal property rights through an Individual Land Trust?
Yes! You will need to:
- Make sure title is legal, and that title holder and seller of property are the same
- Long range study of property to make sure that all past transfers of title were completed in compliance with Mexican federal and state laws
- Have an official property appraisal by a licensed appraiser
- Notarized bank instructions
- Property tax certificate
- No-liens certificate from County Dept of Public Records, verifying:
- No creditor liens
- No utility department liens
- No mechanical liens
- Sellers pay capital gains tax
- Buyers pay acquisition tax
- Title is legally transferred to beneficiary
- Deed transferring rights to beneficiary registered by Notario and stamped by tax office (treasury) and public registry of municipality
You should also seriously consider purchasing Mexican Title Insurance on your property.
What happens if I decide to sell my property to a Mexican national? Does it have to stay in the Individual Land Trust?
Not necessarily. If you are selling to a Mexican national, this becomes the decision of your buyer who can either keep the title in the trust (and just change the name to his/her own) or remove the property from the trust and own it privately through an escritura publica. However you may wish to point out to your buyer that if he/she plans to turn the property over and resell it in a few years for profit, they may wish to keep it in the original trust or Master Trust. This would save money in the long term, if they think their most likely buyer would be another foreigner.
What is the difference between the Restricted Zone and the Federal Zone, when it comes to buying real estate?
The Restricted Zone is the area within 62 miles of a national border or 31 miles of a Mexican coast where foreign citizens were traditionally prohibited from purchasing property by the Mexican constitution. However, thanks to new foreign investment laws enacted in the 1980s and 1990s it is now possible for foreigners to own properties in these areas through the use of an individual land trust held by a Mexican bank.
The Federal Zone is a strip of land extending 20 meters between the mean high tide line and beachfront property. This land belongs to the Mexican government and no-one (not even a Mexican national) is allowed to own it. This is a buffer between the ocean and whatever houses or commercial properties may sit near the water.
What is a Federal Zone Concession? Why would this matter to me if I am a private property owner?
The Mexican government is now granting special permits ("concessions") for a fee to Mexicans and foreigners who wish to make use of that tiny strip of federally owned beach land. For example, many businesses like hotels and watersport rentals get a concession to operate their businesses within in that special Federal Zone on the beach.
This is important to you as a property owner for a few reasons. First, if any part of your new home, back yard, deck or swimming pool extends into the Federal Zone you may find yourself owing a monthly fee to the Mexican government.
More importantly, if your place happens to be located on a fantastic stretch of beach (and you value your view/privacy) you might want to consider applying for your own concession permit to make sure that no-one else is granted a Federal Zone concession between your house and the water! If you don’t do so, and someone else is granted a concession for that area, they might have the legal right to build a shop or operate a business in that area.
All content in this article is the original writing of BajaBound.Com. Information taken in part from the writings of:
Steve Purves and Diane Gibbs