If you’ve ever wondered why there’s a unique process for foreigners to own property in the stunning coastal areas of Mexico, the answer lies in the history of the fideicomiso. Unlock the secrets of property ownership in Los Cabos with our comprehensive guide to the fideicomiso.Let’s unravel the tale behind this legal mechanism and understand why it became a crucial aspect of property ownership in places like Los Cabos.
The Birth of the Fideicomiso: A Historical Snapshot
The roots of the fideicomiso trace back to the Mexican Constitution of 1917. In an effort to protect the nation’s land and resources, the constitution included provisions preventing non-Mexican citizens from owning land within a certain distance from its borders and coastlines. This zone, known as the “restricted zone,” encompasses areas within 50 kilometers of the coastline and 100 kilometers of the national borders.
To encourage foreign investment and tourism, Mexico sought a solution that would allow non-citizens to enjoy the beauty of its coastlines without compromising national interests. The fideicomiso emerged as a legal structure that met this dual objective – offering a secure way for foreigners to hold property rights while ensuring that the land remained under Mexican oversight.
How the Fideicomiso Works: A Closer Look
The Trust Agreement:
In the fideicomiso arrangement, the foreign buyer, known as the “beneficiary,” enters into a trust agreement with a Mexican bank acting as the “trustee bank.” This bank holds the legal title to the property, safeguarding Mexican interests, but does not have the right to put any liens on the property or do anything at all. And what happens if for some reason the bank goes bankrupt and disappears? Simple, the title is transferred to another Mexican bank.
As the beneficiary, the foreign buyer retains full ownership rights, including the ability to use, sell, lease, or pass the property on to heirs. The trust is initially set for a term of 50 years, with the option to renew indefinitely. The costs of the fideicomiso is included in the closing costs of the property (between 4% – 6% of the purchase price) and that’s one of the reasons why these costs are higher than in the U.S. and Canada. We will go more in detail about closing costs in another blog post. Important: There is an annual fee paid to the bank for administration of your trust of around $500 USD.
Conclusion: Navigating the Path to Paradise
While the fideicomiso may add an extra layer to property acquisition for non-Mexican citizens, its roots lie in a thoughtful balance between national interests and the desire to share Mexico’s natural treasures with the world. So, as you embark on the journey to own a piece of Los Cabos, remember that the fideicomiso is not just a legal necessity; it’s a testament to Mexico’s commitment to both protecting its land and welcoming global citizens to experience its beauty. Dive into the process with confidence, unlock the secrets of property ownership in Los Cabos with our comprehensive guide to the fideicomiso, and let its history guide your footsteps toward a piece of Mexican paradise.
