FOREIGN OWNERSHIP OF LOS CABOS REAL ESTATE

What is a Fideicomiso?

A Fideicomiso is a 50-year perpetually renewable and transferable Bank Trust through which foreigners acquire irrevocable and absolute ownership rights to property in Mexico.The transfer of the real property from the seller to the bank is a definite and irrevocable transfer of title. Under Mexican law only an authorized Mexican banking institution can be a trustee. The bank acquires title to the real property and is obligated to allow the beneficiary to use and enjoy the property as he sees fit (as long as the manner in which he or she does so is lawful). If the beneficiaries wish to rent the property to third parties they can do so by obtaining the necessary authorizations. Beneficiaries also have the right to sell the property when they please and to receive the benefits produced by such sale.

The bank you choose to setup and maintain your fideicomiso is barred from encumbering or selling the property without the express written consent of the beneficiary. In order to oversee this aspect of the fideicomiso, Mexican law requires that all real estate transactions be done through a Notary Public. It is their job to ensure that any given property sale or transfer be done within the confines of the law. The entire fideicomiso is made part of the Public Registry and it is what proves your rights as beneficiary. Once recorded, the first deed of title goes to the bank chosen to maintain the trust with the second deed of trust going to the buyer/beneficiary.

Mexico’s Foreign Investment Law permits fideicomisos to be issued in 50 year terms and allows for those permits to be renewed in perpetuity. Fideicomisos can also have more than one beneficiary (fideicomisario). Another important component is the substitute beneficiary. These are usually family members but need not be. Substitute beneficiaries (fideicomisarios sustitos) only have rights as beneficiaries after all of the first beneficiaries have passed away (unless otherwise laid out in the terms of the original fideicomiso).

The Benefits

• A fideicomiso is not a bank asset. In other words, although a Mexican bank of your choosing will be the trustee the trust cannot be used as an asset of the bank even in the case of the bank filing bankruptcy.
• It is renewable in perpetuity and grants the beneficiary(ies) the legal right to sell, improve, or rent the property as they wish.
• Provides for anonymity of the buyer as the Public Registry records the deed of transfer of title as a trust number keeping the owner information private.
• Avoids probate. Naming substitute beneficiaries means the property ownership will pass to that/those individuals when the original beneficiary passes away.
• Avoids the added expense, filing and maintenance of purchasing via a Mexican corporation. If you were to acquire title via corporation you will need to comply with laws that require monthly and annual financial reporting, will need to have at least two shareholders and you must also conduct annual shareholder meetings.