There are two ways for foreigners to hold title to property in Mexico : through a trust or through a Mexican Corporation.
Nearly 90% of our clients are foreigners and have bought their property through a trust.
Regardless the property you are intending to buy, you should consider closing expenses for about 6.5-7% of the total cost of the property INCLUDING the TRUST SET UP FEE.
· What is a trust and who needs a trust ownership?
Since 1973 a constitutional amendment known as the Foreign Investment Law has allowed non-Mexicans to acquire coastal and border property through a trust or “fideicomiso”, established with a Mexican Bank. This trust assures the foreign buyer of all rights and privileges of ownership, and is needed to own properties which fall into the “restricted zone” by article 27 of the 1917 Mexican Constitution (this is within 50 km from the coastline and 100 km from the border). As of 1994 the Foreign Investment Law dictates that the trust be established for a term of 50 years, renewable at any time during its existence by simple application.
· Why trust ownership?
The trust arrangement was established by the Mexican government as a way of protecting foreigners who own property in Mexico . By means of the trust there is an automatic authoritative review of the transaction to ensure it is legal and unencumbered prior to the trust agreement being signed by the purchaser, the bank must confirm the seller’s information; i.e. proper ownership, insurance any liens or indebtedness against the property. All of which provides protection to the foreign owner.
· How does the trust work?
The bank known as the “trustee” holds the Deed for the purchaser, known as the “beneficiary” This property is not part of the Bank’s assets and cannot be subject to a lien or attached to bank obligations. While the bank is the technical owner of the property, they have a statutory obligation to follow the beneficiary’s instructions concerning the property.
· What rights does the beneficiary have to the property?
The beneficiary has all ownership rights to the property and may sell, lease, mortgage, pass to heirs or do any other legal act with the property. The beneficiary may transfer or assign his beneficial interest to any person and keep the profits from the sale of the property, subject to applicable taxes and expenses for the sale. Property held under a trust can be passed on to heirs and there is no inheritance tax. This is accomplished by naming them as substitute beneficiaries in the event of your death.
· How long does the trust last?
Trusts are granted in 50-year periods, and are renewable at any time by simple application.
· How much are trustee fees?
The costs of establishing a trust vary from bank to bank. The typical range is approximately$2,000 USD to $3,000 USD for trust set up (one-time fee) and about $550 USD each year for management of the trust. These fees are paid directly to the bank that has your trust.
· How are these trusts established?
Trusts are established by a Notary Public following the receipt of a permit by the Ministry of Foreign Affairs. There are a large number of foreign-owned properties in Mexico , especially in Playa del Carmen and the Riviera Maya. Standard forms are utilized by local Notary Public.