Property Trusts in Mexico
Fideicomisos why do you need one
In all of Mexico any land or property that falls within 50km of the coastline is deemed as falling in a protected zone.
Foreign buyers of land or property in the protected zones can only buy property in the protected zone by way of a Bank Trust or a corporation.
A fideicomiso ( Real Estate Trust) is basically a real estate trust fund these were set up to ensure foreign investment into Mexico could continue whilst denying the right to direct ownership of land or property within the restricted areas.
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Foreingers can’t buy personally in Tulum
For the purchase of property in Tulum and Quintana Roo you must either have a Trust or a corporation or both.
The Trust is set up by a Mexican Bank who must be the trustees. The Banks take title of the property but the buyer is the beneficiary of the Trust. Whilst the Bank takes title of the property this title cannot be shown as an asset in the Banks balance sheet as they are merely the custodians on behalf of the buyer.
The Bank acts on behalf of the buyer and then manages the Trust in accordance with the wishes of the beneficiary.
Legal process of a Property Trust in Tulum
Permit required to set up a Trust
Before a Trust to purchase a property can be set up the Bank must apply to the Ministry of Foreign affairs for a permit. The Ministry will grant the permit based on the economic and social benefit of doing so. Buying of property and investment in Mexican real estate is considered to be of benefit to Mexico so it is standard for permits to be granted.
The ministry if outside of Mexico City is obliged to respond to the request for the permit within 30 days or it can be assumed granted but this is only one part of the process of setting up the Trust so when buying in a Trust you should take care to not to commit for the purchase to happen in limited timescales.
Banks can vary considerably in terms of cost and level of due diligence and timescales
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Mexican Banks hold the Trust
The Bank itself has other obligations when setting up the Trust for the purchase including due diligence on the property, money laundering regulations and source of funds for purchase, title deeds and the no liens certificate. All of this can take time and Mexican Banks can by nature be Buearocratic and slow.
It is also important to understand what can and cannot be held in a property trust and to gain support from a Lawyer or an Accountant who can advise on what is and what is not possible. Having a local understanding of the cost structure and efficiency of each Bank is also going to be helpful for you in terms of time and initial set up costs and annual fees.
You can reasonably expect to pay around $ 800 plus IVA for set up and similar yearly maintenance fees but each Bank has its own fee structure
When a Trust can't be used
Some limitations of the trust include the fact that land or property that exceeds in size 2000 meters squared cannot be held in a Trust. This often rules out Rustica land which by its nature tends to be larger plots. You need to take great care that the measurements of the property you are buying are not miscalculated before going through the process of the Trust as this can affect its validity.
Trusts are also only meant to hold one property. It may be possible to put two adjoining properties into one Trust but this is a very complicated process. If it is your intention to buy more than one property you should consider a corporation as a longer term solution rather than setting up a new trust each time
Protection of your Mexican asset
Normally Trusts have a life span of 50 years but this can be extended and you will always remain the beneficiary. The asset will not revert to the registered title holder who is the Bank at any point. It is also possible when setting up a Trust to designate a substitute beneficiary in the event of your death. Doing so will help avoid the asset having to go through probate.
Your asset is also always protected immaterial of what may happen to you in your country of residency. If you go through bankrupcy the asset held in the Trust cannot be taken as the Bank is visible owner
Get advice to work out best structure for you
Always seek advice from a Professional
Your Lawyer can advise based on your future intentions which is going to be better for you
At any point you may sell or part with the property you retain control on what happens to the asset within the trust. Selling a property held in Trust can be done to either another foreigner or a resident of Mexico by changing of beneficiary, or the Trust disbanded to allow a local or a corporation to directly hold it
Understand the different rules
Taking advice from a Lawyer or Accountant rather than just dealing with the Bank direct is recommended on the Trust is important as each Bank has different rules.
You need to check that the trust allows for future renting of the property, improving the property or securing of build permits. There is always a round any of these issues and most Banks grant a full POA to the beneficiary but some Banks are more flexible than others and some Trusts are better than others.