Mexico is a coveted destination not only for its rich culture and gastronomy but also for its stunning beaches and natural landscapes. Every year, thousands of foreigners fall in love with its coasts and decide to invest in beachfront properties. However, due to legal restrictions, foreigners cannot directly own properties within the so-called “restricted zone.” This is where the “Fideicomiso” becomes an essential tool. In this article, we will explore what a “Fideicomiso” is and how it is used to acquire real estate on Mexican beaches, in compliance with national laws.

What is a “Fideicomiso”?

A “Fideicomiso” is a legal agreement in which a person (the trustor) transfers the ownership of certain assets to another person or entity (the trustee) to be managed for the benefit of a third party (the beneficiary). This mechanism allows for secure and efficient asset management, offering protection and tax benefits.

Involved Parties

Trustor: The person who establishes and transfers the assets to the “Fideicomiso”.

Trustee: A licensed financial institution that manages the “Fideicomiso”.

Beneficiary: The person or entity who receives the benefits of the “Fideicomiso”.

“Fideicomiso” and Beach Property Purchases.

The Restricted Zone

The Mexican Constitution stipulates that foreigners cannot directly own land within the “restricted zone,” which comprises a strip of 100 kilometers along the borders and 50 kilometers along the coasts. This provision aims to protect national sovereignty but can be a barrier for foreigners interested in investing in beachfront properties.

The “Fideicomiso” Solution

To bypass this limitation, Mexico allows foreigners to acquire properties in the restricted zone through a “Fideicomiso”. The process is as follows:

Selection of Trustee: The foreign buyer selects a Mexican financial institution to act as the trustee.

Creation of the “Fideicomiso”: A “Fideicomiso” is established with an initial duration of 50 years, renewable, where the bank fiduciary is the official owner of the property, but the foreigner (trustor) retains all rights to use, enjoy, and dispose of the property.

Administration and Benefits: The trustee manages the property according to the trustor’s instructions, who can sell, rent, or bequeath the property as any owner would.

Addressing the Fear of Non-Renewal After 50 Years

A common concern among foreigners investing in beachfront properties through a “Fideicomiso” is what will happen when the initial 50-year period ends. It’s natural to feel some uncertainty, but it’s important to highlight that:

Automatic Renewal: “Fideicomisos” are renewable for additional 50-year periods. The renewal process is routine and widely used, as Mexican law permits the extension of the “Fideicomiso”.

Renewal Process: Approximately five years before the expiration of the “Fideicomiso”, the renewal process can begin. This typically involves a formal request to the trustee and the payment of the relevant fees.

Legal Security: The “Fideicomiso” system is designed to offer long-term security. Trustees, being licensed financial institutions, are obligated to follow legal procedures to ensure the continuity of the “Fideicomiso”.

Understanding these aspects can help property owners feel more secure about the continuity of their investment and enjoy their property without worries.

Advantages of the “Fideicomiso” for Beach Properties and Flexibility:

Legal Security: The “Fideicomiso” offers a legally recognized structure protected by Mexican law. Flexibility: It allows foreigners to fully enjoy their property, including the ability to sell or transfer it.

Asset Protection: Assets in a “Fideicomiso” can be protected from creditor claims, providing additional security to the owner.

Legal Considerations and Costs

Creating a “Fideicomiso” involves certain costs and procedures that should be considered:

Trustee Fees: Financial institutions charge an initial fee for creating the “Fideicomiso”, as well as annual fees for its administration.

Legal Advice: It is advisable to have the support of a real estate lawyer to ensure that all documents and processes are carried out correctly.

Government Permits: The Ministry of Foreign Affairs must approve the creation of the “Fideicomiso”, ensuring all regulations are met.

The “Fideicomiso” is an effective solution for foreigners to invest in properties within the restricted zone in Mexico, particularly in desirable beach areas. It offers a secure legal structure that protects the buyer’s rights while complying with constitutional restrictions. By understanding the process and advantages of the “Fideicomiso”, as well as the renewal guarantees, investors can enjoy the beauty and opportunities offered by Mexican coasts without legal worries.

At Seaport Credit Canada, we specialize in providing financing for the purchase of real estate on the beach or anywhere else. If you dream of owning beachfront property in Mexico, we are here to help make it a reality. Contact us to learn more about our financing options and how we can support your real estate investment.