What Is a Fideicomiso? Complete Guide to Mexican Property Trusts for Foreigners

When you're trying to buy property in Mexico, there are terms that get thrown around casually like "ejido" and "fideicomiso"—as if everyone should be familiar with their meaning.

For this reason, it can be difficult for expats to navigate the ins-and-outs of the Mexican real estate market, so those of us at Expat Insurance thought it would be helpful to write an article explaining—in simple English—what a fideicomiso is, how it came about, and how it works in buying a house in Mexico.

Understanding the Fideicomiso: Mexico's Bank Trust System

In plain English, a fideicomiso is a bank trust that you need to form in order to invest in or own property in Mexico. This trust is set up with three parties:

• Trustor (you, the foreign buyer)
• Trustee (a Mexican bank)
• Beneficiary (you and any designated heirs)

Basically, this trust acts as an intermediary between you and the Mexican government, because you aren't technically allowed to own property in certain areas of Mexico as a foreigner. (Don't worry, we'll get to that in the next section.)

In effect, the bank owns the legal title to your property as your legal trustee. The job of the trustee is to represent your interests as you see fit. That means the bank cannot use your property in any way, place liens on it, or use your property for their financial interests beyond the pre-established fees as written in the contract.

But why do we even need a fideicomiso for buying property in Mexico as a foreigner?

Why Foreigners Need a Fideicomiso in Mexico

If you're wondering, Why do I even need a fideicomiso?—you're not alone. It all goes back to the Mexican Revolution and the ejido system. (To read our previous article on ejidos, click here.)

I won't go too much into the history of ejidos, but, to put it in a nutshell, they are reserved plots of land owned by the government, specifically set aside for the people to farm and live off. After the Mexican Revolution, the new constitution outlawed the selling of land to foreigners—to protect these land rights. There have been many ups and downs in the implementation of ejido law in Mexico over the years which are covered in our other article.

However, in 1992, then Mexican president Carlos Salinas de Gortari ratified a change in the constitution that allows for a Mexican bank to act as an intermediary between foreign investors and the Mexican government. This Foreign Investment Law opened the door for the modern fideicomiso system.

A fideicomiso is basically a legal mechanism that allows you to buy property in Mexico because it's not actually you that's buying Mexican property—your trustee is buying it. That is to say, a Mexican bank is buying the property in Mexico on your behalf. This allows foreigners to buy property in Mexico, while still satisfying the conditions of the Mexican constitution.

Does that sound iffy to you? Before you panic, you should know that you have guaranteed rights as a beneficiary of a fideicomiso trust in Mexico.

How Long Does a Fideicomiso Last?

You have full rights as the beneficiary of a fideicomiso trust in Mexico. The Mexican property is yours to use until the fideicomiso expires. After that, you have the option to renew it or sell your property.

Before you get too worried, you can set up fideicomiso trusts in Mexico that last up to 50 years. Once the fideicomiso trust is set up, the trust deed allows you to improve, sell, encumber, bequeath, or lease your property as you see fit.

Fideicomiso Renewal Process

When your 50-year term approaches expiration, the renewal process is straightforward. Most banks will send you a notice well in advance, and you can renew for another 50-year period. The renewal fees are typically lower than the initial setup costs.

Your Rights as a Fideicomiso Beneficiary

A fideicomiso grants you substantial property rights under Mexican law. Here's what you can do with your property:

• Sell your property at any time and keep 100% of the proceeds
• Rent or lease your property for short-term or long-term income
• Make improvements or renovations without bank approval
• Transfer ownership to heirs or other beneficiaries in your will
• Mortgage the property (with a Guaranty Trust structure)
• Use the property as your primary or secondary residence

The key thing to understand: while the bank holds legal title, you maintain all beneficial ownership rights. You control the property completely.

Fideicomiso Restrictions and Restricted Zones

A fideicomiso has rights and restrictions that are stipulated by Mexican law. However, there are basic things that you should be aware of if you're thinking about investing in Mexican property:

The Notario Requirement

Perhaps the most important thing to know is that every document needs to be certified by notarios—the Mexican equivalent of public notaries, though more specialized. Notarios are a specialized section of lawyers, and the government only allows a limited number. For this reason, notario licenses are often passed down to the following generation—and if you want to get anything done, you have to go through them.

Understanding Restricted Zones

There are restricted zones in Mexico where fideicomiso trusts are required:

• Within 50 kilometers (31 miles) of the coastline
• Within 100 kilometers (62 miles) of international borders

These restrictions date back to Article 27 of the Mexican Constitution. While property in these zones is more complex to purchase, it's absolutely possible through a fideicomiso. Realistically, if you want to purchase land in restricted zones without a fideicomiso, you'll have to become a Mexican citizen. (Click here for more information on that.)

Property Outside Restricted Zones

If you're buying property outside these restricted zones, you may be able to purchase through a Mexican corporation (Sociedad Anónima) instead of a fideicomiso, though many foreigners still prefer the fideicomiso structure for its simplicity.

Estate Planning Benefits

You are entitled to leave your Mexican property to any alternate beneficiaries of the fideicomiso trust as you see fit. This makes estate planning straightforward—your heirs can be named directly in the trust document.

Mortgaging Your Property

If you set up a Guaranty Trust, then you are legally allowed to mortgage the property as an estate asset. The downside is you have to find a Mexican bank willing to do it, as international lenders typically don't mortgage properties held in fideicomiso.

Fideicomiso Setup Process and Costs

Here's what you should expect when setting up a fideicomiso:

Initial Setup Costs

• Bank setup fees: $500-$1,000 USD (varies by bank)
• Notario fees: $1,500-$3,000 USD
• Government permits and registration: $200-$500 USD
• Total initial investment: approximately $2,500-$5,000 USD

Annual Maintenance Costs

• Annual fideicomiso fees: $400-$800 USD per year (paid to the trustee bank)

Choosing Your Trustee Bank

Major Mexican banks that offer fideicomiso services include:

• BBVA México
• Santander México
• Scotiabank
• HSBC México
• Intercam Banco

Each bank has slightly different fee structures and service levels, so it's worth comparing options before committing.

Frequently Asked Questions About Fideicomisos

Can I lose my property in a fideicomiso?

No. As the beneficiary, you have full control over the property. The bank cannot sell, use, or encumber your property. Your rights are protected by Mexican law and the trust agreement.

What happens if my trustee bank fails or merges?

If your bank closes or merges with another institution, your fideicomiso automatically transfers to the successor bank. You don't lose any rights to your property. You can also request to transfer your fideicomiso to a different bank if desired.

Can I rent out my property through a fideicomiso?

Yes, absolutely. You can rent your property for short-term vacation rentals or long-term leases. All rental income belongs to you as the beneficiary.

Do I pay property taxes with a fideicomiso?

Yes, you're responsible for paying annual property taxes (predial) and any applicable local fees, just like any property owner in Mexico.

Can I have multiple beneficiaries on my fideicomiso?

Yes, you can name multiple beneficiaries, including family members. This is helpful for estate planning purposes.

How is a fideicomiso different from direct ownership?

In direct ownership, your name appears on the property title. With a fideicomiso, the bank's name appears on the title, but you maintain all beneficial rights. Functionally, there's little difference in what you can do with the property.

Can corporations own fideicomisos?

Yes, Mexican and foreign corporations can be named as beneficiaries of a fideicomiso. This can be useful for business structures or asset protection planning.

Conclusion: Is a Fideicomiso Right for You?

In short, a fideicomiso is a trust set up with a Mexican bank that allows you to purchase Mexican land or invest in property in Mexico without having to become a Mexican citizen first. They are relatively simple to set up, and over one million foreigners have set up fideicomiso trusts in Mexico since December of 1993.

A fideicomiso is a routine part of being a homeowner in Mexico as a foreigner, particularly in desirable coastal areas. While there are fees involved, the peace of mind and legal protections make it a worthwhile investment for most foreign property buyers.

Ready to Buy Property in Mexico?

If you're considering purchasing property in Mexico, make sure you're fully protected. Learn more about expat insurance options in Mexico and explore our comprehensive guides on Mexican real estate for foreign buyers.

Related Articles:

• What Is an Ejido? Understanding Mexican Communal Land
• How to Get Mexican Citizenship
• Complete Guide to Buying Property in Mexico as a Foreigner