Holding title through a “Fideicomiso”

Foreign ownership of residential real estate in Cabo entails owning in the “restricted zone” – translation: property located within 100km of an international border or within 50km of the coastline. Accordingly, you’ll need to take and hold title to that property to a home or condo in Cabo in what’s legally referred to as a Fideicomiso.

With a Fideicomiso, you’ll own the property via a bank trust. While it’s certainly different than what US and Canadian real estate buyers are accustomed to doing, it is a fully legally protected means of owning a home or condo in Los Cabos.

What is a Fideicomiso?

A Fideicomiso is a renewable and transferable bank trust by which foreigners can acquire irrevocable and absolute ownership property rights in Mexico. As the transfer of property from a seller to the bank is an irrevocable transfer of title, only an authorized Mexican banking institution can serve as a trustee according to Mexican law.

The bank holds title the to the property and must allow the beneficiary complete privilege to utilize the property as they wish. If the beneficiaries want to rent the property, they can obtain the requisite authorization. Beneficiaries also can sell a property and are entitled to receive the proceeds from the sale.

The bank selected for the fideicomiso cannot sell a property without the express permission of the beneficiary and that transaction must be performed via a notary public. This ensures that the fideicomiso is recorded in public record. The first deed of title is held by the bank maintaining the trust and the second deed of trust goes to the buyer (beneficiary). The beneficiary must maintain the trust by paying an annual fee.

By law, a fideicomiso is issued with an initial 50-year term and it can be renewed. Fideicomisos can have multiple beneficiaries (i.e., co-buyers) and can also have substitute beneficiaries (i.e., family members) in the instance that the beneficiaries pass.

Fideicomiso basics:

  • A fideicomiso is not a lease
  • A fideicomiso is not considered an asset of the bank, even if the bank itself files for bankruptcy, and the Mexican government cannot take away your property.
  • A fideicomiso is renewable in perpetuity and it grants the beneficiary or beneficiaries a legal right to use, rent, or sell the property however they wish.
  • A Fideicomiso protects the anonymity of a buyer – the notary records the deed and title transfer only as a reference trust number.
  • A Fideicomiso avoids probate issues as substitute beneficiaries will receive ownership in the unfortunate event an original beneficiary dies.
  • A Fideicomiso substitutes for establishing a Mexican corporation to buy property – it’s a much cheaper and easier approach

This Cabo real estate buyers guide provides the basics around a fideicomiso. Questions about real estate in Cabo? Contact us – we’d love to chat.