When the Mexican constitution was written, it specifically prohibited any foreign investor to buy land within 62 miles of any national border or within 31 miles of the ocean.
The Mexican constitution was initially drafted to protect the loss of land, which resulted in the restricted zone. Mexico then created the bank trust or fideicomiso in order to promote foreign investment.
A fideicomiso is a 50-year perpetually renewable and transferable bank trust that allows foreigners absolute ownership rights to property in Mexico. However, the trust established through the fideicomiso does not become part of the bank’s assets.
Instead, the bank simply becomes the administrator or trustee.
As a result, the trust cannot get tied up in any legal issues that may arise with the bank or have a lien placed against it. The trust is established and renewed in 50-year periods with a guarantee of renewal in perpetuity.
The Mexican bank trust is the most common way to acquire coastal real estate in the restricted zone by non-Mexicans in Mexico and it is what we call a fideicomiso. The restricted zone is about 50 km inland from the coastline. Anywhere beyond that, any foreigner can buy property and have outright title to it without a trust.
Although there are other ways to do it, this is the easiest and at a lower cost than the alternatives. Mexican nationals on the other hand, can purchase within this zone through a deed or escritura publica.
A foreign national who buys through a fideicomiso will become the beneficiary or grantee of the bank trust, the seller becomes the grantor, and the Mexican bank the trustee, holding the title/deed on your behalf, which, like any trustee, is working in the best interest of the beneficiary-buyer-owner.
This benefit will extend in the buyer’s favor for up to 50 years which can, at the end of this term, be renewed for another 50 years. The beneficiary can be a single person, a couple, a company, or a group of individuals, related or not. If a couple holding a trust together is divorcing, or a company dissolving, or simply, a beneficiary is to be added or removed, it can be done without affecting the title of the property itself.
This process is done with all intention and purpose to bypass the limitation set by the Mexican government and allow foreigners to hold title on coastal property.
The trust, meaning the property title, can be transferred to another bank if the first one goes bankrupt, cease to operate in Mexico, or if the buyer/beneficiary just wishes to do so.
The property the foreigner acquires through a fideicomiso is an asset and should be considered when filing one’s taxes.
Holding a deed through a bank trust gives you the right to occupy it, build on it, and it can be leased out, mortgaged, left to heirs, sold, and anything else that can be done with any typical property.
Finally, second beneficiaries can be established within the trust to establish automatic inheritance of the property in case of deaths of the first beneficiaries and prevent it from going to probate or being contested in a will.