The Bank Trust for Ownership of Real Property in Mexico

Fideicomiso Translativo De Domino AKA "Fideicomiso"

Article 27 of the Constitution of the Republic of Mexico prohibits foreign ownership of real property within thirty miles of any coastline for sixty miles of either border. This is referred to as the prohibited, or restricted zone.

In 1973, recognizing that many foreigners would enjoy owning property in Mexico, and would bring needed dollars to the country through such ownership, President Echeverria approved the bank trust, "fideicomiso", form of ownership which is available to non-Mexicans. This law governing ownership under a bank trust was further expanded in the Foreign Investment Laws of 1989 and 1993. The formal name for this trust is "fideicomiso translativo de dominico" and no other type of trust provides the same legal rights for foreign purchasers of Mexican property.

Properties located within the prohibited, or restricted zone, which includes the entire Baja Peninsula, may be acquired by a foreigner through a Mexican bank trust which designates the buyer of the property as beneficiary of the trust. Legal title is placed in the name of the bank selected by the buyer as his trustee. The bank administrates the property in accordance with the instructions of the buyer/beneficiary. He may build on the property, tear down existing buildings, modify them, rent, lease or sell at anytime conforming only to the general laws of the country established for all persons.

The term of the trust is fifty years and it can be renewed for additional fifty year periods. In other words, title to the property may rest in one beneficiary indefinitely, provided that it is renewed within the terms established by law.

U.S. title insurance companies will provide title insurance to the beneficiary of these "fideicomiso" trusts, just as with warranty deeds in the States. This insurance, coupled with the passage of NAFTA in 1993, has enabled U.S. mortgage companies to lend on Mexican properties purchased by U.S. citizens once the "fideicomiso" trust is actually formed by the sponsoring bank.

For condominiums constructed in Mexico, the bank, which is in actual title, will form the trust after all of the improvements on a property are completed. In our project, Las Gardenias, we are in the process of subdividing the project into smaller parcels so that each building can become a "trust parcel". Regular mortgage financing could then become available to purchasers more quickly than if we had to wait until complete build-out of the project.