Understanding the Fideicomiso

As real estate agents in Puerto Vallarta, one of the things we are frequently asked by foreigners buying property in Mexico is about the fideicomiso system. Here is a quick overview of what it is and how it works.

In 1917, a constitutional law was passed in Mexico with stated that no foreigner may own property in the “Restricted Zones”, that is, property within 100km of any Mexican border or within 50 km of any Mexican coastline. Over time, the fideicomiso system, essentially establishing bank trusts, was created to allow foreigner buyers to create a trust agreement with financial institutions to purchase land in the Restricted Zones.

The bank charges a fee for creating the fideicomiso and an annual fee based on the value of the property, and the trust is held in renewable 50-year periods with the ability to name second beneficiaries to ensure automatic inheritance.

While the fideicomiso puts the bank as the holder of the title and as acting trustee, the buyer is the first beneficiary and holds all the legal rights to the property, including the right to rent, occupy or modify the property as they wish.

The fideicomiso system is just one of the many ways that purchasing property in Puerto Vallarta can differ from the system in other countries, which is why it’s important for buyers to have an experienced local real estate agency on their side, through every step of their real estate transaction.

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