WHAT IS A FIDEICOMISO

 

I know you have heard that mysterious word and wondered what the realtor is talking about.  Maybe they call it the land trust, which it is in a sense.

 

The reason you will need a fideicomiso is that in Mexico, foreigners cannot “own” land within 100 kilometers of an international border and within 50 kilometers of the ocean.  The figure of the fideicomiso has been adapted as a tricky way  to allow foreigners to “own” land without infringing on the Mexican Constitution

 

First, the fideicomiso was not created to be used for foreigners buying property, it was developed as an adaptation of the figure in the English-speaking legal system called the trust.  The major difference, and what makes the fideicomiso different than the trust, is that the legal system in Mexico (and most of Latin America, France, Quebec) is considered “written law” as opposed to “spoken law” like in the United States.

 

What does this mean?  The fideicomiso (I have heard it called fideo for short, but that means noodle so the spanish speakers might raise an eyebrow) is nothing more than a WRITTEN contract between the grantor of the trust, the trustee and the beneficiary of the trust.  In the case of a fideicomiso for foreign investment, the grantor of the trust is the seller of the property, the trustee is the bank (or other financial institution) and the beneficiary of the trust is the foreigner that wants to purchase Puerto Escondido Real Estate property in Mexico.

 

I mentioned that the fideicomiso is a contract, its a contract that explicitly tells the “fiduciary”, the bank, how they are to utilize the object of the contract (the piece of real estate) in benefit of the foreigner.  They generally say that the foreigner can use and abuse the piece of property, may paint it whatever color he likes and is responsible for dealing with any legal conflicts that come up as a result of the piece of real estate being a piece of real estate.

 

Now, here comes a tricky and controversial part that I try to explain to people and they just don´t want to seem to get it:  For legal purposes, the bank owns the piece of real estate.  There is a clause in the law that says: The bank(fiduciary) has all rights required to carry out the trust, except when limited by the contract, and must act as the responsible party for losses suffered by the property.

 

Pay attention to that first part, I didn´t get it when I first read it either.  The bank possesses ALL RIGHTS related to the property.  This is really important in condominiums, because one of the rights inherent with a condominium is the right to vote in the homeowners association meetings.  Unless otherwise specified in the contract (fideicomiso document), the beneficiary of the fideicomiso doesn´t have the right to vote in the homeowners assembly meetings.  I want to add the clarification that there are certain fiduciaries (banks), that include in their boiler-plate fideicomiso documents the ability of the beneficiary to vote in meetings and represent the piece of real estate in legal matters, most don´t.  If this is something that concerns you, mention it to your attorney before you choose the fiduciary who provides your fideicomiso.

 

The fideicomiso contract will have a defined life-span, usually 50 years.  The law limits the duration of the fideicomiso to 50 years, if by some chance that time period expires and the fideicomiso is still necessary it can be recreated.  The normal practice for a fideicomiso is to name a beneficiary or substitute beneficiary in the contract, but if no-one is named standard inheritance laws apply.

 

Hopefully this information has been useful to anyone with questions about purchasing land in Mexico.

Puerto Escondido Real Estate