If you want to buy a property in the Mayan Riviera you probably have lots of questions related to the most common way to buy in cities like Playa del Carmen or Tulum. Surely wou will hear terms such as restricted zone and fideicomiso or Bank Trust. Buying your second home near the beach or investing in a condo with ocean view is possible for foreingers through two common ways, a Fideicomiso or create a corporation.
To buy a property in the area consider as Restricted Zone most investors use the Bank Trust option best known as Fideicomiso. So what is this about? The following information has been provided by BanBajio Bank.
What is a Fideicomiso or Bank Trust for Real Estate located within a Restricted Zone?
This type of fideicomiso or bank trust is an agreement entered by and between a Mexican person (legal entity or individual), a Trust Bank and a Beneficiary. In said agreement, the Mexican person transfers the ownership of a real estate property to the bank, so that it holds title on the property and allows the beneficiary to enjoy the real estate in almost any form as the actual owner. The beneficiary is entitled to use the property for residential purposes.
What does “Restricted Zone” mean?
Restricted Zone is all the land or constructions comprised within a stripe 50 kilometers (aprox. 31 miles) wide next to the seashore or 100 kilometers (aprox. 62 miles) along the borders.
Why is a Bank Trust or Fideicomiso needed for a foreign person to acquire Real Estate within the Restricted Zone?
It is needed since the Mexican Constitution on his 27 provides that only Mexicans are entitled to acquire direct ownership of land within the “Restricted Zone”.
How long can a trust last? Can it be for an undefined term?
According to the law, this type of fideicomiso or bank trust can be established to last up to 50 years. A few months before said term expires, a renewal for another 50 year period can be requested to the government. As a consequence, there are no trust to last for an undefined term.
What is the process to establish a Fideicomiso to acquire real estate in the Restricted Zone?
The process has many details that we will not specify in this space, but as an overview we can mention that it starts when the involved parties provide certain information and documentation to the bank, along with the corresponding fees, so that it can request a permit before the SRE (Foreign Affairs Secretary).
Once that the permit is granted, the bank sends it to a public notary to prepare the deed to form the bank trust. After the text of the deed is approved, an appointment to sign it is set amongst the parties.
What are the obligations derived from the trust for the beneficiary?
There are many obligations, but the main of them are: To use the property for residential purposes only. The beneficiary has the obligation to consider himself/herself as a Mexican in relation to the property and he/she are not entitled to ask for the protection of his/her government for any dispute arisen in regards to such real estate; under the penalty of losing the rights on the trust in the benefit of the Mexican nation. It is also an obligation to pay a yearly service fee to the bank.
Other obligations are derived from using and taking advantage of the property, such as paying the corresponding taxes or fees for services (water, electricity, telephone, propane or any other service required by the beneficiary) or abiding by the Condominium Regime (in its case).
What are the main rights for the beneficiary of a Fideicomiso or Bank Trust?
The main rights for the beneficiary are:
- Use the property for residential purposes, for himself or his relatives or his friends at his sole discretion, observing the law and the corresponding condominium regimes (in its case).
- Designate one or more substitute beneficiaries, to take the beneficiaries’ place after his/her passing away.
- Build on the land, according to the local and federal laws, as well as to those condominium rules, if applicable.
- Remodel the existing constructions (when permitted by the authorities in accordance to the laws and condominium regimes, if it is the case).
- Sell the property or to assign the rights derived from the trust, by means of a duly formalized agreement with the participation of the bank.
How many beneficiaries can be designated for a particular trust?
The minimum is, naturally, one person. There’s no maximum number of beneficiaries. The number and the names of the beneficiaries are decided by the purchaser of the real estate.
Who can be designated as beneficiary in the Fideicomiso?
Any person or legal entity can be designated as beneficiary.
How many substitute beneficiaries can be designated?
The beneficiary can designate the number of substitute beneficiaries he/she desires. As an example, commonly husband and wife designate themselves as substitute beneficiaries and then their children if both pass away.
How should the order of designation of substitute beneficiaries should be made?
There is not a specified order. It depends on the purchaser’s decision. Legal entities can not appoint a substitute beneficiary, since they don’t pass away.
If you are interested in buying real estate in Playa del Carmen, Tulum , Puerto Morelos, or any other city located in the Mayan Riviera please send us a message. Our experts will help you to find the perfect option for you.
