FOREIGN OWNERSHIP

Fideicomiso in plain English.

If you're a foreign buyer purchasing residential property in Puerto Vallarta, you'll most likely hold your interest in the property through a Mexican bank trust called a fideicomiso.

THE BASICS

Why is a trust involved?

Mexico's Constitution restricts direct foreign ownership of property within 50 kilometers of the coastline and 100 kilometers of an international border. Puerto Vallarta is within this restricted zone.

A fideicomiso provides the legal structure that allows a foreign buyer to acquire the use and benefit of property within that zone. A Mexican bank serves as trustee and holds title within the trust, while the buyer is named as beneficiary.

For most buyers, the important distinction is simple: the bank is the trustee—not your landlord or business partner.

WHAT IT MEANS FOR YOU

You control the beneficial interest.

Use it

You have the right to use and enjoy the property as provided by the trust.

Rent it

The trust structure allows the beneficiary to receive the benefits produced by the property, subject to applicable Mexican law and tax requirements.

Sell it

Your beneficial rights can be sold, with the trust transferred, modified, or terminated as appropriate for the transaction.

Pass it on

Substitute beneficiaries can be designated in the trust, providing a mechanism for your rights to pass after death.

YEARS

What happens after 50 years?

A fideicomiso authorization may be granted for a maximum term of 50 years. That does not mean you lose your property rights when the term ends.

Mexican law allows the term to be extended at the request of the interested party. The important thing is to address the extension before the trust expires rather than ignore the expiration date.

If you acquire the beneficial rights to an existing fideicomiso, you generally acquire the remaining term of that trust rather than beginning a new 50-year term.

PRACTICALLY SPEAKING

What should a buyer know?

The trust affects timing.

Creating, transferring, modifying, or terminating a fideicomiso adds steps to the closing process. This is one reason transactions involving a trust generally take longer than a straightforward direct-title transfer.

There are costs.

Establishing or changing a fideicomiso involves government, bank, notary, and related transaction costs. The bank also typically charges an ongoing trustee fee.

Existing trust or new trust?

If the property is already held in a fideicomiso, the buyer may be able to acquire the seller's beneficial rights rather than establish an entirely new trust. In that case, the existing trust retains its original term, so the number of years remaining is an important consideration.

Assuming an existing trust can sometimes reduce costs.

Establishing a new fideicomiso can have advantages as well. Some trustee banks may allow a buyer to use a Non-Appearance and Acceptance Letter (NAAL) to accept the rights, obligations, and terms of the new trust without being physically present to sign the deed at closing.

When available and approved in advance by the trustee bank, this can eliminate the need for a Power of Attorney solely for that purpose. A NAAL is not a Power of Attorney and does not authorize someone to act generally on the buyer's behalf.

Availability and document requirements should be confirmed with the trustee bank and closing team for the particular transaction.

THE BIG PICTURE

It's part of the process—not something you need to manage alone.

The notary, trustee bank, closing team, and real estate professionals each have a role in getting the trust work completed. What matters for the buyer is understanding what is needed and getting documents and decisions handled early.

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