Mexico-My Space

The Space for Expatriates

 

Several people have suggested I update the blog with more on the basics; as the blog grows it’s getting harder to find the very important information on how we own property in Mexico safely. And especially in light of the recent news I figure there is no better time to re-visit the topic of Fideicomisos, or trusts.

 

Let’s back into this starting with the recent news. Last summer the lower house of Mexico’s congress overwhelmingly pass a bill to amend the constitution to allow foreigners to own property in the restricted zone directly. Currently foreigners may only hold property in a special trust called a Fideicomiso (pronounced fee-DAY-koh-me-so). When that was announced the grassroots response was vehemently negative. I mean VEHEMENT. I believe this surprised the politicians, and so rather than risk any further furor the bill was allowed to die a slow and silent death. The bill reached the maximum time it could be in consideration without action, and so it simply faded into the sunset. The trust system will continue.

 

So why was everyone so up in arms about letting foreigners buy coastal or frontier property? California, Nevada, Colorado, New Mexico, Arizona and, of course, Texas. All of them have something in common: they used to be part of Mexico. And despite what the history books may say north of the border the United States did not ‘purchase’ them. They were spoils of a brutally barbaric war that was sparked by…you guessed it…a bunch of American settlers that moved into Mexico and then decided they’d prefer to be independent of the country that had welcomed them with open arms. Oh, Americans might have forgotten but Mexico definitely remembers how thousands of families were uprooted and their land confiscated. As a result, they don’t trust foreign land ownership. And particularly not in the border areas and close to the coasts where another encroachment might begin. That said; they also know the importance of foreign investment. Article 27 of our Constitution addresses this issue.

 

Foreigners are forbidden direct ownership in the ‘restricted zone’ which consists of any land within 50 kilometers of the ocean or 100 kilometers of the international borders. Obviously Los Cabos is within the restricted zone. However, the constitution provides for foreign ownership as long as the foreigner holds the property in trust with a Mexican bank. This trust is very similar to a land trust in the US or a living trust but with one critical difference. This trust is set up by permission of Congress to grant the foreigner all the rights, privileges and benefits of a Mexican citizen as pertain to owning the piece of property in question. But in return the foreigner pledges to consider themselves Mexican on any matters regarding the property and specifically promises not to ask their native country to interfere with Mexico’s internal affairs. Your home cannot be confiscated (unless you’re using it as a crack house, but they’d do that to a Mexican). You cannot be singled out for any special treatment: you are Mexican under the law. But you absolutely cannot ask your home country to intervene if you have a problem or complaint about something going on in Mexico. Now two very important points about the Fideicomiso:

 

  1. The constitution assures that you will be equal in the eyes of the law. Equal, not above. Many Americans and Canadians take the attitude of ‘what can they do to me’? They can do anything they’d do to a Mexican, that’s what. I mentioned using your property for drug trafficking but more likely the foreigner is breaking the law by evading taxes. If you are renting out your place you need to pay taxes on your income. Historically SAT (our version of the IRS or CRA) has looked the other way but as usual a few bad apples have spoiled it for everyone. Some folks are making vacation rental a commercial enterprise and reaping millions. SAT has already been calling on homeowner’s associations and I believe it’s only a matter of time before they put the hammer down on someone.
  2. While the amendment was still a possibility most real estate attorneys were recommending that, even if it passed, the best course of action was to continue using the trust system. The trust has the benefit of passing to your heirs without the need for probate. Without it the homeowner would need a Mexican will which would have to go through probate or worse, have a foreign will validated in Mexican court. Both options are costly and take forever. For estate planning purposes the Fideicomiso is the better choice.

 

Using a trust to hold title to your Cabo property is safe and has been tested over time for reliability. Yes, there are costs involved. But a wise buyer simply adds them to the budget. It only makes sense to do things the right way and thereby insure that your investment is a safe one.

 

 

 

Carol Billups is Broker/Owner of Cabo Realty Pros. She has enjoyed working with both buyers and sellers for over thirteen years and still thinks hers is the best job on earth. She is also the real estate columnist for Los Cabos Magazine. You can read more of her articles on the website blog www.caborealtypros.com. You can reach her from the U.S. or Canada at 1-760-481-7694, or in Cabo at 044-624-147-7541. You can listen to our 24/7 broadcast on http://www.livecabo.net for a mix of happy music, weather reports and local information.

 

 

 

© 2014 Carol S. Billups

 

 

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Tags: Baja, Cabo, Cabos, Cape, East, Jose, Los, Lucas, Mexico, Pedregal, More…Realty, San, bargain, beach, condo, del, estate, fees, fideicomiso, home, house, income, median, price, property, real, realtor, tax, taxes, trust

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Comment by Robin Miller on February 16, 2014 at 12:30am

Carol, great post. Thanks for sharing. Many people didn't know this so am happy to see that this was posted. I will repost and give you credit on my blog.

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