Mexico's Restricted Zone

Understanding Fideicomisos

If you're considering purchasing property in Mexico, particularly in coastal areas or near the borders, you may have encountered the term "Restricted Zone." But what exactly does this mean, and how does it impact foreign investors?

Under Mexican law, the Restricted Zone encompasses areas within 50 kilometers (about 31 miles) of the coastline and 100 kilometers (about 62 miles) from the borders. Within this zone, foreign individuals or entities face restrictions on owning property outright.

So, how can foreigners invest in these desirable locations without violating Mexican law? Enter the fideicomiso, a legal mechanism designed to facilitate foreign investment while respecting the restrictions on property ownership.

In simple terms, a fideicomiso, or trust, allows a Mexican bank to hold legal title to the property on behalf of the foreign buyer. This arrangement provides the foreign investor with all the rights of ownership and control, including the ability to sell, lease, or pass the property on to heirs.

Essentially, the fideicomiso acts as a safeguard, ensuring that foreign investors can enjoy the benefits of property ownership in Mexico's Restricted Zone while complying with legal requirements.

But how does the fideicomiso process work in practice?

Once you've identified a property you wish to purchase, you'll enter into a trust agreement with a Mexican bank authorized to act as a trustee. The bank will then obtain the necessary permits and register the property with the Mexican Ministry of Foreign Affairs.

As the beneficiary of the trust, you'll have the exclusive right to use, enjoy, and profit from the property. You can build, renovate, rent out, or sell the property at your discretion, all while retaining full control over its management.

It's important to note that the fideicomiso has a lifespan of 50 years, with the option to renew for an additional 50-year period. During this time, you'll be responsible for paying an annual trust fee to the bank, along with any property taxes and maintenance costs.

Puerto Vallarta, nestled along Mexico's Pacific coast, is within the country's Restricted Zone.

Here's how the fideicomiso process works in Puerto Vallarta:

1. Identification of Property: Once you've identified your desired property in Puerto Vallarta, you'll enter into a trust agreement with a Mexican bank authorized to act as a trustee.

2. Trust Establishment: The bank will obtain the necessary permits and register the property with the Mexican Ministry of Foreign Affairs, establishing the fideicomiso.

3. Rights of Ownership: As the beneficiary of the trust, you'll have exclusive rights to use, enjoy, and profit from the property. Whether you plan to build your dream home, rent it out for additional income, or sell it down the line, the choice is yours.

4. Trust Duration: The fideicomiso has a lifespan of 50 years, with the option to renew for an additional 50-year period, ensuring long-term security for your investment.

5. Ongoing Responsibilities: Throughout the trust's duration, you'll be responsible for paying an annual trust fee to the bank, along with any property taxes and maintenance costs.

By leveraging the fideicomiso, you can confidently navigate Puerto Vallarta's Restricted Zone and secure your piece of paradise along Mexico's stunning Pacific coastline. With the legal framework in place, you can embark on your property ownership journey in Puerto Vallarta with peace of mind, knowing that your investment is protected and compliant with Mexican law.

Will Hutt

Coldwell Banker La Costa

Specializing in the Romantic Zone

https://cblacosta.com/will-hutt/

will.hutt@cblacosta.com

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