when i buy a property in los cabos,

do i own it?

by Terry Curtis, Century 21
This is a good, very common question that we as realtors here are still asked today.  Some agents will respond yes, you own it and some agents will respond no, the bank owns it.  Here is the definitive answer for you in easy to understand terms.

The first thing to define is; we have 2 zones here in Mexico, the “restricted” and “unrestricted” zones.  The “restricted” zone is located within 100km of any Mexican border, or 50km from any Mexican coastline, essentially ALL of Los Cabos and Baja.  The “unrestricted” zone would be the opposite of this for example Guadalajara, Lake Chapala, Mexico City and so on.  As a non Mexican citizen purchasing property in what we call the “restricted” zone, the Mexican government requires a “fideicomiso” or for simpler words a “bank trust”.  A non Mexican citizen purchasing a property in the “unrestricted” zone is not required to use the bank trust for ownership.  In addition, Mexican citizens can use a bank trust and non Mexican citizens can own property without a bank trust by using a Mexican corporation (although complicated and usually not the best decision).

What is the difference and why is the trust required in the “restricted” zone?  This answer goes all the way back to 1917 when Mexico decided to make it harder for other countries to take advantage of their lands by generating a “restricted” zone.   This zone meant that only Mexican nationals were allowed to invest in lands located within 100km of any Mexican border, or 50km from any Mexican coastline, as previously mentioned.  However, as time passed and in order to allow foreign investment in these areas, in 1973 the government decided to start issuing the bank trust.  These trusts are similar to one you may hold in the USA, except that the designated trustee must be an authorized Mexican financial institution such as Scotiabank or Bancomer, among others.  Just like in the USA, this trust gives the buyer full ownership rights on the property they are purchasing, but instead of being the “owner”, they are stated as the first beneficiary. This allows the person to benefit from living in, improving, remodeling, fixing, renting, or selling the property without restriction. 

Most properties available for sale here already have a bank trust in place.  It is important for your agent to advise you on the age of this trust and whether generating a new trust would be better than transferring the existing one.  For example; some older trusts were issued for only 25-30 years and if the property you are buying is 15 years old, then it may be best to generate a new 50 year trust.  A simple decision once the information is understood and obviously if the property is brand new you will generate a new trust with the bank of your choice.  There will be an initial fee to the financial institution for drawing up the agreement, which is usually around $1,000 USD, but it will depend on the property and institution.  Annual fees must be paid to the institution holding the trust, usually around $550.   It is important to remember that although the bank legally acts as the trustee and holds the title, your property is not an asset of the bank.  You as the beneficiary have every legal right.  The trusts are set up for 50-year periods nowadays, which are renewable, allowing the purchaser or their second beneficiaries to continue enjoying the rights of the property.  So at the end of the day, you buy your property, you can live in it, sell it, rent it, heir it, tear it down and start over, you own it!  The bank just holds the title for a small fee, so you don’t misplace it J.

Terry Gray Curtis is a veteran Century 21 Paradise Properties agent, he operates www.caboresortproperties.com & www.cabosecrets.com & a blog at http://blog.caboresortproperties.com Drop him a note to receive his very informative, bi‐weekly Newsletter. His e‐marketing program can give you incredible exposure if you are a Seller. Terry can be reached at  terry@c21cabo.com or USA Tel 310.272.9500 Mex Cel (011‐521) 624.151.5530