By Blake Harrington
You’ve been to Cabo a few times and with our perfect weather year-around, beautiful beaches, stunning sunsets, and attractive lifestyle, you are now considering a more permanent move to Cabo. You are not alone! In the past 10 years, thousands of residents in Cabo have migrated from the United States and Canada making Los Cabos their home. Owning Real Estate is entirely possible and many foreign investors/buyers have come to the market to pick up on great deals in stable and safe Baja California Sur.
The basics for foreign investment revolves around the method of purchase available for foreigners, a bank trust called the “Fideicomiso”. The Mexican government realized they needed to make foreign investment available in Mexico and passed the Foreign Investment Act of 1993. Since the Mexican Constitution prohibits foreigners from owning property within 60 miles of the U.S. border, or within 30 miles off the coastline (as Los Cabos is), a secure form of holding title was needed and created with the implementation of the North American Free Trade Agreement (NAFTA) in 1994. The “Fideicomiso” is a trust, just like an estate trust in the U.S., which gives the Purchaser all rights of ownership and is the legal equivalent of Deeded Property, as we refer to it in the States. In order to obtain rights of ownership, the Department of Foreign Affairs in Mexico City issues a permit to the Mexican bank of the buyer’s choice, which allows the bank to act as “Purchaser” of the property. Simply put, the bank acts as the “Trustee” for the trust and the Purchaser is the “Beneficiary” of the trust. The trust is not an asset of the bank - the banks only act as the Trustee to hold the trust.
Just like living wills and estate trusts in the U.S., the Mexican bank, or Trustee, takes instruction only from the Beneficiary of the trust. The Beneficiary has the right to use, occupy, lease/rent and possess the property, including the right to build and improve the property as well. The Beneficiary may also sell the property by transferring the rights to another individual. The term of the trust is 50 years, but the trust can be renewed for additional periods of 50 years indefinitely, thus allowing long term control over the property.