Bye, Bye Fideicomiso! Could it Really Be True?

2013 April 26

PLEASE READ THIS AND SHARE WITH YOUR FRIENDS!

If we were communicating today by drums, the air around La Paz would be vibrating with the coconut telegraph sounding the word, about the impending doom of the fideicomiso. Gringos are all abuzz thinking that they will be able to shed the annoying fideicomiso that is the instrument that allowed them to buy their little piece of paradise. And perhaps they will, but not this week or this month.

The Mexican government changed their constitution in 1997 to make it possible for foreigners to own property in the restricted zones of Mexico. Those zones are 50 km from the coast and 100 km from a foreign border. The fideicomiso ( a trust-like contract) was amended and adapted so that foreigners could safely and legally own property on the beach.

The original logic behind creating restricted zones was to keep foreigners from aiding invading navies or armies. It is highly unlikely today, that Belize or Guatemala or even Uncle Sam will invade by land or sea, or invade at all.

Foreigners owning homes in Mexico complain about the recurring administration fees for their fideicomisos. The fiduciary banks do nothing really, and yet they get their $450-600 dollars every year.

For years we have been hearing that any minute now the federal government was going to do away with the fideicomiso. Well the time seems to have come. A bill was presented to the federal congress to eliminate the fideicomiso.

It passed.

It is now awaiting discussion in the Senate. Once the Senate approves the bill it goes to the president for signature.

But wait! Even after the presidential signature It is not law yet! The signed document must be published in the Diario Nacional (like the Congressional Record in the US).

So, don’t go running to the bank and demand that they close your fideicomiso.

It isn’t going to be all that easy.

First the Senate and others need to decide how the Calvo clause will work if foreigners will now have escrituras ( Mexican fee simple titles). The Calvo Clause is used the world over , in Mexico it is part of the fideicomiso and when you sign your new fideicomiso, you agree to act as a Mexican national and will not try to invoke the laws of your native country when it comes to issue surrounding your property.

Then there is the Investment clause. And this clause states that if you have land larger than 2,000 square meters you must develop it within 24 months and spend at least $250,000 on the improvements. And that investment figure goes up as the size of the property goes up.

Oh and then there is the Secretary of Foreign Relations known as the SRE here in Mexico. When I closed transactions for buyers in Guadalajara and San Miguel de Allende, even though there was no fideicomisos, there was still a permit issued by the SRE. These take time and cost money.

Escrituras are titles that Mexican citizens get when they buy land. There is no SRE permit, no Calvo or Investment Clause in the existing escritura. So how will this work for foreigners? Someone has to figure this out.

My sources say the Senate may very well pass this law, and the president will sign it IF:

  • · If the US doesn’t do something objectionable that affects Mexicans
  • · If the banks don’t somehow throw a monkey wrench into the works
  • · If the bill does not have too many additions or deletions that the president cannot abide

This is wonderful news for new buyers, for  foreign owners, and for real estate attorneys and notarios.

Closing costs may be significantly lower for new buyers.

Existing property owners can drop the fideicomiso and save $400-600 a year, that’s a lot of tequila.

Real estate attorneys and notarios will make more money. And houses can sell and transactions can close more quickly

BUT! Already one buyer has wondered why they should buy now and pay for a fideicomiso that may be no longer necessary in 6 months or a year. The excitement  and the spreading  of misinformation may affect the decisions of buyers.

Could we have a moment of silence while everyone reads this blog post and shares it?

I am as happy as everyone else to wish the fideicomiso farewell, but I can see the issues that have to be ironed out.

We have at least six months, and more likely a year before anything changes.

Watch this space for new developments.

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7 Responses leave one →
  1. April 26, 2013

    Nicely written article Susan. I agree with everything here and it is in line with the views I have heard from other lawyers and professionals.

    And as your post says, we are still a long way from this being actionable however it is a very good sign and as Real Estate professionals we need, as I know we will, to stay right on top of this so that we can advise our clients as best as possible.

    The government has said that the main reason behind this move is to help reignite the real estate markets, particularly in Los Cabos and in Cancun. La Paz will certainly benefit from this too and this is one of the reasons that not buying now is not necessarily the best move.

    If things pick up quickly after a change takes affect then those who waited may be those who missed out on the chance to make some money.

  2. Chuck Whitt permalink
    April 26, 2013

    Is the $250,000 pesos or USD? If it’s USD, then there are going to be a lot of owners like me that are going to be priced right out of Mexico.

  3. Judy Peterson permalink
    April 27, 2013

    Susan really does her homework and knows her stuff. That’s why, when friends are looking for a realtor, I recommend Susan.

    Judy

  4. April 27, 2013

    Chuck,
    The $250k USD rule applies only to lots over 2,000 square meters. And we don’t know how the change in the law will effect the investment clause.

  5. Mercy permalink
    April 30, 2013

    Hi, just wanted to add that it also needs to be approved by 16 STATE LEGISLATURES …here is a good article link

    http://www.topmexicorealestate.com/blog/2013/04/25/bill-to-eliminate-bank-trust-whats-the-next-step/

  6. Ray permalink
    September 16, 2013

    Any recent developments on this issue?

  7. roy burgk permalink
    December 11, 2013

    hi susan, found your article on the internet and found it very interesting. my dad has recently passed away and of course left us with a debt free home in Baja Mar near Ensenada. The problem is I live in Florida and the home is under these Fideicomiso rules which are hard to understand to say the least. We would like to sell this property and I am hoping you or your readers have some advise. thanks roy

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