Fideicomiso in Los Cabos: Guide for Foreign Property Buyers

Fideicomiso in Los Cabos: Guide for Foreign Property Buyers

A fideicomiso is a Mexican bank trust commonly used by foreign buyers to hold residential real estate in Mexico’s restricted zone.

The restricted zone includes land within 50 kilometers of Mexico’s coastline and 100 kilometers of its international borders. Because Los Cabos, Baja California Sur is on the coast, foreign individuals purchasing residential property in Cabo San Lucas, San José del Cabo and surrounding coastal communities commonly use a fideicomiso.

In this structure, a Mexican bank serves as trustee, while the foreign buyer is the beneficiary. The bank holds legal title in its fiduciary capacity, and the beneficiary receives the rights established under the trust and Mexican law.

What is a fideicomiso in Mexico?

A fideicomiso is a trust agreement administered by a Mexican banking institution authorized to act as trustee.

For a foreign buyer acquiring qualifying residential real estate within Mexico’s restricted zone:

• The Mexican bank is the trustee.
• The foreign buyer is the beneficiary.
• The bank holds legal title in its capacity as trustee.
• The beneficiary exercises the rights provided by the trust and applicable Mexican law.

This distinction is important when understanding foreign property ownership in Los Cabos.

Does the bank own your property?

The Mexican bank technically holds title as trustee, but it does not purchase the property for its own benefit or treat the home as one of its ordinary commercial assets.

Subject to the trust terms and applicable law, the beneficiary generally has the ability to:

• Occupy the property.
• Use it as a primary or vacation residence.
• Improve or remodel it.
• Lease it, subject to applicable tax and regulatory requirements.
• Sell the property.
• Transfer the beneficial rights.
• Designate substitute beneficiaries.
• Incorporate the beneficial rights into estate planning.

In practical terms, the bank administers the trust while the foreign buyer holds the beneficial rights associated with the property.

Is a fideicomiso the same as leasing property?

No.

A fideicomiso is not a lease from the Mexican government or the trustee bank. It is a legal ownership structure through which a foreign buyer can hold beneficial rights to qualifying real estate within Mexico’s restricted zone.

How is a fideicomiso created when buying in Los Cabos?

A fideicomiso is typically established or modified as part of the real estate closing process.

1. Select and purchase the property

The buyer selects a home, condominium, villa or other residential property and negotiates the purchase terms.

2. Select the trustee bank

A Mexican banking institution authorized to act as trustee is selected.

Depending on the transaction, the buyer may establish a new fideicomiso or acquire a property with an existing trust.

3. Obtain the required authorization

When applicable, authorization is obtained from Mexico’s Secretaría de Relaciones Exteriores under the rules governing foreign ownership within the restricted zone.

4. Complete the notarial process

A Mexican Notario Público plays an important role in formalizing the real estate transfer.

Depending on the transaction, the process may include reviewing title information, liens, property taxes, condominium documentation and other closing requirements.

5. Transfer title to the trust

At closing, title is transferred to the trustee bank for the benefit of the foreign buyer, who is identified as the beneficiary.

Once the transaction has been properly formalized and registered, the buyer holds the beneficial rights associated with the property.

How long does a fideicomiso last?

A fideicomiso for property within Mexico’s restricted zone may be authorized for a period of up to 50 years.

This does not mean that a foreign buyer automatically loses the property when the original trust term ends.

The trust term can be extended or renewed through the applicable procedure.

When purchasing a property that already has a fideicomiso, buyers should determine how much time remains and whether the trust will be assigned, modified, renewed or replaced as part of the transaction.

Can you sell a property held in a fideicomiso?

Yes.

A foreign owner can sell property held through a fideicomiso.

Depending on the transaction, the sale may involve transferring the beneficial rights under the existing trust or terminating it and establishing a different structure.

The appropriate approach may depend on factors including:

• Buyer’s nationality
• Remaining trust term
• Trustee bank
• Property documentation
• Closing structure
• Tax considerations

Can children or family inherit the property?

A fideicomiso can provide for substitute beneficiaries.

These individuals may become beneficiaries following the death of the primary beneficiary, subject to the trust documents and required legal procedures.

For foreign owners of Los Cabos real estate, beneficiary designations can therefore be an important estate-planning consideration.

Can a fideicomiso have multiple beneficiaries?

Yes.

Depending on how the purchase is structured, a fideicomiso can identify more than one beneficiary. Spouses, for example, may acquire a property together and establish their respective beneficial interests.

The intended ownership and substitute-beneficiary structure should be addressed before closing.

How much does a fideicomiso cost?

Foreign buyers should expect establishment and ongoing administration costs that may include:

• Government authorization fees
• Initial bank trust fees
• Annual trustee administration fees
• Notarial and closing expenses
• Registration costs
• Professional or legal fees, when applicable

Actual costs vary by bank, property, transaction and acquisition structure.

The annual trustee fee is separate from other property expenses such as property taxes, HOA fees, utilities and insurance.

Buyers should obtain a transaction-specific closing-cost estimate before completing their purchase.

What happens if the trustee bank changes?

Property held in trust is not treated in the same manner as assets the bank owns for its own commercial purposes.

The bank acts in a fiduciary capacity for the beneficiaries.

When a trustee must be replaced, Mexican legal procedures allow for substitution of the fiduciary institution while preserving the trust structure and beneficiary rights, subject to the required documentation.

Do foreign buyers need a fideicomiso everywhere in Mexico?

No.

The fideicomiso structure is primarily relevant when foreign buyers acquire qualifying real estate within Mexico’s constitutionally defined restricted zone.

Outside the restricted zone, foreigners can generally acquire real estate directly in their own name, subject to applicable Mexican legal requirements.

Because Los Cabos is within the coastal restricted zone, the fideicomiso is particularly relevant to international buyers purchasing residential real estate in the region.

Fideicomisos and Los Cabos real estate

Fideicomisos are commonly used for residential properties in Los Cabos, including:

• Condominiums
• Single-family homes
• Villas
• Golf-community residences
• Beachfront properties
• Ocean-view homes
• Second homes
• Vacation properties
• Retirement residences

Properties held through bank trusts can be found throughout Cabo San Lucas, San José del Cabo, the Tourist Corridor and other coastal communities in Baja California Sur.

A resale property may already have a fideicomiso, while another transaction may require a new trust. The appropriate structure should be evaluated during due diligence and closing.

Fideicomiso vs. a Mexican corporation

Some foreign buyers consider a Mexican corporation as another potential ownership structure.

The appropriate choice depends significantly on the intended use of the property.

For an individual foreign buyer acquiring a Los Cabos residence for personal use, a fideicomiso is a common structure. Corporate ownership involves different legal, accounting, tax and reporting considerations.

Buyers considering corporate ownership for investment or business purposes should obtain advice from qualified Mexican legal and tax professionals before choosing a structure.

Frequently asked questions about fideicomisos in Los Cabos

Can an American buy property in Los Cabos?

Yes. U.S. citizens and other foreign buyers can purchase residential real estate in Los Cabos. Because the area is within Mexico’s coastal restricted zone, foreign individuals commonly use a Mexican bank trust known as a fideicomiso.

Can Canadians buy property in Cabo?

Yes. Canadian buyers can also acquire Los Cabos real estate using a fideicomiso when the structure is required.

Can I rent my Cabo property if it is held in a fideicomiso?

The fideicomiso can provide rights to use and derive benefits from the property. Owners who rent their property must also comply with applicable Mexican tax, licensing and regulatory requirements.

Can I sell my fideicomiso property?

Yes. Beneficial rights can be transferred as part of a real estate sale, subject to the appropriate banking, notarial, tax and closing procedures.

Can I change the beneficiaries?

Trust documents may be modified through the applicable procedures. Requirements and costs depend on the trustee bank and the requested modification.

Does a fideicomiso eliminate Mexican taxes?

No. A fideicomiso is an ownership structure and does not eliminate applicable tax obligations related to ownership, rental activity or the eventual sale of the property.

Questions to ask before establishing a fideicomiso

Before closing on a Los Cabos property, foreign buyers should understand:

• Which bank will serve as trustee?
• What is the initial establishment fee?
• What is the annual trustee fee?
• How many years remain on an existing trust?
• Who will be the primary beneficiaries?
• Who will be the substitute beneficiaries?
• How would a future sale be handled?
• What fees apply to future modifications or transfers?

A fideicomiso is an established structure for foreign ownership of qualifying residential real estate within Mexico’s restricted zone. For buyers considering property in Cabo San Lucas, San José del Cabo or other coastal areas of Baja California Sur, understanding the trust is an important part of understanding the purchase process.

Before acquiring Mexican real estate, buyers should review their specific transaction with qualified real estate, legal, notarial and tax professionals in Mexico.