The restricted zone is the area defined as being within 50 kilometers along coastline and 100 kilometers along borders, allows foreigners to acquire indirect title to land in the restricted zone by one method; through a bank trust.
The Mexican Congress has implemented a system which by means of a Mexican banks foreigners to acquire the property and place it in trust for the sole “use and enjoyment” of a beneficiary. This right includes the right to re-sell the property at fair market value any time during the trust. The preceding makes it possible for foreigners to have same rights as direct owners of a property.
A “fideicomiso” (equivalent to a Beneficial/Bank Trust) is a three-party contract by means of which the seller (settlor/fideicomitente) irrevocably transfers to a bank (trustee/”fiduciario”) real property so that a third party (beneficiary/”fideicomisario”) can use and enjoy such real property. The transfer of the real property from the seller to the bank is a definite and irrevocable transfer of title. Under Mexican law only an authorized Mexican banking institution can be a trustee.
Any Foreigner or Mexican can constitute a “Fideicomiso”, in order to purchase Real Estate in Mexico, including property inside the Restricted Zone. The buyer will hire a Mexican bank to act as a trustee on her/his behalf.
The “Fideicomiso” is established for a 50 year renewable period. During this period the Bank becomes the legal owner of the property all to the exclusive administration for the benefit of the Buyer/Beneficiary, who will have the use and possession of the property at all times. The foreigner may live on the property undertaking any alterations and/or improvements and at the same time having the ability to instruct the Bank on mortgaging, renting, selling or transfer the title of the property to another individual or corporation. The “Fideicomiso” can be used as a form of will for the property acquired in Mexico due that the law allows the foreigner to assign secondary beneficiaries in case of death. During this period, the Foreigner is able apply for a Mexican residence or FM3 Visa.
The Bank is responsible for the Buyer/Beneficiary to ensure precise fulfillment of the trust in accordance to Mexican Law, assuming full technical, legal and administrative supervision in order to protect the interests of the Buyer/Beneficiary. Note: The property held in a “Fideicomiso” is not considered an asset of the Bank at any time. The Bank only does what it is told by the owner.
For practical purposes, even in unrestricted zones many Foreigners and Mexicans, for that matter, prefer to hold their Real Estate under a “Fideicomiso”.