[quote=barnaby33]I’d be careful about that davelj. My parents have a fidocomiso. The bank owns the land. You get essentially a 50 year lease with at least one guaranteed renewal, but I still do not believe you own the land. Now if its 100 years I think its kind of splitting hairs, but to a lot of people there is a difference.
Josh[/quote]
Here’s the precise language:
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Foreigners most often purchase residential property through a 50 year Fideicomiso bank trust. For all intents and purposes the foreigner owns the land. A Fideicomiso trust is not a lease and never reverts to the original owner. The foreigner may sell the property, rent it and leave it to their heirs. The trust can be renewed at the end of fifty years. What happens after the second fifty year trust expires? Assuming you had not sold the property by then, you or your heirs would have the opportunity to renew it for another fifty years. When purchasing property with a Fideicdomiso trust, you will incur trust charges which include a permit from the Secretary of Foreign Affairs, recording fees with the National Registry in Mexico City, the first year annual administration fee, the bank acceptance fee and 10% IVA tax. Annual trust fees vary from bank to bank so you or your representative should shop the market. Apart from the Fideicomiso trust expenses the buyer will also pay the usual closing costs associated with a purchase which normally include the title search, appraisal fees, tax certificate, notary fees for the deed, filing fees, transfer taxes (1.5% of the purchase price) and recording fees.
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You can keep renewing the lease after each 50-year period, but… the lease rate is only guaranteed for the first two 50-year periods. Now, how the third 50-year lease rate is determined is a good question – no one will run into that issue for another 80+ years. Personally, it’s not something I’d worry about as I won’t be around nor will I have any kids as heirs. Furthermore, assuming I spend less than $175K on my place, it’s a complete non-issue from a present value standpoint.
Having said that… if a non-Mexican builds a $5 million house on a piece of prime real estate then there could theoretically be an issue way down the road for his/her heirs. But that’s probably the exception rather than the rule.
