Categorized | Residential

How Does a Fideicomiso Differ from a Lease

If you want to buy a property in Mexico, the first thing you need to think about is the location of the property you want to buy. A foreign national can buy a property in the nation directly from the owner. However, if the property is located within the restricted zone, near the coast or the border, you may have to buy it through a fideicomiso.

The way a fideicomiso works in Mexico is similar to the way a bank trust operates in the US. In this arrangement, a Mexican bank serves as the trustee and the foreign owner acts as the beneficiary.

A common misconception is that a fideicomiso is similar to a lease agreement. If you think so, you need to think again. The two types of agreements involve real estate properties. The resemblance ends there. The two arrangements are completely different from each other in form and function.

Let’s take a close look at the ways in which the fideicomiso differs from the lease.

Fideicomiso Makes You an Owner and a Lease Makes You a Tenant

A fideicomiso gives you the rights as an owner; a lease gives you the rights as a tenant. You can use a property whichever arrangement you opt for. However, this is the only right that a lease agreement can give you. Some agreements also have a sub-let clause, which gives you the right to rent the property or part of it to someone else.

A ban trust arrangement offers much more; if you use it to buy a property in Mexico, you can rent or sell it whenever you like. You can use it to borrow money from a financial institute. You can also leave it to a family member or friend. It gives you every right that an owner enjoys, and not only the ones enjoyed by a tenant.

Rights over the Improvements Done to the Property

You own any improvement on the property you buy through the fideicomiso; any developments to a leased property belong to the landlord. If you choose land for sale in Cozumel, buy it through a bank trust agreement and built a house there, you would have the ownership right of this structure.

On the other hand, if you have taken a property on lease, you don’t own any developments you make to the property. Whether you built an additional room or renovate the entire house, it would still be the property of the landlord. Moreover, most lease agreements don’t allow tenants to do extensive modifications to the property.

Continuity in the Rights to Enjoy Using the Property

Future renewals are guaranteed on a fideicomiso; no provision of future renewal guarantee is available with a lease. The bank trust arrangement is created with the guarantee that the future renewals would continue into perpetuity. This ensures that you can use the property throughout your life and leave it to family or friends.

A lease agreement cannot contain any guarantee about its continuance. It is often possible to get an extension on the agreement; however, there are no guarantees for this. The property owner may not renew the lease after the specified period is over. As a tenant, you cannot challenge this decision.

If you want to invest in Mexican real estate, a fideicomiso can make the task easier.

The first thing you need to do is to talk to a competent real estate agent. Without adequate knowledge of the real estate market, you may find it difficult to work out the details of the arrangement. You also need to discuss the details with a legal advisor proficient in Mexican property laws to make the transaction a hassle free experience for you.

 

 

Ricardo Garcia works as a property consultant in Mexico. He offers advice and assistance for investors interested in Mexican real estate. His tips and suggestions help you choose the right property, whether you need land for sale in Puerto Morelos or vacation houses in Cancun.

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