SETTING UP A TRUST FUND: THE BEST WAY FOR FOREIGNERS TO INVEST IN REAL ESTATE ON THE RIVIERA MAYA
Investing in property on the Riviera Maya is currently one of the soundest investments around. Given that the Mexican Caribbean is one of the most visited and fastest-growing destinations on the planet, you’ve probably wondered what the legal requirements are for foreigners to be able to invest in this dynamic property market.
Mexican law states that non-nationals cannot buy real estate in a restricted area of Mexico, this being along a 100-km strip from the country’s land borders, and a 50-km strip from Mexico’s coastline. The state of Quintana Roo and the Riviera Maya form part of that restricted coastal strip.
Nevertheless, there is a legal way for foreigners to acquire property in a restricted area such as the Riviera Maya, which is either by drawing up a deed directly, legally and securely through a trust fund, or by setting up a Mexican company and buying the property through the company. The most recommended and common way for foreigners to invest in real estate is through a trust fund, since it’s the safest: it provides property autonomy and a series of other advantages for the property owner such as confidentiality, security and legal certainty. If you purchase a property through a Mexican company you expose yourself to the risk of being subject to any legal proceedings the company is involved in, meaning the property may be exposed to confiscation or repossession.
A trust fund is a risk-free legal mechanism that bestows security to foreign investors on acquiring real estate, in that they hold all property rights.
In other words, a trust fund acts as a contract in which property is transferred through a permit extended by Mexico’s Foreign Affairs Ministry for foreigners to purchase beachfront property. The trust fund is set up through a Mexican bank, which vouches for its operation as follows: through a trustee, who holds the property deed granted by the trustor or founder of the trust, who provides the properties. The trustor in turn transfers the property to the beneficiary, which can be one or more foreign investors, who hold all the rights to the property, such as occupying, leasing, selling, remodeling, modifying, expanding, or improving it, and using the property as a guarantee.
Foreigners who wish to exercise use and development rights over real estate in the restricted area can only do so by establishing a trust fund through a bank or credit institution, as set forth in the Law on Foreign Investment and its by-laws.
The duration of the trust fund is 50 years and the banking institution maintains the title deed, but the foreign investor holds the rights to the use of the property.
In the Riviera Maya several firms specializing in real-estate matters can advise you, and it is important to remember that the permit is issued by the Foreign Affairs Ministry and the only person with the legal capacity to carry out property deed transfers is a Notary Public.
Feel free to contact us so that we can provide you with further orientation and help you fulfill your dreams in a transparent, correct and legal manner.