History of the trust form of ownership in Mexico

Mexico flourished as a Spanish colony before the United States and Canada were meaningfully colonized by their European parents. Many of the great cathedrals and public buildings in Mexico City and Guadalajara, as examples, date to the mid 1500’s. Mexico gained independence from Spain in the early 1800’s (in a revolution inspired in part by the American Revolution of 1776), but the newly independent nation lost a great deal of its territory over the next several decades -- to the United States (most or all of California, Nevada, Arizona, New Mexico, and Texas)!

In many cases Americans had moved into Mexican territory and then agitated to have that territory become part of the United States.  A combination of American military might, the threat of its use, and in one instance American money spent to purchase territory outright, produced the current border.   Mexicans are still conscious of their loss of that territory.

In addition, by the beginning of the 20th century, decades of corruption and self dealing within Mexico itself had resulted in concentration of much of the nation’s land ownership in a favored few – and this included many foreigners as well as rich and powerful Mexicans and the Church. The bloody Revolution against the entrenched powers – really a civil war -- that began in 1910 and lasted for over a decade had as a primary objective the restoration of land ownership to the common Mexican citizen.   The drafters of the new constitution therefore included in that basic document an important provision defining a “restricted zone” in which foreign land ownership is forbidden.   It includes the entire Baja Peninsula, as well as all land within 50 km. of the shorelines and 100 km. of the national borders.  

Until the mid 1970’s, the only way for foreigners to have long term use of property in the restricted zone was through a lease – and many of the leases were of questionable validity. Many of the horror stories and legends we’ve all heard about the dangers of buying in Mexico arise from those leaseholds, which had their own unique set of problems and issues.   At that time however, the Mexican government, in an effort to create a safe means for badly needed foreign capital to come into the country, adopted a trust device that had long been in use in Monaco, to enable foreign investment and ownership without violating or changing the constitution.

In form and function, it works very much like an American living trust in which a bank trust department serves as trustee.   Under that special trust, known as a fideicomiso, a Mexican bank holds title as trustee (thus keeping the legal title in Mexican hands), and the foreign buyer (beneficiary of the trust, in American terms) has all the practical rights of ownership, including the right to sell, to mortgage, to will, to gift, to build upon, etc., just as though the ownership was outright fee simple.

Over the years the mechanism has been modified and strengthened, and confidence has grown, and currently at least three US title companies are writing title insurance policies on ownership held via these trusts.