Trust ownership for foreigners

Trust ownership for foreigners

The restricted zone, according to Article 27 of the Mexican Constitution, is all land located within 100 kilometers of any national border and within 50 kilometers of any ocean. Article 27 of the Constitution states that no foreigner will be allowed to acquire direct title to land within the restricted zone. However, Mexico’s Foreign Investment Law allows foreigners to acquire indirect title to land in the restricted zone through a Bank trust (fideicomiso).

A fideicomiso (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.

The Bank acquires title to the real property and is obligated to allow the beneficiary to use and enjoy the property as he sees fit (as long as the manner in which he or she does so is lawful). If the beneficiaries wish to rent the property to third parties they can do so by obtaining the necessary authorizations. Beneficiaries also have the right to sell the property when they please and to receive the benefits produced by such sale.

The Fideicomiso is also a great way to leave the property to the heirs, since then the Bank will take care of the transfer to the designated Substitute Beneficiaries.

The Bank cannot encumber or sell the property without the express written consent of the beneficiary.

Mexican law requires that all real state property transactions be done by a Notary Public.

The Notary Public in Mexico is a Federal authority, an attorney that has been through a special course to act in behalf of the State and therefore is legally responsible for the correct transfer of the property.

The Notary is obligated to register in his books the deed of transfer of title, have it signed by the parties involved and have it recorded in the Public Registry of Property that corresponds to the location of the property. Once the deed of transfer of title is signed in the presence of the Notary  and registered with the Public Registry of Property, the real property transaction has fulfilled the requirements of Mexican law.

The deed of transfer of title that is registered in the Notary´s books as well as with the Public

Registry of Property will contain the entire trust agreement and is the document that will prove  that you have rights to a certain piece of real property. Once the deed has been registered with the Public Registry of Property, the first deed of title goes to the Bank and the second deed of title is given to the buyer/beneficiary.

If you need to verify to authorities outside Mexico that you have invested in a foreign country, an “apostilled” or “legalized” copy of your deed of trust will be sufficient

The Foreign Investment Law permits trusts for up to 50 years, and such permits can be renewed.

Besides the above, some of the general terms of the contract of fideicomiso are as follows:

+ To establish a trust for a property in the restricted zone, it is necessary to obtain a permit from the Secretaría de Relaciones Exteriores (Secretary of Foreign Relations) which has a duration of 50 years, and is perpetually renewable and transferable.

+ The trust must be managed by a financial institution, such as Scotiabank, Banco del Bajío, Banorte, etc.

+ There can be more than one fideicomisario (beneficiary). If more than one fideicomisario (beneficiary) is designated, each will be co-beneficiaries of the property held in trust (unless otherwise established).

+ The Bank cannot sell or dispose of the property without the beneficiary’s written consent.

+ The beneficiary must pay an annual fee to the Bank for the administration of the trust, which, depending on the Bank, the fee will vary between $450 to $550 USD.

+ The Bank appears as the owner of the property. However, the beneficiary has all rights over the property, and the rights allow you to: sell, rent, remodel, build, etc.

+ The Bank’s approval is required to sell or assign the property rights. Instructions must be provided to the Bank through a letter, and the sale or assignment of the Trust rights must be made before a Mexican notary public.

+ You do not need to be a resident in Mexico to create a trust.

+ The trust can be extinguished when the beneficiary becomes a Naturalized Mexican. As a Mexican citizen, you can own property in a restricted zone with direct Title.

+ The trust is the beneficiary’s property and cannot be used by the Bank in any way.

 

If you have any questions about this process, please feel free to contact Coldwell Banker’s Closing Manager in Los Cabos. egaribay@cbriveras.com.

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