Mexican laws allow foreigners to acquire the rights to use, enjoy and avail real estate located in coastal and border area of Mexico. Through a trust contract ("fideicomiso"), foreigners can acquire land in Mexico for touristic or industrial purposes with the same rights and obligations that a full ownership property gives.
What is a Trustee?
In Mexico banks are authorized to open fiduciary accounts and conduct trust operations. The Trustee holds legal title to the real estate property during the term of the trust contract, and is also empowered with the rights necessary to achieve the objectives of the contractual agreement that creates the Trust.
What characteristics would a Trust Contract have?
The legal effects of the Trust Contract is that the Trustee will keep temporary ownership of the real estate, thus complying with Mexican laws —namely, Article 27 of the Mexican Constitution— that prohibit foreigners from acquiring full ownership of real estate along what is known as the Restricted Zone, a belt of land 50 kms wide along the coastlines and 100 kms wide along the borders of Mexico.
In the Trust Deed, the present owner of the land would appear as the settler or Trustor ("fideicomitente") and would thereby deliver the title of the real estate to the Trustee, who would hold the property during the term of the Trust Contract —ten, twenty, thirty, forty or fifty years, at the buyer's selection. The buyer in turn, who appears as the Beneficiary ("fideicomisario"), is the person having the absolute use and avail of the property.
Therefore, while as a foreigner you cannot register titles to land within the Restricted Zone, you can certainly own the beneficial interest of the Trust contract. In a way, it is similar to owning 100% of the shares in a corporation, and thus for most practical purposes it is like ownership.
What are the requirements?
You or the seller must provide the bank with the following information:
- A copy of the real estate title or deed indicating the exact surface area and boundaries.
- A copy of a draft of the property.
- The name(s) of the beneficiary or beneficiaries, nationality, address and phone number.
- The agreed purchase price.
Upon receiving the information and documents, the bank will present an application for a Trust permit at the Foreign Affairs Ministry. Once obtained, the Trust Contract is executed and legalized before a Public Notary.
It should be noted that Notaries in Mexico have far greater legal competence than those in the United States. A Public Notary is an attorney at law authorized by the goverment to formalize title transfer processes in his Books of Protocols. The resulting documents are then registered at the Properties Public Registry, giving legal evidence of the title in the buyer's name.
What rights and obligations does the Beneficiary acquire upon celebration of the Trust Contract?
As the Trust Beneficiary, you will have the use and possesion of the property —that is, you may live on the land and undertake any alterations and/or improvements. You also have the capacity to instruct the Trustee on mortgaging, renting, selling or transfering the real estate from your beneficial interest to another person or corporation.
If you sell the property to another foreigner, you may assign your beneficial interest to the new purchaser. This assignment of rights must be formalized before a Mexican Public Notary prior to the payment of federal and local taxes and fees that arise from the transfer of beneficial rights.
You will also have the obligation to pay duties on the property, such as annual property tax, condominium maintenance fees, water, electricity, annual Trustee fee, and so forth.
What fees will the Trustee charge?
The fees which the Trust Division of Bancomer, for instance, charges for this type of Trust are:
- Trustee acceptance charge - $600.00 USD, plus Value Added Tax, payable upon signing the Trust Contract.
- Trust handling and services - $600.00 USD per year, plus Value Added Tax, payable in advance. This fee will be increased by the Trustee every two years, according to United States inflation rates.
On every anniversary date of the Trust the bank will mail to your address the bill of the annual fee for keeping the property in Trust.
What other expenses must the Beneficiary cover upon celebration of the Trust Deed?
You must pay all fees, taxes and expenses that arise from the purchase and formalization of the Trust Deed before a Mexican Public Notary.
You must also cover the costs of the permit that must be obtained from the Foreign Affairs Ministry, and of registering the Trust Deed at the National Registry of Foreign Investments.
What happens if the Beneficiary passes away during the legal period of the Trust Contract?
The Beneficiary has the right to appoint a substitute Beneficiary or Beneficiaries, who would acquire all rights and obligations stemming from the Trust Contract in the event of the Beneficiary's death during the Trust's span.
Through such designation your heirs will never need to follow any probate proceedings before any Mexican courts that could cost time and legal fees. They would only need to present the death certificate and IDs to the bank, which in turn would give instructions to a Public Notary in order to register your heirs as the new owners (Beneficiaries) of the Trust property.
What happens when the Trust Contract expires?
A presidential decree was issued on December 27, 1993, to establish a new Foreign Investment Law. According to its Article 13, the Foreign Affairs Ministry may allow the renewal of Trusts within the Restricted Zone upon the expiration of their term.
Furthermore, the Foreign Affairs Ministry may also authorize a new Trust over real estate to be transferred from one Trust to another for a period of up to 50 years, when the Beneficiaries of the original and new Trusts are different.
For further information please contact a
RE/MAX Playa Sales Associate.