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Ownership in Mexico Buying property south of the border In 1993, Mexico passed the Foreign Investment Act. The purpose of this bill was to establish a new legal framework for foreign investment in Mexico. The Foreign Investment Act permits foreigners to purchase and own real estate, and establish businesses, within the "restricted zone". The "restricted zone" is defined as property within 62 miles of any Mexican Border or within 31 miles of any Mexican coastline. The Act permits ownership within this district through a bank trust, or "fideicomiso". What exactly is a Mexican bank trust? A fideicomiso is a mechanism that enables foreign persons or companies to purchase property in Mexico. The sole purpose of the bank is to manage the trust for the benefit of the owner of the trust. The beneficiary of the trust, the foreigner, retains the use and control of the property held in trust and makes the investment decisions regarding the property. Please note that Mexican banks, acting as trustee for a foreign buyer in a fideicomiso, makes no warranty or guarantee of the title to the property nor do they provide restitution in the event of a title defect. The trust is a legal substitute for fee simple ownership, but in this case, the Trustee is the legal administrator of the property. As the beneficiary, you have the right to sell, lease, will, transfer or subdivide your property without restriction. Is the trust renewable? Yes, according to the Foreign Investment Act, trusts must be renewed at the request of the Beneficiary for a indefinite number of successive 50 year periods. In effect, they run in perpetuity. How does a Fideicomiso work? With a Mexican bank acting as Trustee, the Trust Agreement is formalized by the issuance of a permit from the Mexican Ministry of Foreign Affairs. The lot or home buyer is designated as Beneficiary in the Trust and the beneficiary rights are recorded in the public record by a Notario, or Public Notary. What rights does the Beneficiary assume under the Mexican Trust contract? As the Beneficiary, you will have the same bundle of rights as fee simple ownership in the United States. That is, you may live on the land, undertake any alterations and improvements, instruct the Trustee as regards to mortgaging the real estate, rent, sell, transfer, will, or mortgage it in your beneficial interest to another person or corporation. You have the obligation to pay annual property tax, water, electricity, and annual Trustee maintenance fees. What happens if the beneficiary should die during the legal period of the Mexican Trust contract? The Beneficiary has the right to appoint a substitute Beneficiary who will receive all the rights that arise from the Mexican Trust, if the Beneficiary dies during the life of the Trust. With this designation, your heirs will not need to follow any probate proceedings in Mexican courts. They would only have to give notice to the bank and show the death certificate and their identifications. Then, the bank will give instructions on registering the deed with the new owners of the Trust property. How secure is a Fideicomiso? Fideicomisos are an easy and safe way for you to own property in Mexico. They are government sanctioned and offer strong protection. Please be aware the 80% of Mexican banks are foreign owned. For example, Citi-group owns Banamex, the second largest Mexican bank, and Bank of America acquired interest in Banco Santander, Mexico's third largest bank. U.S. National Association of Realtors This is what was said at the National Association of Realtors meeting on November 5, 2001: "Owning a property in Mexico, when done properly, is absolutely no different from owning a property in Chicago...in Kansas City....in North Carolina...it can be just as safe and secure ...if it is done the right way!! I've been asked, isn't this more like a renewable long term lease? The answer is NO!! It is the only legal and secure method for residential property in the restricted zone. What are the disadvantages? None that I have ascertained!" The right way is through a fideicomiso. What additional steps should I take to protect my investment? The first thing a buyer must consider is, does the seller of the property have legal title to the property being purchased, and can the property be legally transferred? There have been many documented cases where foreigners thought they had purchased real estate, only to find out later that the seller was unable to legally transfer title. The seller either didn't own the property, or had not completed the required development procedures for selling real estate. Examples of this are ejido land not properly regularized, a condominium unit that does not have a recorded condominium regime (regime de condominio) or even the sale of a lot or house in a residential subdivision (fraccionamento) that does not have the required and state/municipal development approvals. Is there a way to verify clear title? Yes, with Stewart Title Insurance. Stewart Title is the only legal issuer of U.S. title insurance in Mexico. They investigate all the way back to 1917, when land was first privatized in Mexico. Stewart Title Insurance does the title search and in a case of clear title, will insure your property up to $1.5 million. Does the San Felipe Marina Golf Resort and Spa offer title insurance? Yes, we offer Stewart Title Insurance on all of our properties. |
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