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:
1.A copy of the real
estate title or deed
indicating the exact
surface area and
boundaries.
2.A copy of a draft of
the property.
3.The name(s) of the
beneficiary or
beneficiaries,
nationality, address and
phone number.
4.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
government 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
possession 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 transferring
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.
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