The Bank Trust For Ownership of Residential Property in Coastal or Border Areas
Ownership of real estate in Mexico is different from what we have become accustomed to in many other parts of the world. It is not necessarily better or worse.... just different! It makes sense to understand some of the basics when considering a purchase.
Article 27 of the Mexican Constitution of 1917 prohibits foreigners from owning residential real estate within thirty miles (50km.) of any coastline or sixty miles (100 km.) of either border. This area is known as the "restricted" zone.
In 1973, recognizing that many foreigners would enjoy owning a retirement or vacation home in Mexico, and would bring needed dollars to the country through such ownership, the Mexican bank trust, the Fideicomiso, was established and approved for the purchase of real estate located in the restricted zone. For the first time since 1917, a non-Mexican could invest in a recreation or retirement home and feel safe that his or her investment was secure.
Under the bank trust, legal title is placed in the name of a Mexican bank, in trust, under a permit from the Secretary of Foreign Relations. The Mexican bank holds the title to the vacation or retirement home for the buyer/beneficiary of the trust, the non-Mexican who purchased the trust rights in the property. The bank administrates the property in accordance with the instructions of the buyer/beneficiary. The buyer/beneficiary enjoys the same rights of ownership as does a Mexican national. He may build on the property, tear down existing buildings, modify them, rent, lease or sell at any time conforming only to internal bank regulations for this type of trust and to the general laws of the country established for all persons. Additionally, the beneficiary may finance the purchase and instruct the trustee bank to enter into the security agreement with the lender.
The trustee bank may not, without express written consent from the beneficiary, sell, transfer or encumber the property.
The beneficiary may name the parties he or she selects as co-beneficiaries and may name substitute beneficiaries upon death of the primary beneficiaries, thus avoiding probate in Mexico. Care must be taken however, in establishing the wording and terminology used in the succession of rights in conformance with applicable Mexican law.
A permit to establish a Mexican bank trust (fideicomiso) can now be obtained for a term of fifty years and can be renewed. In acquiring a property with an existing trust, the seller may assign the rights in the existing trust and the new buyer will enjoy the term established in the original trust permit. In other words, a trust established in 1995 will expire in 2045. Prior to 1993, the term of the trust was thirty years. Thus a trust established in 1990 would expire in 2010, unless extended or the original trust permit extinguished and a new permit obtained for fifty years.
The cost for the permit issued by the Secretary of Foreign Relations is currently about $ 1,000.00 U.S. dlls. and bank trust administration fees generally range from $200. U.S. to $750. U.S. annually. There are other expenses involved in the acquisition of a property, however, and it is wise to request a written estimate prior to beginning the transfer process.