Realty Executives, Rocky Point Mexico WE SELL BEACH FRONT PROPERTY!

Brian & Heather Heffernan



The Mexican Bank Trust


The information below is intended for informational purposes only and is not to be considered legal advice.  If you have a legal matter regarding your current or pending bank trust, please feel free to contact us and we can put you in contact with licensed and legal attorneys and Notarios here in Mexico.

 

Q:  Can I own property in Mexico?

A:  Yes, foreigners may obtain direct ownership of property in the interior of Mexico.  By Mexican law, properties within  50 km of any ocean front and 100 km of any country border (the restricted zone) are acquired by obtaining a bank trust or by establishing a Mexican Corporation.  Puerto Penasco falls into this category as it is within the restricted zone and on the Sea of Cortez.  

Q:  Can the Mexican government take my property?

A:  Foreign investors often worry about their land being taken by the government.  Under the North American Free Trade Agreement (NAFTA), Mexico may not directly or indirectly expropriate property except for a public purpose.  This is the same as “eminent domain” in the United States.  If for some reason it is necessary to expropriate land, fair market compensation must be paid to the land owner.  Commonly, when we hear about the Mexican government “taking” property it is due to unpaid property taxes or building in a municipal area without permission. 

Q:  What is a Bank Trust?

A:  The Mexican Constitution does not allow direct ownership of real estate by Mexican foreigners within areas known as restricted zones as mentioned above.  In order to permit foreign investment in these areas, the Mexican government introduced “fideicomisos” (fee-day-e-co-me-sos), which roughly translates to “Bank Trust”.  This is basically a trust set up similar to trusts in the United States but a Mexican bank must be designated as the trustee and, as such, has title to the property and is the owner of record.  The Bank Trust has enabled foreigners, as beneficiaries of the trust, to enjoy unrestricted use of land on the coastlines or borders in order to realize improvements, expansions, and to profit from the sale of the property without restrictions.  

Q:  Can I purchase property within the restricted zone under a Mexican corporation entity?

A:  It depends, if you want to acquire for residence purposes you need to acquire with a bank trust.  If you want to acquire for commercial purposes you can acquire by establishing a Mexican corporation with certain procedures and requirements.  If you choose to do this it will place your property investment in the corporate expense bracket, meaning utilities, taxes, and the cost of maintaining your corporation. 

QWhat does a Bank Trust mean to me as a buyer?

A:  The Trust is a legal vessel for fee simple ownership but the Trustee is the legal holder of the property.  As Beneficiary, you have the right to sell your property without restriction.  You may also transfer your right to a third party or pass it on to named heirs.  

Q:  What benefits does a Bank Trust give me?

  • The beneficiary (you) can occupy the property for the life of the trust.
  • Title to the property can be transferred to the foreign beneficiary in the even that they have the legal capacity to hold such property, or to any legally qualified    person that the beneficiary has designated within the trust.
  • The trust can also be inherited to your family by naming them as Secondary Beneficiaries in the even of your death.
  • The property can also be sold to a person legally authorized to own land or to another foreigner via a trust.
  •  

Q:  How long is the Bank Trust good for?

A:  50 years 

Q:  Will I loose my property at the end of 50 years?

A:   No, the Bank Trust can be renewed indefinitely.  You remain in control and in possession of your property.  The beneficiary (you) has a contractual right under the trust agreement with the Mexican Bank to all benefits that may result from the use or sale of the property.  Under Mexican law the bank, as trustee, has a fiduciary obligation to respect the rights of the beneficiary.  

Q:  What happens to my Bank Trust if the bank fails?

A:  The Bank Trust will be transferred to another authorized bank.  The bank does not own the Bank Trust, you do!!! The property is not an asset of the bank.  

Q:  How does the Bank Trust actually function?

A:  Title of real estate is transferred to a Bank Trust with a Mexican bank acting as Trustee.  The agreement is formalized by the Mexican Ministry of Foreign Affairs issuing a permit.  The buyer is designated as the First Beneficiary in the Trust and the beneficiary rights and the transaction are recorded in the public record by a Notary Public (Notario).  By Mexican law, only the Notario has the power to make documents legal.  Notaries in Mexico are very different than in the United States, it is like having a licensed CPA and attorney all rolled into one and then appointed to the position by the governor of the state. 

Q:  What does being a “First beneficiary” mean?

A:  A first beneficiary is known as the owner.  This is the person or persons who will be making the decisions for the trust.  Multiple people can be listed as first beneficiaries but all must sign for any future transactions whether it is selling, transferring, or movement of the Trust. 

Q:  What is a Second Beneficiary?

A:   A second beneficiary is known as “the beneficiary of the owner”.  It is important to establish second beneficiaries for each of the first beneficiaries.  Exact terms, persons, and percentages must be laid out with the Notario when establishing the Trust.  Be sure to cover all your bases but it is usually best to keep the instructions as simple as possible.

  


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