In 1972, a constitutional amendment known as the Foreign Investment Law was established to allow non-Mexicans to acquire coastal and border property through a trust, called a “Fideicomiso,” in conjunction with a Mexican bank. This trust assures the foreign buyer of all rights and privileges of ownership, and is needed to own properties which fall into the “Restricted Zone.” The “Restricted Zone” includes any property located within 50 km (32 miles) of any coastline, or 100-km (64 miles) of any border. As of 1993, the new Foreign Investment Law dictates that the trust be established for a term of 50 years and extended in 50 year periods.
The Mexican government established the trust agreement as a way of protecting foreigners who own property in Mexico. After the buyer and seller have prepared the proper documentation to obtain a bank trust, the bank applies for a trust permit with the Ministry of Foreign Affairs in Mexico City (this takes 4 to 6 weeks), then sends it to a Notario Publico (Public Notary). The “Notario Publico” is a highly educated attorney (abogado), who is appointed to the position by the governor of the Mexican State where he practices. The Public Notary draws up the trust agreement, obtaining the necessary documents (bank appraisal, certificate of non-physical liens & non-encumbrance), calculates the taxes due, and informs the bank when the trust agreement is ready to be signed (stating the final closing costs). The bank informs the seller and buyer so that they can sign the trust agreement at the notary’s office. The notary will inform the buyer of the amount necessary to cover closing costs. All parties involved, seller, buyer and bank, sign the trust agreement. The notary records the trust agreement with the Public Registry of Property and then gives it to the bank. The bank in turn records the trust agreement with the National Registry of Foreign Investments. The notary then sends a certified copy of the trust to the buyer.
The bank, known as the “trustee”, holds the deed for the purchaser of the property, known as the “beneficiary”. This property is not part of the bank’s assets and cannot be subject to a lien, or attached to bank obligations. The beneficiary has all the ownership rights to the property and may sell, lease, mortgage, pass to heirs, or do any other legal act with the property. The trust is not a lease. The difference between a lease and a trust is that there is no equity in a lease, whereas a trust is fully maintained.
If property is purchased and currently held in a trust, a new 50-year period can be established or the existing trust may be assigned. Trusts are renewable at any time by simple application. It was never the intent that these properties pass back to the Government at the end of the trust period, which has been a common misconception and fear of foreign purchasers. In fact, at the end of the 50-year period, the beneficiary has an additional 10 years to renew the trust.
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