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Why Do Non Mexicans Need a Trust...


FIDEI COMISO - TRUST - FOR REAL ESTATE INVESTMENTS

WHY: For historical reasons, in 1917 the Mexican Congress considered it a matter of national security to limit foreigners from owning property within 100 kilometers (62 Miles) of the borders, and 50 kilometers (31 Miles) from the coast, this has hence been included in the Constitution. Currently, even though it is true that foreigners still cannot record direct title in the so-called "Restricted Zone", as of 1971 they can establish a Trust of Ownership using a Mexican bank's trust services (in Mexico, only financial institutions can act as trustees). Also, Mexican companies in which foreigners hold stock no longer need a trust as long as the property is for business purposes (commercial, industrial, agricultural, etc.)

HOW: On the one hand, the bank holds the title but by law it can only act under instructions of the Beneficiary ("owner", for practical purposes) of the trust. On the other hand, the owner can act just as if he had recorded direct title, with the only "limitation" in case he/she sells the property, to have the bank sign the transfer documents to the new owner. Of course, all real estate rights, obligations and profits belong to the owner.

HOW MUCH? The bank charge for (first) establishing and (yearly) maintaining the trust, varies from one institution to another, ranging from flat fees to 5% of the assessed value at the time of purchase. These charges are usually in Pesos and can be updated yearly.

HOW LONG? Trusts are contracted for up to 50 years and the cost to establish it is now the same regardless of the specified period; thus the bank automatically drafts a contract for the longest term, unless the client instructs otherwise.

WILL IT CHANGE? Given the trend of new laws and Mexican politics, it is almost sure that in 15 years or less, this procedure will not be mandatory. When this happens, canceling the trust and taking direct title should take only some paperwork that can be handled by mail plus a small notary fee.

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