FAQ's
How does Mexico’s Federal or Restricted Zone work?
The constitution of Mexico has adopted legislation that does not allow
foreign ownership within 100 kilometers (about 60 miles) of any border
and 50 kilometers (about 30 miles) of any coastline, waterway or
riverbank this is a protected federal area, or “restricted zone.” What
that means is that a non-national or non-Mexicans are not allowed to
buy or own in this area except through a bank trust. Last mid-century
the government created a system wherein a fideicomiso or bank trust as we know it in English, is set up to acquire property in these areas.
What is a fideicomiso? (fi-day-co-mi-so)
Different than fee simple ownership only in form, a fideicomiso
or trust is extremely safe legal vehicle to hold title to your real
estate investment. Like fee simple title you as the beneficiary of the
trust can instruct your trust administrator to sell, encumber or even
bequeath the property to the heir of your choice. The federally
recognized trust document/agreement is recorded and serves as a
contract between the purchaser / beneficiary and the bank. By securing
a permit from the secretary of foreign ownership which has offices in
most major cities, you have begun the process. Don’t worry any
repeatable real estate professional can guide you thru the process. The
fideicomiso / trust is renewable every fifty years imperpatuity. Contrary to misconceptions the fideicomiso / trust is not a lease .
What role do the parties involved in a fideicomiso / trust play?
The
entity or individual creating the trust, is the trustor , traditionally
the original seller or landowner. Because the trust is irrevocable,
once it’s incorporated, the trustor has no power to change any part of
it or participate in it.
Any
bank registered with The Mexican General Law of Credit Institutions can
be the trustee. These banks are highly monitored and fall under strict
guidelines and regulations as well as being monitored by the Ministry
of Finance and Public Credit, the Bank of Mexico and the National
Banking Commission. Any such trustee cannot participate as beneficiary
of the trust. In fact, all instructions come from the trustee with
empowerment of rights to achieve objectives outlined in the same trust
agreement, acting simultaneously on behalf of the foreign beneficiary
in all of the transactions held under that trust agreement...
Nine times out of ten the purchaser is usually the beneficiary of the
trust, with all of the powers of fee simple ownership: using and
improving, enjoyment of the property, able to use it as collateral, and
selling or renting the property .in simple for us non lawyers, there is
no difference between a trust and simple ownership in use, benefits or
appreciation of the property.
When
the death of the primary beneficiary occurs the rights are transferred
to the substitute beneficiary, there is no will required. It is a much
simpler process if the heirs are listed in the trust document itself
rather than having to go to court to gain the rights to the property.
What Taxes do I have to pay on a property?
Property
taxes in Mexico as an owner ,run a rates significantly lower than those
of the United Stated and Canada typically lass then one half of one
percent of the recorded property value. These property taxes are paid
in at the beginning of each year.
When
you buy a property in Mexico, you as the buyer pay the property
transfer tax, which is 2% ,you should calculate into your over all
closing costs
Certificate of No-Liens or no encumbrance
Thru the closing process your real estate professional who assist you
thru the easy closing process will obtain for you, a certificate that
shows that the property you are buying has no liens or encumbrances
against it. Foreign Relations Permit
A
foreign relations permit is required to establish a trust. This permit
is obtained during you closing process and is provide by the notary who
is a government appointed official who acts as the county registrar the
permit obtained from the Secretary of Foreign Relations to establish a
trust, must also state the indicated usage of the property. If it’s
still a vacant lot, there should be included a development plan in
addition to the amount of the proposed investment and the timeframe for
completing the project. The Notary will obtain this permit in lieu of
the buyer. Bank Administration Fees for the trust
Annual administration $500 USD per year.
(Escritura Pública) Public Deed
The deed acts as your grant deed and conveys title form the seller to
the buyer. The deed is recorded and formalized when completed at the
Property Tax Office and the Public Property Registry
Notario Público (Notary Public)
The Notario Público is a government lawyer who is specially appointed
by the governor of the state to regulate and validate all real estate
transactions; they must have a minimum of 5 years practicing as a
lawyer in Mexico. It is almost like being appointed as a judge if you
were to compare to the United States or Canada the position is highly
regulated because the notario público represents the public interest
instead of private interests. Responsible for performing all recordings
related to deeds and property as well as the title search in all real
estate transactions, the notary plays an integral role in the
real-estate process in Mexico. The notario público ratifies each real
estate transaction by drafting the public deed and verifying the
signatures in each closing. His additional duties include:
- verifying the validity and legitimacy of each document of the selling party
- verifying the title of said property
- verifying the status of the seller’s title by searching public documents for existence of liens
- calculating and handling payment of both buyer’s and seller’s taxes
The process requires two weeks once the documents are in the possession of the notario público.
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