BANK TRUST INFO

BANK TRUST INFORMATION

Courtesy of Hutchison Baja Realty

The Mexican Government created a legal instrument for permitting foreign investment in the tourist zones called the Real Estate Trust. Through the establishment of a trust, foreigners can hold the same rights to the land in question.

If you decide to buy in Mexico, there’s no need to create a new bank trust. Every community like San Antonio Del Mar, Las Gaviotas, and Baja Mar Country Club, have existing master trusts, and are associated with a bank that holds them. The property owner will transfer all of the trust rights to the new buyer. After the purchase, your home is recorded in the office of PUBLIC RECORDS OF PROPERTY along with your parcel number. Your realtor and a notary public will handle these transactions for you.

WHAT IS THE DIFFERENCE BETWEEN PRIVATE PROPERTY AND A TRUST? There is no substantial difference, in Mexico; a Mexican citizen can hold a title of legal private property. For foreigners the title has to be held by a Mexican Trust Bank, considering that the rights of use and enjoyment would be granted exclusively to the foreigner. This includes the right to sell, lease, rent, upgrade, and all other right of a private owner.

HOW A TRUST IS FORMED? A foreign individual or a corporation with any proportion of foreign participation is the beneficiary of the land trust and holds a personal right to use, lease, sell, modify or live on the property. Mexican law specifies that only authorized institutions may act as trustee and exercise the trustee's responsibilities, and that the beneficiaries' personal property rights must be exercised through the bank. Of course, as any other formal transaction in Mexico, some legal requirements and documents have to be provided to Mexican government to apply for the establishment of the land trust. The owner of the property will provide all of these documents.

WHO ARE THE PARTIES IN A TRUST? The parties to a real estate are the following:

THE TRUSTOR. A Mexican citizen or a Mexican corporation, with no foreign participation. The original owner of the real estate, is the party that places the property in a trust.

THE TRUSTEE. As indicated previously, the trustee is the banking institution, which holds the trust over the land for the benefit of the beneficiary.

THE BENEFICIARY. Is the party who buys beneficiary rights from the trustor, almost always is a non-citizen, since Mexican citizens would ordinarily buy direct ownership.

WHAT ARE THE RIGHTS AND OBLIGATIONS OF THE BENEFICIARY? The beneficiary has the obligations of paying the transfer taxes, notary fees, register expenses and trustee fees; also has the obligation as any other citizen, to respect the laws of Mexico and the regulations of the State of Baja California concerning the real estate property. For any real estate transaction it is necessary to obtain a certificate of free encumbrances, a document that describes who is the actual owner according to the public record. As you can see this is the best guarantee to obtain security under Mexican legislation.

HOW LONG DOES A TRUST LAST? The trust lasts 50 years.

WHAT HAPPENS AT THE END OF THE TRUST? A law in the Mexican Government provides that at the end of the 50 years, 6 months before the end of the trust, the beneficiary can renew the exciting trust for another 50 years.

WHAT ARE THE AMOUNTS OF TAXES, EXPENSES AND FEES TO BE PAID WHEN THE TRUST IS SET UP AND WHICH ARE THE BASIS FOR SAID CHARGES? An appraisal made by an authorized Mexican bank is necessary to formalize the trust and this appraisal is the basis to make the payments of the taxes, expenses, etc. The transfer tax and the Notary fee (including appraisal, register, etc.) are aprox. 5% on the value of the appraisal to be paid once at the beginning of the trust. The amount it’s between $ 2,000 to $ 4,000 dlls.

IS IT POSSIBLE FOR NON CITIZENS TO HAVE MORE THAN ONE TRUST IN MEXICO? Yes, as long as permission from the Ministry of Foreign Affairs of Mexico is obtained. There is not limit to date, a foreigner can have various trusts in Mexico.

IS IT POSSIBLE TO SELL OR TRANSFER THE BENEFICARY RIGHTS ON THE TRUST PREVIOUSLY TO THE EXPIRATION OF THE TRUST? Yes, like in private property, it is possible to sell any time during the 50 years of the trust. The rights can be transferred to another foreigner or can be sold to a Mexican citizen.

IS IT POSSIBLE TO PUT THE TRUST IN TWO OR MORE NAMES? Yes, in this case said rights will be treated as co-property between the actual beneficiaries.

WHAT HAPPENS IN CASE OF DEATH? If the trust owner dies, you can name the persons (children, parents, etc.) that will be the beneficiaries in case of death. Give these names to your broker at the time of purchase.