The Mexican Bank Trust System & Your Property Deed

Caribbean Murder Rates
By Robert Curley , About.com
 
According to the latest statistics, Jamaica has the fifth-highest homicide rate in the world, with 49 murders per year per 100,000 people, trailing only Iraq (89 per 100,000), Venezuela (65 per 100,000), El Salvador (55.3 per 100,000), and Honduras (49.9 per 100,000).
Other destinations in the Caribbean region with murder rates higher than the United States include:

There is much confusion and fear about the Fideicommissio or Mexican Bank Trust System.
When Non-Mexicans buy property in the 'protected zone' (within 20 KM of the coast or border they must create a trust with a Mexican Bank that holds the deed.  The deed does not become a asset of the bank. The bank has a fiduciary responsibility to hold the deed and follow your directions if and when you sell or transfer the deed. It is much like a trust you would create for your children.

Large parts of the United States, California, New Mexico, Texas and Arizona were once the possession of Mexico. Mexico has liberal property laws that allowed foreigners to own and hold direct deed. The rest is history. Through war and sales these lands were lost from Mexico.

To safeguard history from repeating itself and to protect its national lands the Mexican Governement ammended its Consitution to protect the property rights of Non-Mexicans and to protect their borders by means of the 'Bank Trust System'. This system has operated flawlessly for over 40 years.

What it means to you:
1. If you buy borderline or coastal property you must create a bank trust to place the deed in.
    Most of our clients use either Banamex (owned by Citibank) or Scotia Bank (a subsidiary of
    Canada's Scotia Bank. The cost of creating a new bank trust is approximately $2,200 USD
    which includes one years bank trust payment.
2. Most properties are aleady in a Bank Trust so you pay approximately $1,600 USD to transfer the deed into
    your name.
3. There is an annual Bank Trust Fee of less than $700.00 USD
4. You can put anyones name on the trust/deed such as your wife, a friend or a business partner.
5. You will have to name a beneficiary in the event of your death, the property would automaticly be transferred
    to the beneficiary's name.

 

The "fideicomiso" is set up through a Mexican bank for a period of up to 50 years and can be renewed for 50 years. To acquire the land the purchaser must obtain a permit from the Ministry of Foreign Affairs.

The buyer can lease, sell or transfer the property to another family member, and if he dies, his property can be passed to an heir. At the end of the 100 years the property can be sold.

In the trust there are three elements: The trust Settlor (Fideicomitente) which may be a physical or legal Mexican person, who is the owner of the property which is to be placed in trust; the Trustee (Fiduciario) which, by law may be only a credit institution and which holds the raw real estate; and the Beneficiaries (Fideicomisarios) the legal or physical foreign persons who are the beneficiaries of the trust who obtain the use and benefit of the property.

The bank (known as the trustee) holds the trust deed (known as the escritura) for the person or persons purchasing the property (known as the beneficiaries). This property is not part of the bank's assets and cannot be subject to any lien or attachment for any bank obligations. The beneficiary has all ownership rights to the property and may sell, lease, mortgage or pass on to their heirs as desired under law. A bank trust is not a lease.

The Mexican government established the trust agreement as a way of protecting foreigners interested in owning property in Mexico. The reasoning was that by making ownership pass through the trust process, there would be an automatic review of the transaction to ensure it was legal and unencumbered. The bank is required to check ownership, insurance and indebtedness of the property, providing further protection to the foreign owner.

Trusts are renewable at any time by filling out a simple application with the bank. It was never the intent that these properties pass back to the government at the end of the trust period. This is a common misconception and fear of most buyers. It may help in understanding the Bank Trust to compare it with the Deed of Trust, a type of financing instrument used in the U.S. People who buy homes, paying the full amount upfront, receive their titles right away. However, this rarely happens.

Under a deed of trust the buyer of a house has only "equitable title," or an equity interest, with the right to use but only a restricted right to sell, until the loan is paid off, after which the owner receives the actual fee simple title. Until then it is held by a trustee, usually a bank or title company. In Mexico the Bank Trust is also held by a trustee, but the buyer never receives the actual title. Realistically many homeowners in the U.S. never receive title to their properties either, because they sell or refinance their homes before the 30-year term of their loan is complete.

Title Insurance

Purchasers of Mexican real property can now receive Owner's Policies of Title Insurance that can be issued on both sides of the border from various companies to both U.S. and Mexican buyers. Most title insurance policies today are U.S. contracts of indemnity guaranteeing ownership rights as vested in a fideicomiso (bank trust) for residential property acquired by foreign buyers in the prohibited zone, or for properties held in a Mexican corporation for non-residential purposes (i.e. industrial and commercial).

Mexico is not unlike the U.S. in that there is a definitive legal framework for ownership of land by foreigners known as the New Foreign Investment Law (Dec. 28, 1993) and as mandated under Article 27 of the Mexican Constitution. In addition, there is formality and compliance in the development of real property. Regulatory statutes and procedures are mandated on a state-by-state basis and require a series of official approvals, permits, and authorizations, coupled with public disclosure and written notification by the governing public agency.