IF YOUR QUESTIONS ARE NOT POSTED HERE, PLEASE CONTACT US.
FIDEICOMISO: REAL ESTATE TRUST ON THE MEXICAN RESTRICTED AREA.
Fideicomiso? (Form Latin: Fedei Commisum. Fedei= Fait=Trust). Fideicomiso is one of the alternatives on which a foreigner in México can acquire and hold rights to a property on the restricted Area, according to the article 277 of the Constitution and what is provided by the Mexican Foreign Investment Law.
The strip of land of 100 kms from the border or 50 kms from the seashore is what we call restricted area.
Foreigners Individuals only can acquire properties that are in the restricted Area through a bank trust with an authorized Financial Institution for a period of 50 years same that can be renewed.
A bank Trust will allow a foreigner to establish a will in favor of his/her loved ones in regard to the property at no extra cost.
Is there any restriction on the size of the land I’m purchasing by means of a Fideicomiso?
Yes, according to article 14 of the Foreign Investment Law, the Ministry of Foreign Affairs shall determine on the permits for setting up a Bank Trust on a piece of land over 2000 square meters according to the economic and social benefit of that trust to the Nation. In other words, they require a commitment letter from the beneficiary of the trust to invest certain amount of money on the property in order to grant the permit for the Fideicomiso. (Again, this is for pieces of Land over 2000 sq meters.)
What are the requirements for the creation of a Trust Agreement
A Trust Requires:
The authorization from the Secretary of Foreign Affairs that is provided by article 11 of the Mexican Foreign Investment Law.
A trustee bank.
A deed attested and certified by a Mexican Notary, who is obligated to assure the authenticity and lawfulness of the transaction.
The parties in a Trust are:
Trustor / Grantor: Individual or legal entity which transfers one or more Real-Estate Properties through the trust ownership.
Beneficiary: Individual or legal entity with the appropriate capacity to receive the benefit granted by the trust deed, being able to appoint several beneficiaries to receive the benefits simultaneously or successively.
Trustee / Institution: Financial Institution, with appropriate capacity to act in México, who receives the property of the trust fund for the benefit of the Beneficiary and who must carry out specific duties with regard to the property.
SUBJECT-MATTER OF THE TRUST:
The subject-Matter of the trust is constituted by Real-Estate property transferred by the trustor to the trustee (institution), as well as the constructions, buildings and improvements, if appropriate, made by and on account of the beneficiary.
Like in many of the countries worldwide, a corporation is a legal entity for commerce purposes, and has legal life apart from their individuals (shareholders). In Mexico there aren’t one single individual owned corporations. To form a corporation in Mexico, there is need at least of two stockholders (or shareholders), the type of the corporation depends on the type of business.
Do the properties handled by Ballote and Associates Law Office have clear title?
Yes. All properties represented by Ballote and Associates have been surveyed, legally registered and are guaranteed to have clear title. We recommend our clients to request that we perform a thorough Title Search and as the case may be, we recommend that we perform a Due Diligence on the property.
As in the United States, zoning in Mexico varies from one area to another. Ballote and Associates at your request verifies the zoning of the property subject matter of the transaction before the agreements are signed, so that you can be sure of the permitted use of each property prior to closing.
How can I as a foreigner own ocean front property in Mexico?
To own a property in the Restricted Zone a trust, called a 'Fideicomiso' could be set up, with the foreigner as the beneficiary.
Another way to own a property in the restricted Zone is by creating a Mexican Corporation.
Which is better the Mexican Corporation System or the Bank Trust System?
Either way is legal, but, There are a list of limitations for the creation of the Trust.
A Mexican corporation, wholly owned by foreigners, can be the Mexican entity required by the Constitution to own property in the Restricted Zone. Now, foreigners can own the Mexican corporation and hold all the papers to it. Your Mexican corporation holds the deed, which means, you get to personally possess the deed. You no longer need to go through the bank to get approvals to build, sell, or improve your property and there are no bank fees.
An added benefit to establishing the Mexican Corporation is that your corporation can own more than one property. You do not need to form a separate corporation for each property, as is the case with the Bank Trust system. Also, if you should decide to sell your property in the future, you can sell your entire corporation, all of your stock, sell part of it, some of your stock, or sell just the property out or it, and keep your corporation.
Also, after you buy property via the Corporation system, you are permitted to file a dormancy election, which means, your company is "asleep", until you decide to activate it. The government intentionally made it very easy for foreigners to own property in Mexico. So much so, that in 1998, the Mexican Government noticed that the revenues from the Industry of Foreign Investment & Tourism, surpassed the revenues from the Oil & Gas Industry. Foreign investment & tourism is now their main source of income and the Mexican government welcomes your participation.
I have only myself and no friends. How do I form my Mexican Corporation if I need two stockholders?
Foreign corporations can be shareholders in Mexican Corporation, some countries allow to incorporate with a sole shareholder, thus, your one owner corporation can be your partner.
Is the Mexican Corporation a 99-year lease?
No it is not. Mexican corporation are recognized by the state and federal governments as a legal Entity with similar rights to individuals, one of this is to legally own property in Mexico. Every 99 years the corporation's charter will need to be renewed. You may not be around in 99 years, but your heirs might enjoy your legacy.
The 99 year term CAN be extended.
Can the Mexican Government take my property after I close?
No. There are real estate laws, protecting the rights of property owners whether they are foreign or domestic.
When are real estate tax notices sent out?
Real Estate tax notices are not regularly sent out in Mexico. At your request Ballote and Associates can arrange to pick up your tax notice each year and advise you the amount to remind and take care of the payment on your behalf.
How much are annual real estate taxes?
Annual real estate taxes in Mexico depends on the area, this is why is needed to make an inquiry before the Municipality to get a balance due on your property taxes account.
Ejido Lands is land which use was granted from the Mexican Government to a cooperative of Mexican families. However, they may have begun the process of converting the Ejido land from government, as a foreigner in Mexico, Ejido lands are not something you can own, so if you want to get involved with. Ejido members be aware that they do not own any of the land. They simply have rights to use the land. As a foreigner in Mexico, you have NO RIGHTS to use Ejido lands, even if Ejido members say that you can.
Is there a conflict of interest to represent the seller and the buyer?
In Mexico is not forbidden to represent both parties in a closing.
Do I have to attend on the closing for my property?
You do not need to assist for the closing if you don't want to. In fact, if you would like to save the cost of the return visit, you may close in absentia. The closing is handled via FedEx by Ballote and Associates.
You may, just as in the U.S., authorize your attorney to execute the final documents for you to close in absentia. This is a common practice and a high percentage of our clients chose to close this way.
Do I have to build within a certain time period?
If you acquire by means of a trust yes.
If you decide to create your corporation No. Unlike many places where you are required to build within a certain period of time, in Mexico, you may hold your land for generations if so desired.
What happens after I sign an offer to purchase?
As you are bind for such contract, the compromises on it have to be accomplished, this means that the seller has to transfer the property into your corporation or the Trustee Bank, and you have to pay the balance due on the total price of the purchase
The Federal Zone extends 66 feet (20 meters) back from the high tide mark. The federal zone is exactly what it says it is. It is an area on the beach which is owned by the federal government. Since it is owned by the federal government, you may not build your house in the federal zone. On inland bodies of water such as lakes and rivers the federal zone extends 33 feet (10 meters) from the high water mark. The federal zone is uniform throughout all 32 states in Mexico.
The beach concession is a permit which can be obtained. This permit enables a property owner who owns property adjacent to the federal zone to use the zone, for example, for the construction of a boat dock, a patio, deck, or gazebo. It does not permit the property owner to construct any part of his house in the federal zone. To keep the beach concession an annual fee must be paid each year.
What documents should a person make sure that they collect from their builder?
They should have a contract with specifications of the quality of the building materials and type of construction, as well as the time frame for the works.
Should an owner collect receipts on every wire transfer to a builder?
It is advisable to have somebody supervising the progress of the building and release funds accordingly.
When should you collect the receipts for the Social Security taxes?
The price of the construction as well as the contract should include the price for the Social Security.
What type of documentation do I need to write off my construction or to be able to prove the cost when it comes time to sell?
You need facturas for the materials, works and government fees. They must be issued in the name of the corporation and using the address for the corporation and the Tax Id number.
Do Americans have capital gains tax, when they sell?
Yes, They do. But there are some tax exemptions when the property is used for residential purposes, by means of a Fideicomiso.
Do Mexican owners have capital gains tax, when they sell?
Yes, They do.
A different question?
Contact us if you have questions or comments not found here.