THE BANK TRUST FOR OWNERSHIP OF REAL PROPERTY IN MEXICO
In recent weeks there has been a lot of discussion about eliminating the Fideicomiso as the vehicle for non Mexicans purchasing property in Mexico. This has been the subject of many rumors and half truths for more than a decade. Now a recent attempt to change Article 27 of the Constitution has failed. So the Bank Trust will remain with us for the indefinite future.
First let me explain the concept and then provide some history, before telling you what has happened with the Mexican government…
Article 27 of the Constitution of the Republic of Mexico prohibits foreign ownership of real property located within 30 miles of any coastline or 60 miles of either border. This is referred to as the “restricted zone.” It represents 43 % of Mexico’s land mass. The country’s favorite tourist destinations are all in the “Zone.” Because it is so long and skinny, it includes the entire Baja Peninsula.
In 1973, recognizing that many foreigners would enjoy the rights of ownership, and bring needed dollars to the country, President Echeverria approved the bank trust, fideicomiso, form of ownership which is available to non-Mexicans. Titles could be held in a bank trust for 30 years. This regulation was further expanded in the Foreign Investment Law of 1989. The bank is the primary beneficiary and the owner of the property the secondary beneficiary. The trust is not part of the bank’s assets so no worries there..
The term of the trust is now 50 years and can be renewed for additional fifty year period. In other words, title to the property may rest in one beneficiary indefinitely, provided that it is renewed within the terms established by the law.
The term of the trust is currently fifty years and can be renewed for additional fifty year periods, after which it must be transferred to "one entitled to hold property" in Mexico. In other words, title to the property may rest in one beneficiary indefinitely, provided that it is renewed within the terms established by the law.
A proposed amendment to Article 27 has been rejected and here is the story. …InMexico City, D.F. in April of 2013, the Mexican Chamber of Deputies approved legislation which would have amended the Mexican Constitution to permit foreigners to purchase property outright in Mexico's Restricted Zone.
Effectively this would have meant doing away with the Mexican bank trust as we know it today.. This proposed change to the Constitution has been rejected, according to a report issued by Mexico's Secretary of Government. (SEGOB).
Rejection of the proposed amendment was the result of not continuing with the amendment procedure within the time frame permitted under Article 89 Number 2, Section III of the Rules of the Chamber of Deputies. The failure of the imitative was announced in a SEGOB ( Secretary of Government) bulletin.
The result is that foreigners purchasing property in the Restricted Zone must continue to obtain titles using the bank trust system, the fideicomiso, initiated in 1972. It is not thought this subject will arise again over the next few years.
There are authorities on the issuance of titles in this matter who believe there is a positive side to the failed legislation. This has to do with probate. On the death of the Beneficiary, the title goes directly to the person(s) named as Secondary Beneficiaries.
In Mexico probate is a long a costly procedure. This can be avoided if the Trust has been established properly.
ABOUT THE AUTHOR: John Glaab is a founding member of AMPI Los Cabos. He is a Certified International Property Socialist and was named International Member of the Year in 2013 by the National Association of Realtors® John is Vice President of International Marketing at the Settlement Company®, Mexico’s oldest title and escrow company.John.firstname.lastname@example.org