Bank
Trust Information |
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. |
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