FIDEICOMISO - RealEstate Trust within the Mexican Restricted Area

By Hector Lara

Fideicomiso?

(From Latin: Fedei commisum. Fedei=Faith=Trust). Fideicomiso is the only option which a foreigner in Mexico can acquire and maintain a property on the restricted zone, according to the article 27 of the Constitution and the stipulated in the Mexican foreign investment law.

Fideicomiso that is made when a foreigner is going to acquire a property that i son the restricted zone, according the article 27 of the Mexican United States Politic Constitution (Constitución Politica de los Estados Unidos Mexicanos), witch says “In the area along 100km from the borders and 50km from beaches, by any circumstance a foreigner could get direct domain over land and water”

The foreigners only can acquire properties that are in the restricted zone through a bank trust, which can have duration of 50 years.

Is there any restriction on the size of land I am purchasing?

Yes, acording to the article 14 of the foreign investment law, the Ministry of Foreign Affairs shall decide on the permits for seting up a bank trust according to the economic and social benefit of that trust to the Nation. In other words, they requiring a commitment from the beneficiary of the trust to invest certain amount of money on the property in order to give the permit for the fideicomiso.

Constitution of the Mexican United States

Article 27 section I.

Provides that in no manner foreigners may acquire the direct ownership of land and water within an area of 100 KMS. among the borders and area of 50 KMS. among beaches; such area is identified as “Restricted Area”.

Foreign Investment Law

Article 11

Through trust deed foreigners are allowed to acquire rights over Real-state within such called “Restricted Area”; The aforementioned is subject to prior authorization by the Secretary of Foreign Affairs.

Article 13

The maximum duration of a trust is 50 years, which is extendable.

Article 14

The Ministry of Foreign Affairs shall decide on the permits to which this chapter refers, considering the economic and social benefit that such operations imply for the Nation.

Any application to obtain a permit must be resolved upon by the Ministry of Foreign Affairs within five business days following the date of the application with the competent central administrative unit or within thirty business days if submitted before the state offices of said Ministry; otherwise, approval shall be deemed to have been granted.

The Trust deed

By virtue of the trust deed, the Trustee (Institution) Receives one or more Real-state properties and destines such estates to any lawful and determined purposes in accordance to the purposes entrusted. “The Trust Agreement is a trusting commission”.

Parties in a Trust Agreement

Trustor / Grantor: Individual or legal entity which transfers one or more Real-states 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 the appropriate capacity to act in Mexico, 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 is constituted by the Real-state 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.

Purposes of the Trust

The benefits of this kind of trust agreements are the following :

• The Beneficiary acquires the right to use and enjoy the Real-Estate subject-Matter of the Trust.
• The Beneficiary shall have the possession of the Real-Estate with all authorities to occupy it.
• Alternate Beneficiaries may be appointed for the event of death, who shall enjoy the benefits in a simultaneous or successive manner.
• The Beneficiary shall have the right to transfer its rights and to freely agree upon the contribution or payment.
• The Beneficiary shall have the authority to instruct the Trustee to transfer the Real-Estate Property to individuals or legal entities with legal capacity to acquire them.

 Prior to the agreement with the Trustee, the Trust deed may be amended under the understanding that a prior authorization granted by the Secretariat of Foreign Affairs shall be necessary in order to amend the purposes and/or to increase the subject.matter of the Trust Agreement.

Requirements for the incorporation of a Trust Agreement

Trust requires:

• The authorization from the Secretary of Foreign Affairs that appoints article 11 of the Mexican Foreign Investment Law;
• A deed attested and certify by a Mexican notary, who is obligated to assure the authenticity and lawfulness of the transaction.

Cost of seting up a Bank Trust - Cost of the fideicomiso

Prices from: www.banorte.com