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jerezano

Dec 30, 2009, 8:51 AM

Post #1 of 22 (8451 views)

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Additional thoughts on the restricted zones

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Hello,

The restrictions are not onerous or difficult. Anywhere in the interior of Mexico which is not
restricted a person may buy property in what we would call "Fee Simple."' Too Federal government permission must be obtained.

In the restricted zones which I believe are 50 km from the coast line and 100 km from the frontier, a foreigner may not
buy land in fee simple. He/she/they may however buy the property in trust. Basically a trust is a renewable land lease
for I think 50 years but the property is not yours. It must be held and owned by a Mexican Financial organization, a bank, a
trust, etc.,(the trustee). But the land lease is transferable with no restrictions. It may be inherited, sold, etc., built on, if already built on,
modified, whatever. Just as if the holder of the trust (lessor) owned the property.

And yes, many, many foreigners have bought such leases (trusts) and many, many more are in the process of buying.

One item of note: All property purchases whether in fee simple or in trust MUST be handled by a Mexican notary public, who
is a practicing lawyer specially licensed to handle real estate matters. If you buy in trust you may use the notary recommended
by the trustee or find your own, but you MUST use one. And some trustees discourage use of competing notaries, because
fees or "honorariums" do vary.

Good luck. And don't worry. Just be leary of ejido land!

jerezano.

(This post was edited by Rolly on Dec 30, 2009, 9:14 AM)

richmx2

Dec 30, 2009, 12:28 PM

Post #2 of 22 (8391 views)

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Re: [jerezano] Additional thoughts on the restricted zones

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One small correction. A Notario is not a "notary public" but a specially trained and licensed lawyer and administrator without a real equivalent in English law.

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mazbook1

Dec 30, 2009, 1:18 PM

Post #3 of 22 (8382 views)

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Re: [jerezano] Additional thoughts on the restricted zones

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And one MAJOR correction. jerezano - A fideicomiso is NOT a lease…not at all!

Although to the outsider looking in the fideicomiso may resemble a lease, it very definitely is NOT a lease. Once the fifty years is up, all you (or your heirs, called secondary beneficary (ies) in the fideicomiso) have to do is renew the trust. The bank or other Mexican Financial organization definitely does not OWN anything, just the same as the trustee of a trust in the U.S. does not OWN whatever is included in the trust. And even there the resemblance is only slight, since a trustee in the U.S. actually does control the trust. With a fideicomiso, ALL control of whatever is in the trust is under the absolute control of the beneficiary…YOU.

Even once the trust expires, the beneficiary (ies) can still sell the property to a Mexican citizen or renew the fideicomiso. The property NEVER reverts to the trustee (the bank) or the Mexican government, as it would if it were a lease. The biggest tip-off that it is not a lease is the fact that YOU pay the annual predial - property taxes - to the local government, which doesn't even show that the property is held in trust. It's all in your name!

The fideicomiso is just a safer, legal method of having a "prestanombre". In this case the trust rather than some individual. The property is YOURS from start to end.

Once I became a Mexican citizen, I merely cancelled my fideicomiso. I had to pay a notario publico to do this, but all it was was some fees to him, a cancellation fee to the bank and some fees to the government office (SRE) in D.F. I did NOT have to buy the property from the bank or anyone, since it was already mine. A lease wouldn't have worked this way at all, not here nor in the U.S.

(This post was edited by mazbook1 on Dec 30, 2009, 1:21 PM)

Reefhound

Dec 30, 2009, 1:22 PM

Post #4 of 22 (8377 views)

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Re: [mazbook1] Additional thoughts on the restricted zones

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I thought that you could only renew it once, for a total of 100 years. Are you saying it can be renewed endlessly, once in the family always in the family? What happens if you fail to renew it after 50 years?

mazbook1

Dec 30, 2009, 1:50 PM

Post #5 of 22 (8362 views)

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Re: [Reefhound] Additional thoughts on the restricted zones

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Reefhound, You are probably correct (I can't say with certainty) because no beneficiary would ever outlive the 100 years. When the trust is inherited by your heir(s), they must get a new trust in their name(s) with a new secondary beneficiary(ies), something they can easily and cheaply do. So yes, the property can remain in the family for an indefinite amount of time, only with multiple (serial) fideicomisos that would show who the current beneficiary (ies) is.

As to exactly what happens if you fail to renew the trust, I don't really know, although in casual conversations with my notario publico he assured me that it would NEVER fall out of my control. It would seem there would be various multas - fines - assessed and definitely some (probably unreasonable) bank charges, but the upshot of it all would be a sort of limbo if the beneficiary (ies) didn't pay the fines and fees and subsequently take out a new trust or sell the property to a Mexican citizen.

I suppose that if this matter went unattended for enough years, the bank charges would eventually be so high that the bank would go to court to take the property in lieu of payment, but again, I don't know for certain.

(This post was edited by mazbook1 on Dec 30, 2009, 1:52 PM)

Moisheh

Dec 30, 2009, 6:07 PM

Post #6 of 22 (8312 views)

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Re: [mazbook1] Additional thoughts on the restricted zones

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My notario explained the trust to me this way: You have all he rights of a property owner. You can will the home, sell it, rent it, WHATEVER. The rip off is the $375 to $575 the banks collect to have a computer spit out a receipt and file some paperwork. At one time ( days of Salinas I think) there was talk of letting other institutions handle trusts. I suppose the Banks in Mexico are in cahoots with the government just as in the USA.

Moisheh

jerezano

Dec 30, 2009, 6:17 PM

Post #7 of 22 (8306 views)

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Re: [richmx2] Additional thoughts on the restricted zones

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Hello,

Quote:>>>A Notario is not a "notary public" but a specially trained and licensed lawyer and administrator without a real equivalent in English law.<<<

absolutely correct. I thought I had pointed that out, but the emphasis makes it much clearer.

Here in the US the notary public simply testifies that the signer of a document has appeared before him and properly identified himself.

A Notario Público here in Mexico not only does that but is really testifying that all the statements in the deocument are also really
true. So you can see why that licensed lawyer needs special training. That is also why, sometimes a Notario Público will refuse to
sign a document or will demand from the presenter much more information than the presenter thinks is necessary.

jerezano

mazbook1

Dec 30, 2009, 6:18 PM

Post #8 of 22 (8304 views)

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Re: [Moisheh] Additional thoughts on the restricted zones

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Moisheh, Yes, the bank actually does practically nothing to earn their annual fee, BUT if you add their annual fee to the predial - property tax - and think of it as just a tax, it's so much lower (ridiculously so) than what you would pay in property tax in the U.S. that it is insignificant. Hardly a ripoff.

jerezano

Dec 30, 2009, 6:32 PM

Post #9 of 22 (8294 views)

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Re: [mazbook1] Additional thoughts on the restricted zones

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Hello mazbook 1.

quote:>>And one MAJOR correction. jerezano - A fideicomiso is NOT a lease…not at all! <<<

Sorry mazbook1. My first house was a Bishop Trust purchase on the island of Oahu, Hawaii. In all respects, that "trust' document
was exactly equivalent to the fidiecomiso, with the exception that the period of the lease was longer. As I recall it was 90 years
instead of 50. And yes the house and land was mine in all respects and I paid full price for it (it was not a typical lease) and I made improvements and sold it on a FHA purchase later on. But the property always remained in ownership of Bishop trust (the trustee).

So far as I know, the trustee of a fidiecomiso is owner of the property. But that is a technical matter of which I can't be sure, but here
in the United States trustees are the owners. Limits of control are of course, placed on both the trustee and the trustor. There are some
trusts which are revocable. It would seem that mazbook1's experience about converting the trust to true ownership when he obtained
citizenship exercises some type of revocable clause in the trust.

Be what may. Do NOT worry about fidiecomisos. They are just as safe as the financial organization which administers them, and I would
assume that the government has set up some kind of control on those trusts in case that financial organization should tank.

again, forgive me if I have confused anybody.

jerezano.

jerezano

Dec 30, 2009, 6:47 PM

Post #10 of 22 (8287 views)

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Re: [Moisheh] Additional thoughts on the restricted zones

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Hello Moisheh,

quote:>>>My notario explained the trust to me this way: You have all he rights of a property owner. You can will the home, sell it, rent it, WHATEVER. The rip off is the $375 to $575 the banks collect to have a computer spit out a receipt<<<<

Well yes, trustees always collect fees for their administrative effort. There in the USA those fees are notoriously high also. Here in Mexico,
they are even higher and the trustee's administrative tasks appear to be a lot fewer.

Unfortunately with a trust, because of the nature of the beast, those fees cannot be escaped. True, a person should be able to
search for a trustee who charges less but that is very difficult and some developers along the coast have selected their preferred
trustee and will not allow a competitor to be substituted. So, the purchaser is stuck.

But if that is where you want to live and buy, the situation MUST be accepted. It is part of the apple.

jerezano

Moisheh

Dec 31, 2009, 5:06 AM

Post #11 of 22 (8230 views)

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Re: [jerezano] Additional thoughts on the restricted zones

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Jrazano:

One thing I discovered: Some banks charge less for their annual fees and less for the fees to initiate the trust. The worst are Banamex and Bancomer ( no surprise). The best is Scotiabank. These Canucks even have a system where the fees can be automatically applied to a credit card annually.

Moisheh

RickS

Dec 31, 2009, 8:28 AM

Post #12 of 22 (8180 views)

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Re: [mazbook1] Additional thoughts on the restricted zones

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I guess I've always known of the 'ownership' restriction on the coast and the frontier and that one could actually 'own' land there through a fideicomiso, but this thread has me asking, "why was it set up this way to begin with?". Since there is this viable methodology to, in reality, 'own' land within the zones, is not the restriction, in effect, irrelevant? Has not the original intent, whatever it was, been side-stepped?

(This post was edited by RickS on Dec 31, 2009, 9:09 AM)

Rolly

Dec 31, 2009, 9:01 AM

Post #13 of 22 (8168 views)

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Re: [RickS] Additional thoughts on the restricted zones

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It's a way of side stepping an article in the constitution that forbids foreign ownership in those ares. I guess it was politically possible/easier to work it this way rather than to change the constitution.

Rolly Pirate

tonyburton / Moderator

Dec 31, 2009, 9:34 AM

Post #14 of 22 (8152 views)

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Re: [RickS] Additional thoughts on the restricted zones

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The original intent is to protect Mexican territory (particularly border areas) from foreign incursion. The restrictions were put in place following the series of foreign attempts (including France, U.S., U.K.), some more successful than others, to acquire chunks of Mexican territory in the nineteenth century.

mazbook1

Dec 31, 2009, 11:30 AM

Post #15 of 22 (8115 views)

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Re: [jerezano] Additional thoughts on the restricted zones

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jerezano, I too have owned property in Hawaii. There I only owned the improvements, the underlying land was on a lease. A very typical Hawaiian situation and not at all the same as the fideicomiso in México.

In Hawaii, the land NEVER becomes your property, and were something to happen and the lease payments not made or the lease ran out without you selling the improvements, the whole kit 'n caboodle would have reverted to the Bishop Trust. Not very likely, but it could happen.

With a fideicomiso, the trustee owns NOTHING, he is just a "hired gun" for administering the trust that owns the property. Without court action, as in my earlier post, the property (land and improvements) can NEVER revert to the trustee or to the Mexican government. It's a whole ball of wax different from those "typical" Hawaiian land leases.

I'll stick by my guns on this, as with a lease, the property always automatically reverts to the leaseholder at the end of the lease (unless there is some option to purchase clause) and with a fideicomiso, the property NEVER automatically reverts to anyone, since you are the owner.

I think your confusion arises from the fact that with the Bishop Trust in Hawaii, the beneficiaries of that trust may also be the trustees, i.e., owners, something quite different than the fideicomiso in México.

The fideicomiso is, in fact, a legal method of side-stepping the Constitutional restriction against foreigners owning property in the restricted zones. As a matter of fact it was designed expressly (originally by a group of Mazatlán real estate people) to stop the blatantly illegal practice of foreigners using a prestanombre to buy a vacation or retirement property along the coast. Too many foreigners were being ripped off by unscrupulous Mexican prestanombres, so the real estate folks (all Mexican FYI) came up with a legal, safe method for those foreigners to own their small pieces of coastal property without fear of losing their investment, then lobbyed it through the Federal Congress as law. Originally, the term of the fideicomiso was only 25 years, but when it became obvious that that was too short a period, in the '90s it was increased to 50 years. Also, I might note, there is a rather small amount of land (1 hectare, I THINK, maybe even less) that can be owned by a foreigner.

Also, there is no "revocable" clause in the fideicomiso, it's just that this particular type of fideicomiso is denominated in US dollars and is available only to foreigners. Since I was no longer a foreigner, I could not hold property in this type of fideicomiso and it had to be cancelled and the property put in my name in "fee simple"—to use common U.S. terminology.

richmx2

Dec 31, 2009, 3:16 PM

Post #16 of 22 (8073 views)

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Re: [tonyburton] Additional thoughts on the restricted zones

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I'd add, Tony, that foreigners had a bad habit of demanding "special rights" when it came to property (calling in U.S. thugs to put down strikes at the Canea mines in 1908; William Randolf Hearst's importation of U.S. cowboys for his ranch -- at the time the largest single piece of private property in the world; the foreign oil company's mercenary troops in Tabasco and Veracruz up until 1938). For both economic and national security reasons, it was natural to limit foreign ownership (several European countries had similar law over the centuries), the fideocomiso is just a way of allowing the foreigner to pursue legitimate control of their property while giving the property a Mexican jurisdictional personality (i.e., the property is technically Mexican owned, and subject to Mexican law, while the person who has the rights to use the property may or may not be Mexican).

Of historical interest, the concept is based on a 17th century Church-devised financial planning tool. Those little side altars in the cathedrals were "fideocomisos" -- endowed by wealthy families and under the care of a nominal curate (normally the family ne-er-do-well) who received a stipend out of the fund... which was pooled and invested by the Church, which charged a small annual fee for administrative costs, and -- of course -- made a nice profit off the investment funds those pooled fidocomisos made available.

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tonyburton / Moderator

Dec 31, 2009, 4:03 PM

Post #17 of 22 (8058 views)

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Re: [richmx2] Additional thoughts on the restricted zones

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"foreigners had a bad habit of demanding "special rights" "
Absolutely correct - historically, colonial powers often wanted/expected better than average protection for their "investments".

Thanks for the interesting comment about relationship between fideicomiso and C17th churches - I'd be interested to learn more if you can suggest a suitable URL or book,
Tony

mazbook1

Jan 3, 2010, 10:48 AM

Post #18 of 22 (7925 views)

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Re: [jerezano] Additional thoughts on the restricted zones

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jerezano, Here is an article from a real estate professional that just came out yesterday:

http://www.maz-amor.com/...same-as-a-lease.html

Perhaps his explanation is more clear than mine.

arbon

Jan 3, 2010, 11:58 AM

Post #19 of 22 (7905 views)

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Re: [tonyburton] Additional thoughts on the restricted zones

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Tony, do you remember the relationship between the University of Manchester, CORETT, and Guadalajara?
~~~~~~~~~~~~~~~~~~~~~~~

tonyburton / Moderator

Jan 3, 2010, 1:43 PM

Post #20 of 22 (7869 views)

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Re: [arbon] Additional thoughts on the restricted zones

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No, don't know anything about that. [CORETT = Comisión de Regularización de la Tenencia de la Tierra].
I'm still curious to know some sources for earlier statements in this thread about link between C17th Mexico and fideicomiso(s) if anyone has any suggestions to offer. Tony

richmx2

Jan 4, 2010, 7:56 PM

Post #21 of 22 (7769 views)

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Re: [tonyburton] Additional thoughts on the restricted zones

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There's a brief mention in passing of the clerical trusts in Leslie Bird Simpson's "Many Mexicos" which was written in the late 1950s, long before the modern fideocomisos were though of. There are passing references in other Church histories about the era (both in Mexico and in Europe). I'm not aware of any written documents relating to framing the bill(s) that created the modern instrument, but I rely on the word of legal scholars who assure me that the historical precedent was know.

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tonyburton / Moderator

Jan 4, 2010, 9:28 PM

Post #22 of 22 (7757 views)

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Re: [richmx2] Additional thoughts on the restricted zones

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Thanks! Let me know if you come across anything else on this topic, and I'll do likewise, Happy New Year! Tony