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Buying, Closing and Owning Real Estate in a Trust, Fideicomiso, in Baja, California Sur, Mexico
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Real Estate Ownership Rights Held in a Mexican Trust, Fideicomiso
In Loreto, La Paz, or anywhere in Baja Mexico, a foreigner or foreign corporation obtains all the rights of raw land, lot house or home ownership (meaning you can sell, lease, use, bequeath, improve, transfer and encumber the properties) through a Mexican bank trust known as a Fideicomiso. The Mexican bank trust is established by the government created during the closing process and gives non-Mexican foreigners, especially Canadians and Americans buying and owning Mexican property, the very same rights of ownership enjoyed by Mexican citizens. The actual title is held in a Mexican trust for you by a trustee, typically a bank. The trust operates the same way as a family trust in the U.S.Protecting Mexican Real Estate
Mexico is predisposed to being cautious about non-Mexican foreigners acquiring real estate in Mexico. Take a look at history. First, the Spanish came over and duped the Aztecs with deceit and then did their best to annihilate the indigenous population, subjugate those that weren't annihilated, and exploit the country to the nth degree by taking all the wealth they could by unscrupulous and treacherous means. Even the Spanish clergy were claiming land in Mexico "for the Spanish crown". They didn't come to Mexico buying and owning property, they came to take it. Then the North Americans gained half of Mexico by military means. Mexico wants to make sure that their land is protected from being usurped. Let's face it, Mexico is beautiful, large, mostly tropical, and loaded with natural resources. In my opinion, Hawaii has nothing on Mexico and Mexico has everything that Hawaii has in triplicate, including , much more history, closer and cheaper to travel to, better fishing and much better food (more of it, too), tropical beauty and fantastic beach front property- at 1/4 the price! Can't blame Mexico for being cautious about the process to allow buying and owning Mexican real estate by foreigners.
"Prohibited Zone"
Since 1973, the Mexican government has facilitated and encouraged the buying and owning of "prohibited zone" Baja real estate by non-Mexican foreigners. Also, since NAFTA, acquiring, buying and owning real estate in Mexico is easier and more secure for both Canadians and Americans. Baja real estate property is designated as “prohibited zone” property, i.e., Mexican land that is either 100 km (62 miles)from the US border or 50 km (31 miles) from the ocean – in other words, all of the Baja. Not only are American, Canadian, and European individuals buying and owning property in Baja Mexico at record rates, but Canadian and American real estate developers are developing in Baja at a very aggressive and committed pace in the last five years; much different than ever before. Now is the time, my friends. In five years from now, you will have to pay Newport Beach, California prices. Top Non-Mexican foreigner’s acquiring, buying, owning Loreto or La Paz Baja Mexico residential real estate property, that is to say, the obtaining of all the rights of ownership is achieved through a Mexican bank trust known as a “fideicomiso”. These rights of ownership are the same as those of real estate (lots, land, houses, homes) owned by any Mexican citizen. It is like an American family trust. The fideicomiso trust is renewable for 50 years, and since 1993, renewable for as many more 50-year periods as you wish simply by application. As in the United States, you can will your Loreto or La Paz Baja Mexico property owned in the trust to your heirs. Buying and owning Loreto or La Paz Baja Mexico property by way of the fideicomiso affords the raw land, lot, home or house owner with all the management and control of ownership. While the actual title is held in trust for you by a trustee, typically a Mexican bank, you, as the owner in the trust, have all the rights of ownership such as the total ability to build on the property, live in it or not, use it or not, rent it or not, transfer or encumber the real estate or not, total authority to permit or prohibit who is able to come onto your property, pass it on to your heirs, to sell it - or just keep it. You are the owner, it's yours, and you have all the raw land, lot, home or house ownership rights, period. Top An important part of the buying, owning and purchase transaction is legally required to be officiated by a specialized Mexican attorney known as a “notario”. A notario is a highly credentialed formally educated Mexican attorney appointed for life by both the state and federal governments and must pass two very tough legal exams. The Mexican notario is required by law to preside over the real estate closing transaction leading up to and on the day of the closing. He/she prepares the “deed of conveyance” known as an “Escritura” subject to and based on the terms of the purchase-sale agreement. After the closing day, the notario is required by law to file and record the closing documents and the deed at the relevant governmental agencies. Top After the buyer's offer is accepted by the seller, immediately obtain the services of a Notario and the services of a Mexican bank to act as trustee for the Mexican bank trust, the “fideicomiso”. Both buyer and seller should promptly provide both the Notario and the bank with the informational items and documents that they request. The Mexican Notario will examine the documents of the selling party to ascertain their correctness and apparent validity and cursorily search the public records to determine the condition of the seller's title and the existence of outstanding recorded liens, if any. Record the Purchase-Sales contract with the Notario and he will file the contract with the Public Registry of Property. The Notario will require up front payment of fees to cover their work, surveyor fees, appraisals, and various certificates. He will examine the sellers title documents as initial confirmation of title validity. The Notario will procure an appraisal and Site Survey of the property for tax valuation purposes in accordance with Real Estate Law, “Ley de Catastro”. Buyer and seller are to provide necessary information to the Mexican trustee bank.
Once the bank receives the necessary information and documents from the buyer and the seller, it will apply at the foreign affairs ministry, for the Trust Permit and a Foreign Affaires Permit (SRE). The Secretary of Foreign Relations grants this permit which allows the foreign buyer to enter into a contract to purchase Mexican real estate thereby laying the legal groundwork for acquisition of property by a foreigner. The bank, as trustee of the fideicomiso trust, must get a permit from the Foreign Affairs Ministry in order to establish the trust in the first place. The purpose of the trust is to provide the trust beneficiary(s) (the buyer) with all the rights of ownership in the Mexican "prohibited zone" real estate property being purchased. The Notario will obtain a No-lien Certificate (certificado de libertad de gravamen) on the property in Loreto or La paz Baja Mexico. It should indicate the owner of record, surface area and classification of property type, the legal description, and whether there are any liens or encumbrances (e.g., unpaid utility bills) filed on record against the property, based on a title search from the Municipality’s Public Property Registry. The Notario will obtain a certificate of No-tax Lien which will enable the Notario to assess that the Mexican property tax has been paid prior to the transfer of the property in Loreto or La Paz. Top Buyer and Seller should be present to sign documents and the notario's "protocol book". The buyer needs to be there to also pay final balances owed and any unpaid fees. However, if buyer and/or seller cannot be present, a surrogate (a separate surrogate for the seller and a separate surrogate for the buyer) with a properly drawn and executed power-of-attorney document can stand in and sign for the principal parties. If surrogates are used at the closing, arrangements must be made in advance to make the required payments. Using surrogates is common practice. The Mexican notario will "Authorize" the required buyer and seller signatures upon execution of the “escritura”. The fiduciary bank will likely attend or will have already signed the Trust ("fideicomiso") documentation. The notario is responsible for collecting the government transfer taxes from the buyer. The buyer must pay any unpaid fees at this time as well. The seller is responsible for paying Mexican Capital Gains taxes and any unpaid real estate commission to the seller's agent. Also, it's a good idea for the buyer or his surrogate to get the keys for access to the property. Top The Buyer can normally take physical possession of the property immediately. The Notario will record the Mexican title deed (the "escritura" which was extracted from the Notario’s protocol book that was signed by the buyer and seller) with the Public Registry of Property where the property is located in Baja Mexico. The Notario will register the buyer’s Mexican ownership interest with the Secretary of Foreign Affairs which provides public evidence of the title in the name of the buyer. The Notario will register the bank trust with the Loreto or La Paz city’s property registry. Buyer should separately ensure that the property in Loreto or La Paz Baja Mexico is also registered in the city’s urban department (Catastro) so that the buyer gets proper credit for property tax bills, and so that the previous owner’s name is removed from all city records relating to the property. The Buyer may request a copy of the bank trust from the Notary within a few weeks to three months, depending on the Notario and their workload. The Trustee has the obligation to process the registration of the Deed with the NATIONAL FOREIGN INVESTMENTS REGISTRATION (RNIE) within a 30 day period after the granting of the deed. Living in Loreto or La Paz Baja Mexico for more than three months? Buyer needs to apply for and obtain an FM3 resident visa. Buying and owning property in Baja, Mexico can be one of the greatest experiences you can have. Think of it, to have a 100% owned vacation or retirement house or home on its own lot, in a Baja beach town near the marina, for 1/5th the cost of coastal property in California, drivable from San Diego, near great fishing all year round, great diving, great food, great scenery, 0.25% property taxes, nominal utilities cost, warm tropical weather 9 months of year, and a rapidly appreciating real estate investment all for $150,000 US. The merits of buying and owning property in Loreto or La Paz is a no-brainer. Top Fideicomiso - Bank Trust
The Notario in Mexico
Process for purchasing Mexican property in the Baja
Before the closing
On the day of the closing
After the Closing