:: REAL ESTATE OWNERSHIP IN MEXICO ::

Manner of owning real estate property in México within de "Restricted Zone"

The Mexican Constitution prohibits foreigners from purchasing or owning real estate within that area of land which is 100 kilometers inland from the borders or within 50 kilometers inland from its coasts. This area is defined as the “Restricted Zone”. Aware of the need to foster foreign investment along that area, the Mexican Government developed an instrument of ownership of real estate property within the “Restricted Zone” under which title could be held safely and securely by foreigners, and at the same time over come and satisfy the nuances of the Mexican Constitution. This instrument, called a Fideicomiso, allows ownership by foreigners of real estate property trough a Mexican Property Trust. This trust agreement provides its beneficiary with all the rights incidental to the ownership of real estate.

The mechanism by which this Trust is created is rather simple. The Mexican Foreign Ministry issues a permit to a Mexican bank of the purchaser’s choice, allowing the bank to act as purchaser for the property on behalf of the beneficiary. The purchase property is placed in a Trust. The bank is the “Trustee” of the Trust and the actual purchaser is the “Beneficiary” of the Trust. Only a Mexican bank can act as Trustee of these types of trusts.

The trust is not an asset of the bank; the bank simply acts as Trustee to hold the Trust. The role of the Trustee is a passive one, only subject to the instructions it receives from the Beneficiary.

Much like Living Wills or Estate Trusts in the U.S., the Mexican bank, as Trustee, takes instructions only from the Beneficiary of the Trust. The Beneficiary has all incidental rights to the ownership of real property, including, but not limited to, the right to use, enjoy, occupy and possesses the property, rent the property, the right to build on it or otherwise improve it, etc. The Beneficiary may also sell the property by instructing the Trustee to transfer the rights to another qualified owner; or in the case of death of the Beneficiary, by providing in the trust instrument to bequeath the property to an inheritor. It should be noted that an important provision of this type of Trust is that it allows for a Successor Beneficiary, creating in essence a succession structure in the event of death of the Beneficiary.

The initial term of the Trust is 50 years, and it can be renewed for additional periods of 50 years indefinitely, providing long-term control of the asset.

--CS Financial México--

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