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A few Notes for foreigners Acquiring Real Estate in Acapulco: Let’s start off with the fact that it is impossible for foreigners to own property in fee simple within 50 kilometers of the seacoast or 100 kilometers of the land frontier in Mexico. In order to provide a legal secure manner for foreigners to acquire in these restricted zones, the Mexican government devised the Bank Trust form of holding in 1971. The trust hold has been reviewed by scores of attorneys during the 30 years of its existence and it has proved to be a very satisfactory instrument. More detail on the bank trust follows.
The law to promote and Regulate Foreign Investment: The purpose of this law is to promote foreign investment, thus encouraging a fair and balanced development, and therefore, consolidating the country’s economic vigor. It specifies the manner in which Capital should participate and how, by establishing a Trust, foreigners may enjoy real estate earmarked for industrial and tourism activities. Residential Holdings: The purpose is to accelerate industrial and tourism development within the coastal and border zones, as established by the Mexican Constitution. For the purposes of those reading this report, “Tourism development” is construed to include residential holdings for foreigners. The law establishes that Trust Institutions can acquire land in such zones acting as “Trustees” for foreign beneficiaries if said land is used for industrial and tourism activities. When a foreigner wishes to acquire the right of use and enjoyment of property. He/she can instruct the Mexican bank of his/her choice to purchase and retain such property “ In Trust” for a term of fifty years. Provided the Ministry of foreign Affairs grants the necessary authorization and permits. Ownership of the Property and rights of the beneficiary: Upon acquiring a property “in Trust”, the Bank becomes its new legal owner, subject to the clauses of the contract guaranteeing the beneficiary the rights to use, enjoy,, rent, sell the property, or transfer said rights to a third party. The formalities involved are straight-forward and simple. Renewal of trust: At the end of the Trust’s term which, as mentioned before, can be for a term of fifty years, the Beneficiary has the following options: - If the Mexican Government’s present policy does not change, It is impossible for the Trust agreement to the renewed for an additional period of fifty years. In the event that the authorities should fail to grant such an extension. The Trust will have to be terminated by selling the property, delivering the proceeds to the beneficiary. -No matter what future results may be, the beneficiary’s interests will be adequately protected. It should be pointed out that the beneficiary can, at any time during the term of the Trust agreement, or at its termination, arrange for the sale of the property to any person legally qualified to purchase it, including another foreigner acquiring in Trust. Structure of the Trust: Parties involved in a Trust Contract: -The Trustor: A Mexican Citizen or a Mexican corporation with no foreign participation. The original owner of the real estate is the party which places the property “In Trust”. -The Trustee: As indicated previously, The Trustee is the Banking Institution which holds the property “In Trust” for the benefit of the Beneficiary. -The beneficiary: The first beneficiary is normally the buyer who acquires rights of enjoyment in order to develop the property and sell his Trust interest to other parties, in turn. The final Beneficiary is, usually, a foreigner, since Mexican citizens normally acquire direct ownership. -The Trust division of the Mexican Bank requires the following documents in order to be able to process a trust agreement:
§ Title of the property (Deed) § Map indicating the location of the property § Receipts covering payment of the Real Estate Tax § Permit from the Ministry of Foreign Affairs. This is obtained by the Bank.
Additional Points of Interest Total acquisition costs will run somewhere in the neighborhood of 4.5% of the true purchase price of the property, varying only slightly up or down from that figure depending upon the amount of the purchase. Annual property taxes and bank trust fees will each run in the area of 0.75% (1.5% total) per annum based on the true purchase price.
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