BAHIA REALTY | BUYER INFO

TRUST INFORMATION

Kino Bay lays within the “restricted” zone which is defined as 100 kilometers (about 62 miles) from Mexican borders, and 50 kilometers (about 31 miles) along all Mexican coastlines. In harmony with Article 27 of the Mexican Constitution which prohibits direct ownership of real estate by foreigners within that zone, foreigners are required to purchase real estate indirectly, using a ‘Fideicomiso’ or real estate Trust available through one of several Mexican banks or government qualified financial institutions.

The law does not apply to Mexican citizens and to most of them the concept is as foreign as the foreigner. Having your Real Estate Agent provide the seller with an explanation of the process and how it differs from a direct purchase is advantageous just as knowing how it affects you as a foreigner buyer.

When a foreigner purchases a property from a Mexican citizen within the “restricted zone,” the foreigner can only do so through the Trust arrangement, and the cost of establishing it is part of the ‘closing costs’ paid for by the buyer. The amount may vary slightly depending on the Fiduciary. When a foreigner purchases from another foreigner, the rights and obligations in the existing Trust (ask your Real Estate Agent the current state of the Trust) can be transferred from the seller to the buyer which is generally faster and slightly less expensive. Some financial institutions that provided Real Estate Trusts no longer establish new Trusts or modify or transfer rights on existing Trusts. In the case of the latter, a substitute Fiduciary must be acquired at the time of purchase.

Without exception, all real estate transactions in Mexico must be documented by a government approved Public Notary and registered in the Public Registry of Real Estate and Commerce. Notary fees – which are also included in the ‘closing costs’ – include various payments to government departments including a formal appraisal, transfer of ownership, registration in the Public Registry, name change with the department of land taxation, as well as the Notary’s charges and related office expenses. These fees are generally based upon the sale price. The seller is responsible for payment of any Capital Gains (Impuesto Sobre la Renta.)

When a new Trust is formed, or a transfer of rights is performed, there is information documented within its contents – such as the designation of substitute beneficiaries – that your Real Estate Agent can assist you with to avoid future difficulties or additional expense.

‘Fideicomisos’ or Trust agreements are currently issued for a period of 50 years. The renewal process should begin a minimum of six months before expiration. Establishing, transferring, or renewal of a Trust all generate similar fees – generally the Fiduciary charges for the necessary permit and its registration, along with an acceptance fee, and a yearly maintenance fee.

Although the Fiduciary (bank or financial institution) holds title to the property and is the registered owner, the beneficiary(-ies) (Fideicomisario(-s)), retain the rights of dominion. These rights include the use and enjoyment of property, as well as the lease or sale of the property within the boundaries of the applicable laws. The rights and obligations are generally stated in the trust document when it is established.

Various factors can influence the choice of the financial institution (Fiduciary) that will establish the Trust Agreement or become the substitute and the choice of the Public Notary who will document and register the transaction. These choices are usually made early in the purchase process. Your Real Estate Agent can assist you to simplify the selection and guide you through the process to successfully establish or transfer the Trust (Fideicomiso) that protects your investment.

DORREEN SMITH

DORREEN SMITH

OWNER/ AGENT | STATE LICENSE #591

Dorreen Smith has been living in Kino Bay since 1996. With over fifteen years experience in real estate in Mexico, Dorreen has learned to evolve with the ever changing Real Estate requirements of buyers and sellers in Mexico. She endeavors to stay up to date with new ideas and technologies, while preserving the classic and traditional tactics that have withstood the test of time.

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