Real Estate Trust: Benefits and Frequently Asked Questions

“For foreigners, it would obviously be much easier and less expensive if they could have a direct property title in Mexico. However, the Constitución Política de los Estados Unidos Mexicanos states that they cannot own property within the country’s Restricted Zone. This is where the Trust comes in as a secure solution in these types of transactions.” Braulio Ruiz, independent real estate agent, offered this information when Vallarta Real Estate Guide approached him to explain some of the benefits that this real estate transaction tool has in ensuring foreigners can purchase property in our destination.

Braulio Ruiz, independent real estate agent, explains the pros of this tool.

“The primary purpose of a Trust is to comply with the constitution by granting legal title to the property in the name of the trustee as opposed to direct ownership. The trustee’s responsibility is to maintain and transfer the property title under the direction of the beneficiary (buyer),” he explains.

BENEFITS OF A TRUST

Our expert points out and explains some of the main benefits of a Trust:

“The real estate Trust, by holding the ownership, allows foreigners to purchase a real estate property within the Restricted Zone. Mexico’s Restricted Zone includes all those properties that are within 62 miles from any border and 31 miles from any ocean.”

“The trustee (bank) holds the property for the beneficiary (buyer). In addition to creating a corporation for certain types of purchases, the Trust is the only legitimate way to acquire real estate in destinations with a beach, which are, of course, the most privileged places in our country.”

“The buyer has all the legal rights as the owner of the property, so he can subsequently sell, renovate or rent out the property.”

“Within the Trust, a substitute beneficiary will be designated who will receive the property when the owner dies. The heir will take care of the Trust/Property, which will avoid wasting time and investing in the expenses involved in succession or inheritance procedures in Mexico.”

“The Trust is faster to establish and easier to maintain than setting up a corporation to own the property, which is another tool with which a foreigner can acquire a property in Mexico’s Restricted Zone.”

“The Public Registry of Property contains all the names of property owners. However, if the property is held in a Trust, there is a level of anonymity, as only the identification number will be published, giving full discretion to all those who wish to keep their real estate assets private.”

FREQUENTLY ASKED QUESTIONS 

Is the Trust a lease?
“No, even if the term of the Trust is for periods of 50 years, it can be renewed indefinitely.”

Do the prices for establishing a Trust vary between banks?
“Yes, but you can request a quote of the installation fee as well as the annual fees to compare them with each other and choose the best option.”

What happens to the property if the bank where the Trust is held fails?
“The Trust is not considered an asset of the bank, so if the financial institution in question has problems, the Trust will be transferred to another bank.”

Does the annual payment of the Trust include the payment of the Property Tax?
“No, the Property Tax is collected by the municipality where the property is located, the Trust fees are collected by the bank, which are two separate entities.”

What happens if there are arrears in annual payments?
“Property is not lost if you fall into a backlog of annual payments, but you will incur interest and penalties. If there is an intention to sell the property, the overdue balance must be settled before starting the operation.”

How to pay the annual fee?
“The payment can be made directly at the bank that holds the Trust. Or to make it easier, instructions can be obtained from the bank on how to make an online bank transfer for the payment.”

“Finally, if the trustee does not live full-time in Mexico, you can review with your bank the electronic or online transfer options to make the payment from abroad. On the other hand, the owner’s property manager, an accountant or lawyer can also make the payment. But it is always important to request proof of payments and keep the receipts,” he concludes.