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A policy of title insurance is a
contract with an insurance company in which it agrees to indemnify (compensate
or reimburse) the insured against a loss sustained as a result of defects in
the title, other than those outlined as exceptions. The title policy may insure
the owner, a lender, a mortgage holder, a holder of any interest, as indicated
by the buyer of the policy. The title insurance company agrees to defend, at
its expense, any lawsuit affecting title which is based upon defects insured in
the title policy.
A Title Search or title
investigation involves an examination of the recorded documents on a particular
property. It is extremely important for a buyer to know the true condition
of the title before making an important investment decision.
The definition of an 'Escrow' is
the method of closing a real estate transaction in which an impartial third
party is authorized to keep or safeguard a certain item, generally money, while
supervising the fulfillment of specific instructions. Upon satisfaction of said
instructions, the Escrow entity delivers the escrowed item to the designated
Without a doubt, the Fideicomiso
(trust) is one of the most dynamic legal instruments in Mexico. And by
contrast, it's probably the document least understood by Foreigners.
Article 27 of the Mexican
Constitution grants to the Mexican Nation ownership of the land and water
within the national territory, and provides that the Nation shall have the
power to transfer ownership rights to such properties to private individuals,
thereby creating private property.
Section I of the abovementioned
Article 27 grants the right to acquire the dominion of land and water only to
Mexican individuals and companies, and grants the government the discretionary
power to grant the same right to foreigners, subject to the conditions that the
foreigners agree with the Ministry of Foreign Affairs to consider themselves
Mexican nationals with respect to the property acquired and not to invoke the
protection of their home governments with respect to the same.
The Fideicomiso is the instrument
or vehicle used by the government to exercise its discretionary power
permitting foreigners to acquire ownership rights to real estate property
within the "restricted areas" of Mexico, granting the Trustee (a
Mexican bank), legal title to the property for a determined period of time.
The Parties to a Fideicomiso are:
The Settlor (Seller)
The Trustee (the Mexican bank)
The Beneficiary (Buyer)
The Beneficiary Substitutes (move into title upon death of the primary
As Trustee, the Mexican bank acts
on behalf of the foreign Beneficiary in any and all transactions involving the
property held in Fideicomiso. However, the Beneficiary retains the use and
control of the property and makes the investment decisions regarding it.. The
Beneficiary has the right to use, improve, lease without limitation, sell
without restrictions and to pass the property to named heirs. In essence the
Beneficiary has the same absolute rights to use, benefit and enjoy the property
as if it were in fee simple (direct) ownership.
CLOSING COST ON A TRANSACTION?
In addition to the purchase
price, a real estate sales transaction involves numerous expenses for both
parties, such as pro-rations, taxes, brokers commissions, title investigation
and insurance expenses, load fees, among others. These fees can represent a
substantial expense and it is prudent to request a written estimate prior to
beginning the transfer.
For a detailed
discussion of closing costs, click here.
DE DERECHOS (ASSIGNMENT OF RIGHTS)
When a property has already been
placed in a Mexican trust, fideicomiso, the transaction most likely to be
entered into would be an Assignment of Rights, because the Buyer in essence, is
acquiring the Sellers rights to the Fideicomiso that holds title to the real
FOREIGN INVESTMENT LAW
This was published and became law
on December 28, 1993, and has brought genuine enthusiasm throughout the world
concerning Mexico's investment opportunities. The law has been a major step
toward bringing ownership of Mexican real estate in line with other
industrialized countries. It allows fee simple (direct) ownership of
non-residential properties in the country's restricted areas, provided that
such property is 1) owned by a Mexican corporation; and 2) that it is for
non-residential purposes. The law also extended the duration of the Fideicomiso
term for residential properties from 30 to 50 years, with a renewal upon
request by the party having an interest in the property.
SIMPLE (DIRECT) PURCHASE
A 100% foreign-owned Mexican
company may directly acquire property within the restricted zone, providing it
is to be used for non-residential activities. In other words, the usage
must be industrial or commercial, in order to qualify as non-residential..
Defined under the Mexican
Constitution, the "restricted" zone is the band 100 kilometers deep
from any Mexican border, and 50 kilometers from any coastline. Because it is so
long and skinny, the entire Baja peninsula is considered to be in the
"restricted" zone and the Mexican bank trust (fideicomiso) is
required for any non-Mexican acquiring residential property