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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 Beneficiary.

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 beneficiary)

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.

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.

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 property.

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.

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