Last month in this column we looked at all the documents that are obtained for the Notary's scrutiny, to determine the property free and clear of all encumbrances, liens and debts, and ready for transfer to a new owner.
The laws governing the real estate ownership changed a few years ago. While foreign buyers in the coastal zones and along the borders must still hold title in a bank trust, buyers in the interior of Mexico may now choose between the bank trust and holding title in a direct deed.
The choice is not as simple as some folks believe, and the rules that define how properties may be deeded, and to whom they may transfer without additional expense are very specific.
Most buyers look to their selling agent to advise them about the deeding of the property. Unfortunately many agents just can't explain the difference between the two systems, so they favor the direct deed "because it is cheaper." Unfortunately, technicalities in real estate law can cause very expensive mistakes for unwary buyers.
While it is true that the deed has only a one-time fee, in many situations, the trust is the least expensive way to own the property and effortlessly transfer title of the property to friends or relatives at the time of the deaths of the owners, without probate, legal fees, powers of attorney and trips to Mexico by the heirs.
DIRECT DEED: The direct deed allows buyers to name a direct line heir to the property in the deed. This heir MUST be a parent or child of the owner(s). The law governing the deeding of property has recently been redefined. In Mexico, couples decide upon either joint or separate assets at the time of marriage. When a couple is married with joint property, they must then deed all property jointly. It is assumed by the Mexican government that all marriages in Canada and the United States are with joint property. Unless foreigners can prove they were married with a condition for separate property, they must both be listed on the deed, rather than one owning the property, and naming the other as the beneficiary.
The direct deed works well for couples with children in common, and no children from previous marriages. If a couple owns the property jointly, are in a second marriage, and each has children from previous marriages, the deed is so designed that when one of the owners dies, the other owns just 50% of the property, with the spouses children the owners of the other 50%. Widows have been forced to sell their property by their stepchildren. Sales of properties have been stalled or prevented by children refusing to sign off on the property for half the money.
When a couple purchases a property, each person pays a one-time fee of $4200 pesos at the time of closing. The beneficiaries must each pay the same fee at the time of the owners' deaths, as the property must be legally transferred and reregistered to them. All beneficiaries will be required to come to Mexico or to obtain a Power of Attorney allowing one beneficiary to act for all in Mexico. Probate is often required to transfer the property, even from husband to wife.
BANK TRUST-FIDEICOMISO: Currently buyers can shop for the best deal in bank trusts. One bank offers a trust at $450 to start up the account, and $450 US per year. This fee is stated in the body of the trust, guaranteeing that the cost will remain the same for the duration of the ownership of the property.
A trust is registered in the name of the bank, with supporting documentation giving the owners of the property the use of the property, and the freedom to improve, sell or transfer the home as they wish.
The persons named in the trust can be married or single. When owned jointly, 100% ownership transfers to the survivor at the death of one of the owners. Beneficiaries are listed the document, and can be anyone, relative or not, in any percentage. In one case, the seven sisters of a gay couple were the beneficiaries, with each receiving an equal part.
The property does not have to be transferred and registered to the beneficiaries at the time of the deaths of the owners in order to be sold. The beneficiaries can notify the bank with a death certificate, and can proceed immediately with listing and selling the property.
It is not legal for owners to name the same beneficiaries in more than one trust or deed. If this has occurred, the newest deed or trust is allowed to stand, with the beneficiaries allowed to inherit that property without penalty. Other properties must go through probate to determine ownership. Be sure to alert your agent and the Notary if you already own one property in Mexico, so that you can plan appropriately to make the transfer of ownership of your other properties as easy and inexpensive as possible.
