The ABC of the Mexican Restricted Zone Trust.

As we explained in the article so-called “Foreigners facing Mexico ́s real estate situation” the
Mexican trusts in the restricted zone are the main option to acquire properties in Mexico ́s coasts
and we underlined the main obligations of the trustee, but what is a Mexican trust? Which are the
subjects involved and what roles do they perform? Is it a formal title? What are the particularities
of this?

The Mexican restricted zone trust is a contract provided in the Mexico federal laws, specifically in
the credit instruments and operation general law that is valid in all the Mexican territory. The
contract is described as a hybrid legal act where it can be involved in several subjects, several acts
with several purposes, and useful to transfer goods, to constitute guarantees, collaboration deals,
etc.

On the case of a restricted zone trust, the purpose is very easy to understand, by which the settlor
(Mexican owner and seller of the property located on the restricted zone) transfer the property to
the trustee, which is a Mexican bank that withholds the title of the property in favor of the
beneficiary (the foreigner that purchase the estate) in which this last one keeps the rights of
possession, use, and usufruct of the property, and thus the beneficiary could issue instructions to
the trustee in the future if decides to sell the property and cancel the trust, make a cession of the
trust, modify conditions of the trust, etc.

To clarify then the role of each participant of this contract we described as follows:, A) the settlor
transfer (sells) the property to the beneficiary transferring the ownership through the trust, B) the
beneficiary pays the price of the property to the settlor/seller and also pays the expenses to
constitute the trust and an annual fee to the trustee, C)the trustee shall withhold the title on its
name providing the mentioned rights to the beneficiary and following instructions in the whole life
of the trust.

It is important to mention that the trust is going to be formalized on a title deed that shall be
notarized as all properties are in Mexico, and also shall be subscribed in the public register of the
state that it belongs, so it will be a process that normally goes to 1 month to 6 months or more,
depending on the situation of the land/ property that the foreigner desires to acquire, its legal
background and more characteristics that a real estate lawyer has to review in every particular case.
The particularities of a Mexican restricted zone that in general you have to know are the following;
I)it’s a contract that has a 50 years duration, . II) In the situation that you pass away, one of the
conditions at the time of its constitution, the foreigner shall establish one or several beneficiary
substitutes, so the trust can continue its purpose, and where the substitute beneficiary shall
communicate the situation to the trustee with the proper documentation once that it happened.
III) Authorize a third person through a POA to issue instructions to the trustee if permitted. IV) If you
are married or foreigners desire to purchase the property as co-beneficiaries, the share of the
beneficiary rights shall be divided accordingly. V) The foreigners shall respect the politics of the
trustees as there are situations to review before constituting or changing conditions of the trust, so
if there is a specific issue on the property where you want to constitute the trust or specific situation,
then it shall pass through an authorization process.

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