Trusts: Foreign Ownership
With the real estate boom in Mazatlan, the acquisition of properties in the city by foreigners has increased.
As there is a constitutional prohibition for foreigners to directly acquire property in this city, the problem is solved by resorting to a trust where a fiduciary institution (usually a bank) acquires the property while the foreigner is named as the beneficiary of the trust.
Thus, while the property is owned by the trust, the foreigner named as beneficiary is granted rights to use and enjoy the property.
This type of trust works well and provides legal security to foreigners.
The problem arises when a foreigner wants to “sell” the property. This is when they fall into the hands of bad real estate brokers, notaries or lawyers, who recommend and even prepare private contracts for the “sale” of the property.
Due to the legal structure of trusts of this type, the foreigner cannot “sell” the property because they are not the owner. The owner is the trust.
So what can the foreigner sell? The answer is that they can sell their rights as beneficiary of the trust, by entering into an assignment agreement of those rights in favor of the person who wants to “buy” the property.
If the “buyer” is a foreigner, by entering into the assignment agreement of the beneficiary’s rights, they will simply become the holder of the same rights that the previous beneficiary had.
That is, although the owner of the property remains a trust, the new beneficiary will have the right to use and enjoy the property.
Now, if the “buyer” is a Mexican, the foreigner who wants to “sell” their property has two options, depending on what the buyer chooses.
One option is to enter into an assignment agreement of the beneficiary’s rights, just as it is done with another foreigner, and the other option is to instruct the fiduciary institution (bank) to sell the property to the interested party.
In any case, the money from the assignment of the beneficiary’s rights or the sale made by the bank is obviously delivered to the original beneficiary.
If you are a foreigner and acquired your property through a trust and fall into the hands of an inept real estate broker, notary, or lawyer, be careful if they recommend entering into a sales contract (red flag).
But if they already made you sign a sales contract instead of an assignment agreement of the beneficiary’s rights or giving instructions to the fiduciary institution to sell the property, don’t worry.
Although you would be entering into an irregular contract, you would not be committing any crime and in case of any claim, you would simply solve the problem by regularizing the type of contract that you legally should have entered into.
In conclusion, if you are a foreigner and acquired a property in this city through a trust, seek advice when you want to transfer your property to a third party.
Our city is not very big and it can be easily known which real estate brokers, notaries, or lawyers are not recommended or vice versa, who are recommended.
By David Cristobal Alvarez Bernal | david@bufetealvarez.com
Photo by Jaime Florian en Unsplash