Do you really have title to your property?
by Dennis John Peyton

Over the years I have had several clients who have come to me with documents which they thought entitled them to property in Mexico, only to find out that the documents were invalid. Many people believe that if the title documents are notarized before a public notary in Mexico then they have nothing to worry about. Unfortunately this is not true.

 

Assignment of Trust

 

One of the most common problems I have seen in the restricted zone, involves the assignment of real estate trust rights without the consent of the trustee/bank. This type of agreement is used when the property you are buying is already held in trust. It is an assignment of rights because what you are actually purchasing are the beneficial rights the seller has in the real estate trust which holds title to the property. What usually happens is the seller, who has property in a real estate trust "fideicomiso", sells his or her rights to the buyer without first getting consent form the bank. The buyer and the seller merely go before a public notary and execute the assignment of trust rights but neglect to inform the bank.

In order for the assignment to be legal it must be carried out before a public notary or a public broker and abide by the terms and conditions of the trust agreement. The bank/trustee will also need to notify the Ministry of Foreign Affairs so that assignment may be authorized. Almost without exception, the real estate trust agreement will require that the trust beneficiary get prior consent before he or she can assign the trust rights to the buyer. Moreover, the bank will also normally charge a fee to carry out the assignment and notify the Mexican authorities.

The fact that assignment has been executed before a public notary in Mexico does not necessarily mean that the transaction if valid. If the transaction was carried out correctly the notary should make sure that all the provisions of the trust agreement were met, and the assignment of trust rights does not violate any of the provision of the trust agreement. Since the bank is actually owns the property, and is party to the trust agreement, it is imperative that the notary makes sure that there are no outstanding obligations with the bank before executing the assignment.

Unfortunately, there have been numerous cases where notaries carried out trust assignments without even consulting the bank/trustee. This usually results in the bank refusing to recognize the buyer as the beneficiary of the trust. This is because the bank is required to notify the Mexican government when the trust's beneficiary is changed, and must pay a fine if this is not done within the allotted time. I have personally seen and in every one the buyer didn't realize what had happened until years after the transaction was carried out. This can create serious problems, especially when the seller cannot be located.

 

What To Do

This information is based on Mr. Peyton's Book "How to buy real estate in Mexico" second edition, published in December of 1997 and available from Law Mexico Publishing