Advantages & Disadvantages to a Fideicomiso
Translativo de Dominio CONTRACT
By: Lic. Jacques-Edouard Beaulne;LL.B. D.D.N.,at firstname.lastname@example.orgIntroduction.
(edited by Cheryl MIller)
A couple of years ago, a Constitutional reform of article 27.1 was proposed to take place. It did not. But, it
may come back to the table in the future. at which time many who have a Fideicomiso Traslativo de Dominio
contract (FTD contract) in the restricted zones,which provides Personal Rights1, may want to change over to an
“Escritura” (2) so as to have Real Rights(3).
Personal Rights vs. Real Rights and the notion of ownership.
In Mexico one who has Real Rights is said to be the owner but in reality as in every country on the planet there is no
real / true ownership of a real estate property because in every country´s Magna Carta(4) there is a disposition which
provides power to the Nation to expropriate the occupant of any part of the territory and in some countries if one does not pay the property taxes the property is seized and sold; thus the notion of ownership is in one´s gray matter and does not exist except for a Nation. The final result is that only Nations are real owners of any part of a country`s territory. The consequenses of changing over or to elect for an “Escritura” a time of purchase. One who elects to cancel the FTD contract or purchase a property under a writing must look at the advantages and disadvantages of the two ways of holding Rights on a real estate property and the cost of changing from one to the other. FTD contract:
1.-Any claim by a third party of Rights on the property can not be directed against the named benificary in the FTD contract who only has personal Rights on the property;(5)
2.- The property can be used for a commercial venture;
3.- The property can be subdivided;
4.- At time of death there is no need to do a probate process in front of any Court to transfer the property to heirs.(6)
1.- The benificiary must pay initial and annual fee to the financial institution which administers the contract;
2.- One who acquires an area larger than 2,000 square meters must promise to invest a certain amount which is in proportion to the purchased area.
1.- No need to promise to invest a certain amount due size of property;
2.- No initial fees and administration fees; only profesional fees to the contract lawyer who will draft the “Escritura”.
3.- The property can be used for any legal venture.
.- In the event of death of the one who has Real Rights the property is transfered via a Probate process which can be very costly. Changing over, On who already has an FTD contract on a dwelling can use it as a commercial venture (bed and breakfast, rent rooms, office etc.,)7 but once the change over is done to an “Escritura” the possibilities of doing such ventures will not be possible and if done or continued the property will be seized by a federal government agency and remitted to the Nation,in other words loose the investment; thus one must look into the future so as not to generate high change over costs in the future. One must be aware that the change over will be costly because of the Financial Institution fees to cancel the FTD contract, the Notario Publico`s fees to draft and register the necessary documents which will attest the cancellation, the aquisition 3% tax charged by the municipality on the value of the property, professional fees of the appraiser and the Notario Publico´s fees, which are prorata to the value of the property, to draft and register the “Escritura”, 11% IVA tax8 on fees and not to forget that with a new appraisal the property taxes will be higher. As for one who elects from the start to have an “Escritura” the previously mentioned restrictions and consequences of not respecting them will apply so will the costs of changeover if one wants, in the future, to do a commercial venture in his dwelling...thus again before choozing one must evaluate the pros and cons of each avenue. For any information on the above or any legal subject please contact Lic. Jacques-Edouard Beaulne;LL.B. D.D.N., at email@example.com _______________________________________
(1) Personal Rights are attached to the person not the property, example: Usus & Fructus (having the Use and getting the Fruits) see also http://en.wikipedia.org/wiki/Personal_rights
(2) The word “Escritura” in English is Writing (Writing of sale, Writing of donation, ect.,).
(3) Real Rights are attached to the property, ius in re exemple a mortgage, see also http://en.wikipedia.org/wiki/Special:Search/Real_rights
(4) The latin expression means Great Charter, used the identify a country`s Constitution see also http://en.wikipedia.org/wiki/Magna_Carta.
(5) Any complaint must be addressed to the Financial Institution who administers the contract and conserves the property, the Institution does not own the property, the Nation does.
(6) With an FTD contract at time of death the secondary named benificiary must present the death certificate along with a letter informing the Financial Institution of the death of the benificairy who named the second benificiary and request that the changeover be registered, the Institution then produces a letter of instructions to the indicated Notario Publico by the person requesting the changeover who in turn will draft and register the necessary document. The process has a lower cost than if the property was under an “Escritura”.
(7) The same restrictions will apply to who ever elects not to have an FTD contract at purchase time.
(8) The IVA tax is equal to a sale´s and service tax, the tax rate is 16%.
(9) The Author, graduated from the Faculty of Law of the University of Montreal in Montreal, Québec, Canada; first person in Mexico to be awarded license to practice law with studies from outside the country. Author of “How to buy real estate property in Mexico”, Professor of Law and recognized authority in legal matters over Real Estate properties in Mexico, International private and public law.
(10) CAN-AM-MEX FRIMA JURICIDA / LAW FIRM is composed of 8 lawyers, in the last 10 years more tan 800 clients were attended. The firm`s personal provides legal assistance in all of Mexico and defends abused children, men or women “Pro Bono” when needed.
Lic. Jacques-Edouard Beaulne;LL.B. D.D.N., Lawyer in Mexico, The same restrictions will apply to whoever elects not to have an FTD contract at purchase time.
NOTE: The IVA tax is equal to a sale´s and service tax, the tax rate is 16% .9 The Author, graduated from the Faculty of Law of the University of Montreal in Montreal, Québec, Canada; first person in Mexico to be awarded license to practice law with studies from outside the country. Author of “How to buy real estate property in Mexico”, Professor of Law and recognized authority in legal matters over Real Estate properties in Mexico, International private and public law.10 CAN-AM-MEX FRIMA JURICIDA / LAW FIRM is composed of 8 lawyers, in the last 10 years more than 800 clients were served. The firm`s personal provides legal assistance in all of Mexico and defends abused children, men or women “Pro Bono” when needed.