Wednesday, January 19, 2005
Trust vs. Lease
This question always comes up often with people new to the world of Mexican coastal real estate. It also comes up among seasoned veterans in the RV and mobile home communities. One comment we have heard is: "Trust -- lease; it's all the same in Mexico". The fact is, nothing could be further from the truth!
What's the difference? The difference is in the ownership of the "asset value" of the underlying real estate. The underlying real estate is the land plus all permanently attached improvements. The question is: Who ownes the "asset value"?
Under the Trust situation: When you purchase you become the "beneficiary" of the trust with a Mexican National Bank as the "trustee" in a fiduciary capacity. No one HAS EVER lost a property property placed in a Mexican Land Trust! As the beneficiary of the trust, you receive ownership of 100% of the asset value of the real property along with all of the responsibilities of real property ownership. When you purchase you can assume an existing trust or set up a new one. A new trust runs for a period of 50 years.
KEY POINT: ALL of these trusts are renewable such that you or your heirs can own 100% of the asset of the real property for as long as you want! You can buy it, sell it, will it or donate it at any time. You can improve it all you want subject only to local zoning regulations. These zoning regulations ca be either municipal, or agreed to by the members of an owner's association. (Since we are guests in a foreign countrym it is very important that we respect these regulations whether we agree with them or not!).
Under the Lease situation: The asset value is owned by the landlord. The responsibilities of property ownership are negotiable. Again, the asset value includes the land plus all permanently attached improvements regardless of who paid for them. Technically you own the right to the property for the duration of your lease as long as your lease payments are current, HOWEVER, at the end of the lease, unlike the trust, you own NOTHING. Under this arrangement, as we have seen in San Carlos in the recent past, the leases can be broken and the lessees run off.
Information from Richard Baca, Sunshine Realty, San Carlos Sonora, Mexico 85506. For more information e-mail us at vivasancarlos@gmail.com
What's the difference? The difference is in the ownership of the "asset value" of the underlying real estate. The underlying real estate is the land plus all permanently attached improvements. The question is: Who ownes the "asset value"?
Under the Trust situation: When you purchase you become the "beneficiary" of the trust with a Mexican National Bank as the "trustee" in a fiduciary capacity. No one HAS EVER lost a property property placed in a Mexican Land Trust! As the beneficiary of the trust, you receive ownership of 100% of the asset value of the real property along with all of the responsibilities of real property ownership. When you purchase you can assume an existing trust or set up a new one. A new trust runs for a period of 50 years.
KEY POINT: ALL of these trusts are renewable such that you or your heirs can own 100% of the asset of the real property for as long as you want! You can buy it, sell it, will it or donate it at any time. You can improve it all you want subject only to local zoning regulations. These zoning regulations ca be either municipal, or agreed to by the members of an owner's association. (Since we are guests in a foreign countrym it is very important that we respect these regulations whether we agree with them or not!).
Under the Lease situation: The asset value is owned by the landlord. The responsibilities of property ownership are negotiable. Again, the asset value includes the land plus all permanently attached improvements regardless of who paid for them. Technically you own the right to the property for the duration of your lease as long as your lease payments are current, HOWEVER, at the end of the lease, unlike the trust, you own NOTHING. Under this arrangement, as we have seen in San Carlos in the recent past, the leases can be broken and the lessees run off.
Information from Richard Baca, Sunshine Realty, San Carlos Sonora, Mexico 85506. For more information e-mail us at vivasancarlos@gmail.com
