(1) CAN AMERICANS OWN REAL ESTATE IN MEXICO? YES! - In most of Mexico, Americans, or any other foreigners, can own land outright with what's called fee simple title, the same kind we have in the United States. Only in the restricted zone--50 km.(31.05 miles) from the ocean and 100 km. (62.1 miles) from the borders--is it true that foreigners can't hold fee simple title). Puerto Peņasco is in that area, so these limitations apply.

Perhaps one reason for this restriction is that the Mexicans were somewhat concerned about having lost so much territory to the U.S. in the 19th century--about 1/3 of their country: Texas in 1845, and in 1848 through the treaty of Guadalupe Hidalgo the territory that became California, Nevada, Utah, most of Arizona, and parts of New Mexico, Colorado, and Wyoming. The treaty was signed shortly after American forces had captured Mexico City. The U.S. paid $15,000,000 for all this land. And in 1854 through the Gadsden Purchase the U.S. acquired the rest of what is now Arizona and New Mexico. It's not surprising that Mexico was a little nervous about allowing foreigners, especially Americans, to acquire any more land.

But old wounds heal, and now the U.S. and Mexico are working hand in hand. NAFTA has promoted good business relationships, but even before NAFTA, Mexico wanted to make it possible for foreigners to invest in their country, so in 1971 they developed the bank trust (fideicomiso) as a way for Americans to buy residential property in the restricted area.

(2) IS A BANK TRUST A LEASE? NO - Under a bank trust the beneficiary (buyer) has all the rights of ownership: the right to use, borrow money on, make improvements on, and transfer. A lease grants only the right to use. If the tenant makes improvements, such as building a house, on the property, that house belongs to the landlord. Nor can the tenant sell the property or borrow money on it.

In Puerto Peņasco there have been in the past many long-term lease agreements for land. Before 1971 the Bank Trust was not available, and leasing was the only option for Americans. Apparently some of them were confused about the difference between a long-term lease and ownership; thus they built homes and made improvements on the land they were leasing. After the Bank Trust was initiated, some leases expired and the landlords declined to renew, which was their legal right. The tenants then lost the houses they had built. This frightened other Americans, who thought that their compatriots had their ownership rights taken away, when in fact they had never possessed such rights. In many cases, however, the tenants of the former leases were able to regularize their situations by purchasing the property under a bank trust.

(3) CAN THE MEXICAN GOVERNMENT TAKE AWAY FOREIGNERS' PROPERTY AT ANY TIME? NO! - The bank trust is established by the government and gives foreigners the same rights as Mexican citizens. The only difference is that they never receive the actual fee simple title. It is held in trust for them by a bank. When first established, the term of a Bank Trust was for 30 years only. In 1989 it was made renewable for another 30, and in 1993 the term was extended to 50 years, renewable for another 50.

It may help in understanding the Bank Trust to compare it with the Deed of Trust, a type of financing instrument used in the U.S. People who buy homes for cash receive their titles right away. But the majority don't buy for cash. Under a deed of trust the buyer of a house has only "equitable title," or an equity interest, with the right to use but only a restricted right to sell, until the loan is paid off, after which the owner receives the actual fee simple title. Until then it is held by a trustee, usually a bank or title company.

In Mexico the Bank Trust is also held by a trustee, but the buyer never receives the actual title. Realistically many homeowners in the U.S. never receive title to their properties either, because they sell or refinance their homes long before the 30-year term of their loan is complete.

(4) WHAT IS A NOTARIO PUBLICO? - A Notario is a lawyer with a position similar to that of judges in the U.S. It is not the same as a notary public, although the names sound alike. In the U.S. anyone can post a bond, pay a fee, and become a notary public. But a Notario in Mexico has several years of apprenticeship after legal training and must pass a very difficult examination. I hear it's as bad as the bar and the CPA exams rolled into one. Notarios are appointed by the governors of each state, and there are very few of them (only 2 in Puerto Peņasco). Their functions are a combination of real estate lawyer, tax assessor and IRS auditor. It is they who close real estate transactions, like escrow officers in the U.S., but with expanded powers. Since the Notario is a neutral party, buyers should hire their own lawyers if they need representation.

Two U.S. companies are now offering title insurance in Mexico: Stewart Title and First American Title. This will provide added security for foreigners.