Week in Review: Rumor Pot Continues to Simmer
From time to time we will bring readers a slice of some of the major (and minor) rumors floating around EDR and the North Beach communities. We will attempt to elaborate (and, speculate) on some of these stories to get at what might be something close to the truth. But, we don’t guarantee a hundred percent accuracy. Final judgment is left to the reader. We encourage our readers to jump in and further illuminate, elaborate, or muddy the waters. Chances are you probably know a lot more than we do! When it comes to rumors around SF, you can rest assured that we are always certain, but, often wrong!
If you have rumor-worthy items you would like to include, please feel free to mention them in the comments, or, pass them along to email@example.com, or, contact us so that you, too, can become an author!
Updated and New Rumors
Short Answer: Well, it might as well be—closed–forever.
Longer Answer: Before I retired, I attended faculty meetings once a month. At every meeting there was this one colleague who made a habit of asking the same question about a particular issue we were dealing with that year. And, every time, he would get the same answer. Finally, one day, we asked him, “Why do you persist in asking the same question every time we meet? After all, you know what the answer is going to be!” He responded, “Because I hope that circumstances will have changed and that I will eventually get a different answer.”
That is sort of what it feels like living with an avid lap swimmer. Every day for the past month, this group of die-hard swimmers ask the question: “When is the big pool going to be open for lap swimming?” The pool guy will shrug and say, “When new part comes.”
To everyone’s surprise, last week they got a different answer.
Lap swimmer: When is the big pool going to be open for lap swimming?
Pool guy: (shrugs) There is not enough money to heat pool.
Lap swimmer: (eyes widening) What? I thought you said the big pool needed a new heater or a new pump or something?
Pool guy: (shrugs) Yes. That, too.
Moral of this story: Don’t hope for a different answer. It might be worse than the original answer.
And, so it is with the pool complex. Apparently $8,000/month was budgeted to heat the pool(s). According to reliable sources, this would have been an appropriate amount to budget had the ORIGINAL pool design been built. However, since the ORIGINAL pool building committee got the sack, the replacement pool building committee (#2 )redesigned the pool complex and did not account for the fact that it was going to cost almost double to heat the larger, redesigned pool. To make matters a tad big more prickly, the dynamics between the second pool committee and the second set of pool builders (oh, did I forget to mention them?) have disintegrated. The people who actually wound up completing the pool are not happy about honoring guarantees to parts they didn’t install. So, the long and the short of this is that our brand new, less than a year old “HOA owned” pool complex is experiencing a few “hiccups.”
Short answer: Still, not true in 2014.
Longer answer: Stop! Hold the bus! Well, it just goes to show, NOTHING in life is static. Last time I checked in with you on this subject, I had it on good authority that The Roadrunner Upstairs would be open for breakfast, lunch, and dinner at least until June, 2014. This week, because of something having to do with the new tax reform and business incorporation papers, The Roadrunner has had to develop a new strategy. So, for all of you Roadrunner fans, here is their latest schedule as of Sunday, 26 January:
The Roadrunner Upstairs
Beginning January 29–open from 5 until 9 p.m and serving DINNERS ONLY. Open Wednesday through Saturday (ONLY)
The Roadrunner Downstairs (Deli)
Beginning January 29–open from 7 am until 2 p.m. and back to serving breakfast and lunch. Open every day but Tuesday.
Old News Becomes New Again: The Fideicomiso is Going Away.
Short answer: Before you run down to the bank….hold your horses. The law has not changed, yet.
Longer version: Stories about eliminating the fideicomiso have been floating around for years. Last season, when the new President, Enrique Pena Nieto (PRI party), took office, a bunch of bills–that had been sitting dormant– floated to the surface. One of those bills had to do with eliminating the fideicomiso.
But, let’s back up a minute. I think it’s safe to assume that when many of us first came down to check out property on the Baja, we knew as much about fideicomisos as we did about the desert brittlebush. Under this new President, and with a different Party in office, it behooves us to have a rudimentary working knowledge of the fideicomiso: what it is, and, what, if any, impact it will have on foreigners “owning” property. An informed and educated public is a responsible citizenry, or, something like that.
What follows is just the tip of the iceberg on this subject. I don’t Pretend to know what I’m talking about. So, if you need or want more information, I encourage you to speak with a Mexican attorney or do a lot of reading. Consider this my disclaimer.
Fideicomiso 101 in a very tiny nutshell
A fideicomiso (pronounced: “fee-day-ko-me-so”) is similar to a “Trust.” The word comes from the Latin word “fideicommissum.” Fides meaning “trust,” and, comissum meaning “to commit.” One can assume that the most ancient origins of fideicomisos can be found in Roman Law. This makes sense since at that time there were restrictions on who could and couldn’t inherit property. No surprise, women, slaves, and foreigners were excluded from inheriting property. Apparently there must have been people back then who wanted to circumvent this restriction, thus they creating this “wiggle room.”
Later, in England, during the Middle Ages, the fideicomiso became an institution known as a “Trust,” whereby the trustees have legal title to the property and the beneficiaries hold the equitable or beneficial ownership. Some historians speculate that this might have been a way for wealthy landowners to get around paying property taxes.
The Mexican fideicomiso was created early in the last century and is based on the Anglo-Saxon institution of Trusts. It was described initially as an:
“irrevocable mandate by means of which specific assets are delivered to a bank, as fiduciary, for him(sic) to dispose, according to the intention of the person who gave them to him (called fideicomitente), for the benefit of a third party or beneficiary, called fideicomisario or beneficiary.” –Sergio Monserit Ortiz Soltero.
I think the most important thing to remember here is the terminology. From my understanding, a fidecomitente is the person who initiates the trust. The fiduciary (in terms of real estate) is the bank. The fideicomisario is the beneficiary or the person who is currently benefiting from the property thanks to the fidecomitente and the bank.
Why do “real estate fideicomisos” exist in Mexico? Initially, a fideicomiso was created with Mexican National Security in mind. The Mexican Constitution prohibits non-Mexican citizens from owning real property located within 100 kilometers of Mexico’s inland borders or within 50 kilometers of its coastlines. These areas are referred to as the “restricted zone.” Only Mexican citizens — or, Mexican corporations whose bylaws forbid the ownership of stock by non-Mexican citizens–are allowed to directly own real estate within the restricted zone. The whole of the Baja is a “restricted zone.”
During the early 1970’s, the Mexican government decided that it would be to their benefit to allow foreigners to purchase real estate property in the coastal areas of Mexico. The government explored ways to balance Mexico’s needs of maintaining secure borders and encouraging foreign investment. Their solution was to allow foreigners to purchase the “beneficial interests” in a fideicomiso, under which legal title to the restricted-zone real estate is held in the name of a Mexican bank. They tweaked their Constitution in 1997 so that foreigners could have unrestricted use of the property (almost as if she/he owned it outright), but the Mexican bank’s legal ownership of the property would technically satisfy the prohibitions against foreign ownership in restricted areas as found in Article 27 of the Mexican Constitution.
For years, foreigners owning homes in Mexico have complained about the recurring administration fees for their fideicomisos. The fiduciary banks don’t appear to do much to earn their $400 to $600 annual fees. And, for years we have been hearing about the government doing away with the fideicomiso altogether. Last year a bill was presented to the Federal Congress to get rid of the fideicomiso. And, it passed with an amendment that says they will allow direct ownership of restricted-zone property by foreigners as long as use is for residential purposes only. No commercial activities will be allowed (i.e. rentals and leases). It goes now to the Senate for discussion. While in the Senate, Senators and others will have to hammer out the “ Calvo Clause” to decide how foreigners will have “escrituras” (title that a Mexican national receives when they purchase land). The Calvo Clause is used all over the world. In Mexico it would be an agreement you would sign saying that you would behave like a Mexican national and would not try to invoke the laws of your native country when it comes to issues about your property. In addition, Senators and others need to discuss and agree on something called, the Investment Clause. This clause says that if you have land larger than 2,000 square meters, you must develop it within 24 months and spend at least $250,000 on the improvements. There are other provisions, but, those appear to be the big issues.
Once approved by the Senate, it goes to President Pena Nieto. Some speculate that the President will sign it if:
- The US doesn’t do something objectionable that affects Mexico between now and then.
- The banks don’t decide to muddy the waters.
- The bill doesn’t have too many additions or deletions that the President doesn’t like.
But, wait. Even if the President does sign it, it still has to go to the States for ratification. (Does all of this sound like a familiar process?) A simple majority of the State Legislatures need to approve it before it becomes law. That could take another year. And, then, should it be ratified, there is the process of implementation. I don’t imagine that that is something that will happen– shall we say—“smoothly.”
Even though it’s unlikely that we will see the fideicomiso totally gone anytime soon, I do think it is looming on the horizon. The real estate people are rubbing their hands together with glee already over it. One of their contentions is that once Americans and Canadians can be assured of outright title to property they will come in droves. Consequently, with so much pressure from realtors and developers, it doesn’t hurt to be prepared and understand the implications should it actually come to pass.
What happens when we eliminate the fideicomiso? Realtors and developers are quick to point out that closing costs will be reduced. I’m not one hundred percent sure what they mean when they say, “closing costs.” The only closing costs I’ve seen referenced are filling the fideicomiso. Those include: the $1,000 bank fee and the $4,000 notario fee. If there are other fees, I’m not aware of them. Okay, so let’s assume for the sake of argument that the fideicomiso costs are the closing costs and that they go away. But, wait. It ain’t that simple. The fideicomiso cost may go away but it will be replaced with another filing cost. It has to. Indeed, in order to receive title to the property we will have to file a yet-to-be-determined-new-for-foreigners “escritura” and pay all associated fees that go with it—like a notario fee and a bank fee. So, personally, I’m not buying the “this will reduce closing costs” argument, quite yet.
Next argument from the real estate people is that you will be saving $400 to $600 annually in fideicomiso fees. True enough. They are quick to emphasize that $400 to $600 annually will buy a lot of tequila. I think they are trying to be funny. But,what if you are part of a master trust as we are at EDR? Are our yearly fees for the master trust deducted from our HOA dues? If so, how much are they? If the fideicomiso goes away, and we pay for that out of our HOA dues, will we see a drecrease in our HOA dues? These are all questions for which I have found no answers. And, I couldn’t even begin to tell you where to go to get answers to these questions!
Starting Next Week: All Banking in Mexicali Only
Short answer: Not totally true
Longer answer: While it is true that Bancomer got rid of its branch on the Chetumal, its main office for San Felipe is still on Mar Caribe across from the orange indoor mall. Banamex on the Chetumal, will, according to the note on the door will be closing its doors next week. If you have an account with Banamex, you will have to go to Mexicali or figure out how to bank on-line with them.
In terms of ATMs, three still remain in town.
- La Palapa at LVDM
- OXXO on Chetumal next to Agua Express
- Bancomer downtown
If anyone knows of any others, or has any info on these bank office changes, please pass it along under the comments for this post. Thanks.