Friday, February 3, 2017

A Gringo and His Money are Soon Parted in Costa Rican Real Estate

Gringos are often attracted to Costa Rica for its beauty and its claim to be the happiest nation on Earth. Some decide to buy real estate, but the result is not always happy.
My first awareness of the risks in investing in Costa Rican real estate came in 2004 from an old friend who decided to retire, sell his travel agency, and invest the proceeds in a cliffside restaurant/home in Costa Rica.  Being a Venezuelan national, he was fluent in Spanish and could competently read any document presented to him in Spanish. He hired an attorney to advise him on the purchase. After delivering his life savings to the closing of the sale, he then went to visit his property, only to find out that the seller did not have title to the property and that his own attorney conspired against him. 
He returned to the U.S., broke and reduced to sleeping on friends’ couches.
I first started appraising in Costa Rica in 2010, and I started hearing stories of foreigners cheated in real estate deals.  The best known story at that time was the experience of Sheldon Hazeltine, who created a YouTube video titled “Costa Rica land fraud”.  Hazeltine and his partners bought a coastal parcel near Los Sueños with the intention to develop it.  While he was outside Costa Rica, a nearby wealthy landowner organized squatters to occupy the land and then declare squatters’ rights.  In Costa Rica, a squatter can acquire a right to possession (not ownership) after just one year of occupation, unless it is an agrarian parcel, in which case, the Institute for Agrarian Development can expropriate the land and transfer ownership to squatters who are farming the land. Otherwise, after 10 years of occupation, the squatter can then obtain titled ownership, anyway.
After some time being occupied by squatters, though, a billboard was erected on the property advertising the development of a hotel on the site by the wealthy landowner.  He basically paid the squatters to take the land and enable him to obtain ownership through their squatters’ rights. The squatters were paid off to leave. Hazeltine had been trying to get back his land for almost 20 years.
This YouTube video is no longer available due to a defamation lawsuit against Hazeltine.  He accused a thief of being a thief.
I was told of squatters who have taken over properties previously belonging to Tropical American Tree Farms, a failed teak farm venture. A young attorney organized squatters to occupy the former teak farms, charging them for the privilege. They cut down the trees and planted crops. It is possible, now that the teak farms have been vacated for so long, that the squatters may have obtained title to the lands per agrarian law.
There is a logic behind these squatters’ rights laws that is antagonistic to absentee landlords living in other nations.  Possession is nine-tenths of the law; there is little sympathy for supposedly rich gringos that own land but do nothing with it when there are so many landless campesinos in Costa Rica who just want to earn a basic living.
But the problem of expropriation of land from foreigners gets worse.  There has been a proliferation of property theft gangs which use public notaries to record transfer deeds in their favor without the owner of the land knowing about it.  Any deed transfer by a notary public is accepted as true until a judicial proceeding establishes otherwise, and such litigation typically takes 5 to 7 years.
Property theft through fraudulent title transfer has become such a problem in Costa Rica that a legislative bill was introduced last August to quicken the pace of justice for defrauded landowners.  
Legislative bill number 19.968, the Law for the Cancellation of Irregular Entries in the Property Registrar (Ley De Cancelación De Asientos Irregulares En El Registro Inmobiliario Del Registro Nacional), would create an administrative mechanism to cancel fraudulent property documents that have entered into the Property recording system.   By bypassing the courts, the time frame to revert a fraudulent transfer would be significantly reduced.
If a foreigner wants to be an absentee landlord in Costa Rica, nevertheless, the risks are high.  The best way of having a defensible ownership is to buy within a gated community.  Otherwise, one must live in Costa Rica full time or else hire security, and there may be little to prevent your security guards from transferring the ownership into their names.


Michael said...

Whenever I want to complain about the US legal system I'm reminded of stories like this. We may not have the best system but it still seems better than all the rest. The rule of law and property rights are pretty strong here and people don't ever have to worry about having their property stolen out from under them.

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Andy Petter said...

Great job Vernon. Completely a new idea and knowledge I have experienced after ensuring my first entrance in this Costa Rica real estate business. Regardless to say about the stunning beauties of Costa Rica and people from different countries love to invest their life savings in here. But the story you stated here was really very sad and awareness creating too. But what about the attorneys? If they do not work honestly, that may be a great cause of sorrow for many foreigners. Anyway, I enjoyed your useful experience and also would like to share for getting any real estate help especially for the guys in Sacramento area. May be found it really helpful.

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