A few words on property fraud to help foreigners understand why it happens and how to prevent it:
Our legal system is based on the civil law (a/k/a as Roman law) which includes the public registries as the way to record and prove ownership over property. Whenever you buy a piece of land you have to get a notary public to write what we generically call escritura de compra venta (“property deed”) which states who sells, who buys, the nature and legal status of the property being sold-purchased and the price.
The notary is forced by law to do a full research on the property to make sure that the seller is the legal owner and that the property does not present any legal conditions that would prevent it to be transferred to the buyer. If, by the moment he does his inquiry on the public registry’s Web page, the property is free and clear and, no problem, the deed is written, signed by both parties in the protocol and sent for official registration.
But wait. There are some things that a diligent notary should also do although not mandatory:
a.) If the seller is a recently constituted S.A, that’s a red flag. It’s easy to know if an S.A. is new or not, just by it’s ID number of cédula juridica. For example, right now we are by the 700’s, that is if an S.A.’s ID is 3-101-701530 you can bet it is fairly new.
Why is this important? Well, why would an S.A. like this sell a piece a property that by necessity it, in turn, purchased little ago?
b.) The notary public should always check on the history of the property being sold/purchased: A piece of land that for the past 10 years or so belonged to a foreigner and during which time it has not presented any movements, and that little while ago appears to have been sold to an S.A. of recent constitution which in turn very recently also mortgaged it by a significant sum and is now reselling it for a fraction of the actual price to someone who thinks to be getting a bargain, you can bet it was stolen from its original owner.
c.) If the previous buy/sell transactions have been done by proxy, that is, not by the actual legal representatives of the involved S.A.’s, that’s another flag. This is the typical scheme that is found in most of the cases for property fraud in the criminal courts now. There will normally be two victims: the original foreigner owner and whoever granted the loan on the mortgage. The former loses his property and the latter his money. This type of fraud is normally accomplished by criminal organizations usually made by land surveyors, real estate brokers and notary publics, all of them crooked and working for some big boss.
The case files tend to be thick and move slowly in court since these organizations work in waves, that is, during some time they start hunting for “abandoned” property and hire different notaries, surveyors, and other accomplices, get loans from different lenders and resell the properties to different buyers, resulting in many different lawsuits mainly against the notaries who registered the false sale transaction and the S.A. that got the unpaid loan.
How to prevent this? Easy. If you own a piece of property but seldom come to the country, just get the almost free property monitor service from the Registro Público called “Registry Alert” which will alert you if your property had any activity in the last 24 hours, and, of course, have some trusted buddy check on your property regularly.
In this very moment I am representing several clients in court who got their property stolen under the above scheme, and the common factor in all these cases is their being absent for 10+ years without regularly checking on their investments. Costa Rica is a safe place to invest, but you have to do your part regarding watching your investment.
Mario Valverde Brenes
abogado, notario, CPA