Gated communities in Costa Rica are double-edged swords. They usually give residents more security but take away individual rights at the same time. Ley 7933, Ley Reguladora de la Propiedad en Condominio, or the law to regulate condominium property is to blame.
The problem: The voting rights of condominium associations. Article 27 of the law dictates 100 percent membership approval to change any article of incorporation or bylaw. This fact clearly violates the democratic principle that establishes the interest of the majority outweighs the minority. Years back, the Sala IV, Costa Rica’s constitutional court, upheld this inequity in the law stating it was proportional and reasonable.
The owners in condominiums make up the homeowners association. Elected officials from within the group lead it. This group can tweak little things of common interest to the whole group but cannot change anything of consequence. In some cases, developers hang on to many votes and sway the voting even on the little matters.
Costa Rican law requires three legal books for this association:
1. actas de asamblea or assembly minutes
2. actas de junta directiva or board of director minutes, and
3. caja or cash for accounting of the organization.
Allan Garro, of Garro Law, says many if not most of the residents buying into a project never read the bylaws of a condominium before purchase. Even fewer of them know about the governing law and how it affects their ownership and individual rights.
People that contact him for advice are surprised when they learn the facts, he added.
When buying into a development, it is important to know the rules because they may include many restrictions on having children, pets, and parties, along with maintenance and upkeep mandates.
When someone does not follow the rules, they can get a written warning letter initially, but can end up evicted. Yes, even owners get thrown out of their own places.
Developers started to use the condominium law about 15 years ago. They moved away from the traditional structure of using fully titled parcels.
There are good reasons condominiums in gated communities are better for buyers:
1. There is more security.
2. Houses do not need their own gates, window bars, high walls and razor wire.
3. Ground keepers maintain common areas for everyone.
4. Internal regulations control construction, parties, noise, pets and other things.
Developers like them, too, because local municipalities prefer to approve them. These types of projects let municipalities off the hook because homeowners are responsible for the maintenance of internal road, sidewalks, and open space.
Project designers can target special groups like retirees or high-income buyers for luxury housing to maximize their profits.
Finca or farm is the name given to real property parcels in Costa Rica. Divided property under the condominium law, the mother property becomes the finca matriz or mother farm. The word matriz is a feminine noun in Spanish meaning womb, original, or master.
Each individual property inside the mother becomes a finca filial. Filial means the same thing in Spanish as it does in English: of or relating to a son or daughter, or bearing or assuming the relation of a child or offspring to a parent.
When a property goes condo, each finca filial gets registered at the Registro Nacional separately with a unique number. In other words, people get a real piece of property with real property ownership rights. However, they are limited by the bylaws.
Now here is where it gets tricky or interesting, depending on one’s point of view. Beach property inside the maritime zone in Costa Rica cannot be owned.
However, developers are building condos on the land called concession land. The holder of a legal concession over the maritime zone can build a project and go condo under the condominium law.
It is a relatively safe investment if the project has all the correct permits from the local municipality, the tourism ministry, the national housing institute, and the health ministry.
Even though the land is leased or in-concession, owners of each condo share in the licensing agreement obtained by the developer with the Costa Rican government as a sub-leasee.
However, this is a complex issue. All concessions are required to be held 50 percent by Costa Ricans, and the rule of thumb is 51 percent. This means majority ownership, or controlling interest must be held by one or more Costa Rican citizens. Having this ownership or control in the hands of one person or a small group could be dangerous to the whole because it could contribute to a takeover or unwanted sellout. Something like what happens on Wall Street everyday.
What happens when a project just does not qualify for condo? Well, some developers are still physically dividing properties into lots and selling a 99-year rental contract over the space. On this area one can build. Or the same developer will offer to build to suit. This scheme does not exist here legally, but real estate people are busy selling property based on it every day.
More importantly, local law and jurisprudence holds any contract over 10 years as abusive. In this kind of scenario, one never holds title to anything, just a trumped-up rental contract.
Another flaky deal is where one just gets stock or shares representing a piece of a property, again, no legal ownership of legal property.
Buyers need to be careful when buying a condominium. They need to know the structure used which created the project. They need to read the rules and regulations and understand their real rights and how they might be limited.
Homework is the key when considering a gated community. Those that do not do some studying are usually sorry later.
Garland M. Baker, a certified international property specialist, is a 45-year resident and naturalized citizen of Costa Rica. His firm’s team provides multidisciplinary professional services to the country’s international community. Reach him at firstname.lastname@example.org. Baker has undertaken the research leading to these series of articles in conjunction with A.M. Costa Rica. Find the collection at http://crexpertise.info, a free reprint is available at the end of each article. Copyright 2015. Use without permission prohibited.