The continual lament of readers is real estate scams

At least several times a month a reader sends an email to describe how he or she has been defrauded in a real estate deal in Costa Rica.

Many are retirees who have sunk much or all of their savings in a home for their golden years. Some end up losing it all, and others spend years trying to gain full ownership.

Although this is a problem that directly impacts investments in Costa Rica, the nation’s institutions seldom take action.

Repeatedly foreigners who think they have been scammed say that prosecutors, the lawyer’s professional associations and even the various embassies do nothing. Frequently the would-be retiree is handicapped by lack of knowledge in the Spanish language and lack of understanding on how legal matters like property transfers take place here.

The allegations of scams range from simple theft to more sophisticated efforts. A U.S. woman told a reporter that she gave her lawyer $15,000 so he could purchase for her a lot on the Caribbean coast. He took the money for his own purposes. She complained, but the best she could do was obtain a promissory note from the man, a politician as well as a lawyer, who promised to pay back the money little by little.

Other unsatisfactory deals involve trusted legal advisers playing fast and loose with the company books. A frequent complaint is that a lawyer-notary who created a corporation also gave himself a full power to control it. Then the absentee owner finds out that the lawyer negotiated one or more mortgages using the property as collateral.

The would-be retirees can either forget about the property or pay off the mortgages.

A variation on this scheme, which was the subject of a reader email this week is that the lawyer managed to mortgage the property even though he did not have a full power of attorney. This would either involve having a friend at the bank or falsifying legal documents.

There are a handful of Web sites that devote themselves to fraud. All are outside Costa Rica and free from its tough defamation laws that prevent full discussions of individual problems.

One is Ripoff Report where a search for Costa Rica generated 270 responses Monday night. Most of these are not real estate-related, but some are.

There also is Quatloos! which calls itself a public educational Web site covering a wide variety of financial scams and frauds. There is a section on Costa Rica property scams. That Web site says:

“No doubt, Costa Rica is a beautiful place which abounds in opportunities, and it appears to be one of the leading jurisdictions for U.S. expatriates to settle down in. Unfortunately, too many of these expatriates are expatriates because they were caught in the U.S. committing some sort of scam or fraud, or committing tax evasion. And so, it is a notoriously corrupt little country, with at least as many scammers as Belize, Antigua and Nevis.”

The Web site then continues to describe a scam where visiting U.S. citizens purchase property and find later that squatters have moved in and set up housekeeping. Without a significant investment in money and time, the property owners will never dislodge the squatters because of the lenient laws favoring the landless. The Web site suggests that real estate salespeople can orchestrate the squatter invasion in order to buy back the property cheaply.

Editors and reporters have found that squatter invasion more likely can be traced to local public officials.

In addition to squatters, there are a whole host of situations that can jeopardize legal title. One expat found out that some of his land was a public right-of-way.

Sometimes beachfront, which nearly always belongs to the state, is sold as titled property. Sometimes property is sold by someone who does not even own it.

Only infrequently do these property cases reach the courts. Prosecutors usually let these cases slide until the clock runs out. One expat had to have his personal lawyers prosecute his case to recover stolen ownership.

And for every expat who is scammed in a property deal, there are hundreds of Costa Ricans who are victims. That is one reason why deaths here are not well publicized. Widows can find out that her home or other property supposedly was sold by her husband just days before his death. Many lack the resources or worldly knowledge to mount a good defense.

Property in Costa Rica continues to be a good deal. But there are some steps, based on extensive input from readers, that can minimize future problems.

1. Expats and would-be expats should deal only with brokers who are members of the two real estate organizations or who come highly recommended and are legal residents. A.M. Costa Rica will give honest recommendations on those who advertise here.

2. Property purchasers should obtain their own professional services, such as lawyers and surveyors, and not take the word and help of project developers, sellers or salespersons.

3. Costa Rica does not have a trust account system, so any down payment might vanish without a trace. Consider having escrow handled through a U.S. title insurance firm.

4. There is no hurry. The land will still be there. Avoid falling for a salesman’s claim that speed is of the essence. Homework is critical.

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