Trusts are one of the most important legal documents a lawyer can make for a client in Costa Rica. It is amazing that most attorneys do not know how to create or administer them here. Most people think of trusts in the case of death and inheritance, but they can be used for many more situations.

This is a refresher for expats to remind them of the usefulness and power of making a trust to protect assets or to solve a dispute. Originally, this subject was addressed last year in “Trusts are a perfect vehicle for getting deals done.”

Many large property transactions are based on trusts. Banks use them to lend money. Developers use them to hold property until a sale and then, once payment is made for a piece of property or building, they release it from the trust to the purchaser. The later is usually done in conjunction with the lender to the developer.

Fideicomiso is the word for a trust in Costa Rica. There are five basic parts to a fideicomiso: 1) trustor or fideicomitente, 2) trustee or fiduciario, 3) beneficiary or fideicomisario, 4) trust property or bienes fideicometidos, and 5) the trust contract or contrato de fideicomiso.

The rate published in the lawyers’ fees guide to charge for a trust is .01 percent. However, this rate is not what lawyers usually charge for the document. Really the fee charge by a lawyer depends on the complexity of the trust. The going rate is more like 1 to 3 percent of the value of the trust. Usually, trustees charge a yearly administration fee as well, and it can be expensive.

The value of a trust for the average expat is to use them as a vehicle to sell or buy a piece of property or to solve a legal dispute. Here are a couple of examples:

An expat has a property to sell and he or she has found a buyer, but the buyer is another expat who cannot get credit in Costa Rica and does not have all the money. The seller can take back a mortgage and attach the property, but the danger is that the buyer may not pay. Even though the collection laws in Costa Rica have changed, foreclosures can still be complex and can get hung up in court.

What happens in many cases is a buyer who cannot pay sues the original seller in criminal court over some trumped up allegation to postpone paying. This tactic does not work as well as it use to, but it still works for awhile. If the seller in this case puts the property in a trust, it would be harder for a nonpaying buyer to wiggle around and not pay.

In this example the seller and the buyer would be trustors or fideicomitentes and they would put the property in question in a trust or fideicomiso held by a trustee or fiduciario for the term of time that it would take the buyer to pay the seller. In this case, both the seller and the buyer would be beneficiaries or fideicomisarios of the trust. The purpose and result of the trust would be that the seller would get paid in full and the buyer would get the property free and clear of any encumbrance.

This kind of legal transaction lessens the chance the buyer will pull any funny business on the seller because if he or she does, the trustee would revert the property back to the seller.

Trustees can be virtually anyone, but they usually are lawyers, title insurance companies or banks. Making a trust with a lawyer and using a lawyer as the trustee is in most cases the cheapest alternative. Title insurance companies are reasonable priced in most cases, with banks being the most expensive and more complicated when it comes to the paperwork.

Trusts work great to solve legal disputes.

Say two or more people are in a legal battle. Usually, this means fighting over money or assets. If the parties to the dispute can come to an agreement to end the matter, the terms of the arrangement can be put into a trust document to enforce the agreement.

For example, an employee of an expat leaves and sues for amounts unpaid by the employer. This is a very common occurrence in Costa Rica: Disgruntled employees suing their employers. Under the Costa Rican labor laws, there are amounts that must be paid to an employee regardless of the reasons the employee leaves or whether the employee is fired.
Employees love going to the labor ministry and in many cases to court because they believe they will win big. However, in most cases they are willing to settle out of court for a lesser amount because they know the court system in Costa Rica is slow.

The best case scenario is for the expat employer to just pay the employee off and be done with the problem. However, many expats are on a limited income because they are retired and cannot pay the full amount. In this case, a simple trust with a lawyer comes in real handy.

The trustors, the employer and the employee would go in front of a lawyer who would act as a trustee to an agreement and set out the terms of payment. The employer would make payments to the lawyer who would in turn disburse the money to the employee. In this way, an expensive legal battle in labor court would be avoided. Nine times out of ten, an employer loses in labor court, so it is a nice place to avoid.

Trusts are not magic, but they are sure a good way to solve simple or complex legal situations in Costa Rica. In many cases, they can be a less expensive alternative to financing, collection and solving legal problems.

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Renting properties in Costa Rica is as common for locals as it is for foreigners. However, relationships with landlords may be negative for expats who expect property owners to adhere to the basic rental laws. When renting a property in Costa Rica, expats can expect many headaches along the way, most of them provoked by landlord negligence.

Even though landlord problems occur in every country, if Costa Rica is the country of choice, expats may be better off buying than renting. Foreigners who plan to live in the country temporarily should prepare to deal with frustrating situations, miscommunications and neighbor issues provoked or plainly overlooked by property owners.

There’s one fact expats can count on: Most landlords in Costa Rica never read the rental law (No. 7527). They have no idea about their rights or duties as property owners or about violations or legal procedures that protect both tenants and owners.

Another fact is that even though some landlords have no idea about the content of the rental law, they will likely and blatantly violate it numerous times, and most of the time they can get away with it.

Costa Ricans tend to avoid confrontation. Culturally, Ticos are taught that standing one’s ground is a sign of rebellion, and as a family-centered culture, Costa Rica has done a pretty good job teaching its citizens that obedience and passivity are the best attitudes in life. That is mainly the reason why business owners and landlords have had the upper hand when it comes to abusing or neglecting their roles in society.

Therefore, once a tenant or customer decides to fight for rights and demand quality for what they are paying, common reactions from service providers or landlords are shock, indifference and even confrontation.

Many landlords have only one goal: Getting the most for the least. They do not flinch at violating the law if it means saving money. Expats should not be surprised if they encounter any of the following situations while renting in Costa Rica.:

Insecurity. Some apartment buildings lack safe, sturdy gates or security systems to keep tenants safe. Many buildings lack intercoms, making it easy for criminals to be buzzed in by mistake or to break in. Only very exclusive buildings have 24-hour security guards or intercoms with cameras. Many tenants come home to find their living quarters emptied by burglars that were mistakenly buzzed in.

Options: In this case, expats cannot protect themselves legally against negligence by the landlord concerning insecure facilities.

Misleading contract clauses. Rental contracts are supposed to have a group of clauses warning tenants of the rules to follow before considering moving into the apartment or house. However, consequences for violating certain clauses are sometimes not specified in the document, making it impossible to know how those violations will be punished. The most common of these situations is a contract specifying that pets are absolutely prohibited in the building. Then some months later one or two neighbors get pets. Problems like excessive noise from barking, odors and dog attacks against neighbors from untrained dogs and negligent pet owners can follow.

Options: Getting some legal advice is key in finding out how to make rental contracts enforceable against insensitive landlords.

Hidden apartment problems. Once a tenant leaves, some landlords tend to repair only the most visible problems, and more serious ones are left untouched until the new tenant complains about them, which can take months until noticed. That buys landlords time to enjoy the initial deposit — which is equal to a month’s rent — and to procrastinate about fixing problems when notified by the tenant. Some landlords play dirty by blaming tenants for recurring problems that can be easily disguised as new problems, such as pipe obstructions and water leaks.

Options: Having a lawyer inspect the apartment before moving in and documenting its condition will help identify which are recurring and new problems. Having another inspection before moving out will protect tenants and help them get back their whole deposit because landlords will not be able to invent or exaggerate damages left by tenants. Besides, according to Section 30 of the rental law, any major deficiencies in the property unknown by the tenant are reason enough to request a proportional deduction of the rent amount. Depending on how serious they are, tenants can file for damages.

Maintenance negligence. Even after months of constantly getting notified by tenants of problems, some landlords have the nerve to gracefully ignore them and use their favorite weapon of choice: words. Sweet little promises or placing blame on contractors that do not show up are common responses that can take months to surmount. Such cases usually end up in legal action by the tenant to break the cycle. Landlords generally tend to push the envelope.

Options: E-mail notifications are much better than phone calls from tenants in case the situation goes out of hand. After informally notifying a landlord of a problem immediately it is noticed, landlords might take care of it right away, wait a little or ignore it for months. According to the rental law, if landlords do not fix the problem 10 business days after getting notified, tenants can take care of it and deduct the cost from the rent. If tenants want landlords to take care of the problem instead (as it should always happen), the situation gets more complicated for tenants. The law details that if the problem is not fixed within the 10 business days after notifying the landlord, tenants can go to court and seek permission from a judge to deposit the next rent payment in court.

The judge evaluates the situation and, if approved, the judge sends a court notice to a landlord to force the owner to take care of the problem before getting the rent from court. There is a process to follow, however, before going to court:

• Tenants have to document all the notifications sent informally (by e-mail) to landlords in a formal letter that must be printed and illustrated by pictures of the problem. The letter must end giving the landlord 10 business days to fix the problem, stating that otherwise the tenant will go to court (juzgado con jurisdicción) and deposit the money of the rent.

• Tenants must get two impartial witnesses – police officers are recommended, since judges will take it more seriously than if family members or neighbors witness it – to attest that the document was delivered to the landlord. If tenants decide to go to the police, they should ask for an acta de observación diligence. Calling services by their correct names saves tenants the run-around in police stations. Requesting for a witnessing service incorrectly will immediately raise a red flag among policemen and they will send tenants to different municipal offices that will not help at all.

• Once the document has been given to the landlord and the acta de observación is duly filled out by the police officers, tenants wait the 10 days.

• If the problem is never fixed, tenants must go to a lawyer to prepare a document to take to court about the case. All proof must be kept and submitted (pictures, acta de observación, letter, e-mail copies) to the lawyer.

• Tenants agree on a day to go to court with their lawyer and process their case. If approved or denied, the judge dictates the procedure to follow.

Neighbor disputes. Even though Costa Ricans tend to be mellow and passive, they can also get quite violent with neighbors or when driving. Ticos can be really territorial. Therefore, whether it is complaints about noise, garbage or pets, landlords do not necessarily strive to keep the peace among tenants. Tenants have the obligation to notify landlords when neighboring tenants cross the line. Landlords are responsible for solving any problems keeping the peace in the rental building. However, that rule is rarely followed. Landlords might even make things worse by not using tact when talking about the problem or blaming the complaining neighbor for being too inflexible.

Reluctance to solve neighbor property issues. Problems from neighboring properties such as large trees that cover one’s backyard, excessive noise, garbage, among others, are most likely going to be ignored by landlords until tenants take it to a law enforcement level.

Options: Tenants should not take the matter into their own hands in this case. They have to make landlords deal with other property owners, since they are solely responsible for their piece of land, even if it is affecting their tenants only. Therefore, the legal steps specified above for maintenance negligence must be followed by tenants in order to get neighbor problems solved.

The rental law specifies all rights and duties for both tenants and landlords, as well as many legal procedures both parties can opt for in different circumstances.

Nevertheless, many landlords get scared once they see their tenants are serious people who will not let anybody walk all over them. Showing up at their door with two police officers, filling out an acta de observación and having a well-written letter with good pictures attached will likely do the trick, and no further legal action may be needed. Landlords sometimes are just lazy and only need a reality check to do their job. Otherwise, courts tend to protect anybody who presents a well-documented case.

Tenants must keep in mind that if they take any legal action against landlords, they may be subject to more negligence in the future or even spiteful revenge tactics from resentful landlords. The rental law specifies that unhappy landlords can notify the tenants to vacate any time after three years of living in their property, but if the apartment is located in the same lot as the landlords’ home and they share a common entrance, tenants can be evicted any time and for any reason.

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The judge won. He said his decisions were not open to question. The Sala IV (Supreme Court) of Costa Rica agreed. A judge can decide anything they deem appropriate in a given case, and it is not up for discussion. The Office of Judicial Inspections have been ordered not to question the judges’ final word either — even in cases where there may be obvious bribery, curruption or fraud.

The Sala IV has said that a judge’s resolution could be overturned by a superior court but could not be voided by anyone other than him or herself. Their decision would reject any oversight of any other judicial considerations.

In one instance, the Sala IV ordered the Court’s Judicial Inspection Department to reinstate a judge — who had been suspended for making a suspicious decision — and pay him all his wages back because the office had suspended him wrongly. The inspectors had questioned one of his resolutions and suspended the judge because they felt there was some monkey business going on concerning a civil collection case.

Costa Rican law originated from Roman law, unlike the U.S. legal system, which originated from Anglo law. Roman law is based on rules, and Anglican law is based on jurisprudence. In Costa Rica, rules are written as laws and their interpretations are left up to the judges. Their rendition is their business, no one else’s, according to the Costa Rican Supreme Court.

Here is the story:
In a case where an asset was given as a guarantee, the creditor asked — as is his right under Costa Rican law — that a court-appointed trustee be in charge of the asset in question until a collection case was settled. A judge, overlooking the creditor’s right, said no to the request.

The creditor appealed the judge’s decision to a higher court. Superior courts are usually made up of three judges in Costa Rica, and they are referred to as tribunal courts. The appeal process took more than a year to resolve, but the creditor won. The higher court ordered the lower court – in very stern language – to grant the court-appointed trustee the asset in order to protect the creditor.

Here is where things get interesting. The creditor contacted the trustee, and they went to the court on a Friday to get the pickup order for the asset. They got the run around from the court clerks, but the clerks finally prepared the order for the judge to sign. As it turned out, the same judge who said no the first time and whose decision was overturned by the superior court was in charge that day.

However, at the time they needed the judge’s signature, they were told that the judge had some emergency come up and had to leave the court building early that day. None of his assistants told the creditor or the trustee that in reality, the judge had stayed there all day and did not leave the building until the court was about to close. The creditor and the trustee had waited all day for the order to be completed. The only thing they were told at the end was that they had to come back Monday to get the document signed.

Was the judge there on Monday? No. It just so happens that he went on vacation and a substitute judge was in his place. After a bit of pushing, they finally convinced one of the assistants to let them speak with the replacement judge. The creditor and the trustee explained the whole case to the man so he would sign the pickup order. After the judge listened to the story with little interest, they were told to wait outside.

Lo and behold, the debtors in the case were also sitting in the chairs outside the judge’s office waiting to see what would take place.

Any expats who have lived a reasonable time in Costa Rica can probably guess what happened. The replacement judge said he would not sign the order as it was written. He called in the assistant — the same one who prepared the order on Friday — and told her to redo the order to say exactly the opposite of what the creditor and the trustee needed.

The creditor, with nowhere else to go, filed a complaint with the court’s Judicial Inspection Office. They took the case immediately and went to the lower court in question to investigate. The original analysis stated that the investigators considered the judge’s decision as wrong by dismissing the higher court’s order. After further probing, they suspended the substitute judge. This judge immediately filed an amparo – a special injunction for relief and stay – with the Sala IV claiming that a judge’s decision cannot be questioned in Costa Rica.

The results are in. The creditor, trustee and the Judicial Inspections Office lost the case. The judge won. The Sala IV very clearly agreed with him. Decisions by judges — no matter how unreasonable, wrong, or suspicious — cannot be scrutinized by anyone, including the Judicial Inspections Office, who was also strongly reprimanded by the Sala IV for over-stepping their bounds.

The Sala IV, in its decree, told the inspectors’ office that they can only investigate a judge regarding their administrative protocol — such as showing up for work on time, remaining a certain amount of hours in their offices and completing their duties as expected by court — but never on the grounds of illegally obstructing justice or meddling with correct law procedures.

Recently, three lawyers who found out about this case were flabbergasted over the Sala IV’s ruling. They feel it makes it that much easier for judges in this country to be swayed in their judgment, especially when they cannot be held liable for corrupt, illegal or suspicious decisions.

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So many expats make the same mistakes with domestic workers in Costa Rica. Usually their intentions are good. Nevertheless, from the outset of the work relationship most start it off on the wrong foot, giving workers a reason to go to court. Why should they wait to be fired upon by the domestic staff? They should fix the mistakes. It is easy to do.

The scenario usually starts innocently enough. Expats come to the country and start looking for a domestic employee to help with household chores. This process starts by asking others for references or putting the word out in their community. Placing ads is not common practice for domestic workers because all kinds of weirdos answer them. Some even are crooks looking to case out locations to rob.

First mistake: Once a person is found for the job, most people do not sign them up as a legal worker but pay them by the hour. The going rate today for this type of worker -— someone working by the hour and not registered legally to work — is around 1,500 colons ($2.75) an hour. The official rate for a servidora doméstica is 518.67 colons an hour with an upward adjustment coming Jan. 1. People pay more thinking they can circumvent the law. Some get away with it, many do not.

Paying a worker by the hour and not putting them on an official payroll is a mistake because the Ministerio de Trabajo says that even temporary or part-time workers need to be registered with the Caja Costarricense de Seguro Social, the nation’s social security agency.

Doing so is easy enough. An employer needs to go to their local social security office and ask them to start a planilla, a payroll for their domestic staff. The amount paid to an employee is reported at the beginning of each month and the social security costs are paid around the third week of the month. Reporting can be done online at the Sistema Centralizado de Recaudación, “central collection center,” Web site. Payment can also be done online. Once a payroll is reported to the collection center, the amount due can be paid from one’s bank account via a link to the social security agency.

An employer is responsible for deducting 9 percent from the employee’s wages and paying it to the social security department along with the employer’s payment of 24.5 percent for a total of 33.5 percent. For example, for a total payroll of 100,000 colons — this is just an example in round numbers — an employer needs to pay the Caja 33,500 each month over and above the wages of the worker. This extra amount covers the worker for health insurance, old age and disability benefits, among other things.

Second mistake: Giving the employee too many “in-kind” benefits is a big no-no. “In-kind” means things in a form other than money. This includes meals, lodging, clothes, education assistance, and transportation. In Costa Rica, any “in-kind” benefits an employee receives can become part of their payment for work performed. In addition to the legal consequences, being too nice can backfire on any employer.

All domestic workers are entitled by law to some extras like meals. If no percentage is set in a contract, 50 percent of their salary is assumed the amount. It is very important to have an employment contract with domestic workers stating the exact monetary value of their “in-kind” benefits.

Third mistake: Not covering an employee with workers compensation is a legal problem just itching for court. Most expats do not cover their domestic staff with workers compensation — called riesgos del trabajo — because they do not know they have to. It is easy to do for domestic workers by purchasing a homeowner’s policy called seguro hogar comprensivo or comprehensive homeowners insurance. One does not need to be an actual owner of a home. The policy also works for people renting.

If an employee is hurt on the job and the employer does not have workers compensation, depending on the injury, the employer could be looking at criminal liability. Comprehensive homeowners insurance is relatively cheap. Why would any expat take the risk? Those without should call an insurance agent today.

What constantly happens is that at some point where a worker is not covered as they should be according to the law, they complain and want to be compensated. If they go to the work ministry or the social security agency all hell breaks loose. Inspectors are sent to the workplace to study the complaint, and they are not very friendly. Employers can be liable for all back payments and be fined heavily for not complying with the law.
If the situation goes to court, the matter becomes even worse. There is no winning for the employer just paying through the nose to set things straight. This is one area where Costa Rican attorneys take cases on contingency because they know they will eventually win.

Expats that have made these classic mistakes should start over before they get stuck up and extorted. They should end any work relationship that is not properly set up, pay the person the legal amounts due for dismissal. Then re-hire the person and put them on a payroll, stipulate their “in-kind” benefits in a labor contract and cover them with workers compensation.

Complimentary Article in PDF Fomat

Looking for high interest on money? There are loan brokers in the local market with customers looking for cash. Some of these brokers are even lawyers representing their clients.

Watch out. There is a scam which preys on anyone willing to lend their hard-earned savings. It is a trap for those blinded by money and eager to beat the interest they are getting at the bank or on certificates of deposit.

This is how the swindle goes.

First step, finding the right property to use in the scam.

Scamsters look for a property that has not moved for years in the database of the Registro Nacional. Even though quite a bit of information is available online via the Registro’s Web site, it would be very time consuming to find a list of properties not moving without some inside help.

However, it is very easy to get property information without an owners permission on individual parcels. Asking neighbors of an unkempt property is a good starting point. If they say the owner has not been around for a while, the next step would be to check the movements at the Registro to see if the property has shown any activity. If not, the next place to check would be obituaries and immigration information to see if the owner is either dead or out of the country.

This process can also be done in reverse by looking up property records for people that have died or are out of the country. If a match is found, it is important to know how long the person has been dead or gone. Finding information about Costa Ricans is easy. Almost anything one wants to know can be found at the Tribunal Supremo de Elecciones, the supreme electoral court also known as the Registro Civil. It is more difficult to find immigration information, but with the right contacts at immigration, the information is available.

Once the right property is found, it is time to go to the next step: transferring the property using a crooked notary. They are not that hard to find. Usually they are young and need quick cash.

Now for the third step, get the word out a loan is required. There are many advertisements in the local papers for loan brokers. The loan brokers look for lenders for a fee. Usually a high interest rate is offered like 18 percent or more, and the borrower offers three months advance interest. Expats fall for the gimmick because expats like to lend their money for high interest so they can live off the proceeds. The multitude of expats involved in the failed high-interest loan operations once very common in Costa Rica are a good testament to this statement.

When the lender/victim shows up with the cash, the transaction is made with the crooked borrower. From the funds being loaned, three months interest is taken from the proceeds and given back to the lender as prepaid interest. He or she goes home happy thinking they have made a good deal. They do not know the property was not really owned by the person borrowing the money.

Three months go by and no more interest is paid. The borrowers disappear and the lender goes to an attorney to try and collect. The lawyer finds it impossible to find the scamsters. In some cases, legal proceeding are already in process by the legitimate owners or their heirs to get the property back.

Even in the best of cases, the chances the person lending the money will get it back are very remote. Usually, the people involved are seasoned criminals who know the ropes. They know that eventually the property will revert back to the original owner and probably no one will try very hard to catch them. Even if they are accused by the court, they most likely will not do any jail time. Many cases like the example here just expire and the bad guys get off with the crime.

Expats that get caught in this kind of scam are usually scammed again by the legal professionals they hire to protect them. The lawyers tell them they have good hopes of getting their money back and collect a handsome fee up front. In most cases, the truth is they will never get their money back and spending anything to fight to do so is just throwing good money after bad.

Why is it so easy to hoodwink people into dubious financial transactions? It appears just to be human nature. Everyone wants to find the gold at the end of the rainbow or the lost treasure of Sierra Madre. Some expats who come to Costa Rica to live out their retirement years are easily sucked into the most preposterous of schemes. Most of them just want to find a way to augment their retirement and others are just blinded by money and do not make good decisions.

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Expats living in Costa Rica may be interested to know that certain foreign judgments are enforceable in Costa Rica by means of a process called an exequatur. Going through the process to get an exequatur can mean collecting monies due when they were otherwise lost or collecting child support from a deadbeat spouse hiding in this country.

The court here can even order judicial liens over assets — called embargos in Costa Rica — to protect assets in this country during litigation in another country.

An exequatur, which is the same word in English or Spanish, is a judgment or other legal act issued by a Costa Rican court that states that a decision issued by a foreign court is legally executable or enforceable in this country. The Sala Primera of the Corte Suprema de Justicia — the first division of the supreme court of Costa Rica — decides what foreign judgments are legal here and which ones are not. The articles governing this process can be found in the civil procedural code, articles 705 through 708.

This is how they work:

Once a foreign judgment is obtained in another country, the interested party represented by a lawyer in Costa Rica petitions the Sala I to enforce it in Costa Rica. The court here does not re-try the case, it just approves or denies the exequatur. The lawyer must supply the following information to the court:

1.) The judgment from the foreign court translated and authenticated,

2.) Proof the defendant was properly served with the legal action or declared en rebelde — not locatable or in hiding — in accordance with the laws of the country from which the case originates,

3.) Proof the defendant was properly served with the final judgment,

4.) Evidence the legal matter is not exclusively a Costa Rican one,

5.) Proof the judgment is enforceable in the country from which it comes,

6.) A document showing that the judgment is not against Costa Rica law.

Exequaturs can be broken down into two major types: 1.) Exequaturs of private interest and 2.) formal requests from a foreign court for assistance in a legal matter also known as letters rogatory.
Most private interest exequaturs have to do with family matters. 95 percent of them have to do with divorce or approving other martial affairs. The other 5 percent have to do with adoption or childcare, like child support.

Here is an interesting example of an exequatur sought and granted in Costa Rica:

A Costa Rican woman and a Japanese man were married in Alajuela on Oct. 28, 1978. The marriage was properly registered in the national civil registry in this country.

A divorce by mutual consent is not difficult to obtain in Japan. The parties presented themselves in front of the mayor of Kanagawa, Japan in 2003 and requested a divorce. He granted the divorce, and they just had to sign in his book to make it legal.

In 2005, they filed for an exequatur in Costa Rica to recognize the divorce. The Sala I granted their request in November of the same year stating they followed the correct procedure in Japan to divorce and it should be upheld in Costa Rica because the act did not violate any Costa Rican laws. The court ordered the exequatur which meant registering the divorce with the civil registry here.

Another example is an adoption case. An expat man took his wife and her child to the United States so he could adopt the child because the process is easier there. He obtained the adoption and filed for an exequatur in Costa Rica. It was granted, saving a couple of years of court proceedings in this country to accomplish the same task.

In other cases of divorce and adoption, the actions were denied and no exequatur was issued because the situations were not consistent with Costa Rican law. In one example, a divorce was granted in Nicaragua where the woman was not properly considered in the action. The Sala I denied the exequatur to register the divorce in Costa Rica because in this country the two parties to a divorce have a say. Unilateral divorces are not permitted here.

Letters rogatory usually pertain to process service, taking in evidence, and in Costa Rica attaching assets with judicial liens while a legal process is going on.

Many attorneys do not know how to use the power of letters rogatory. This includes attorneys in Costa Rica and other countries. Letters rogatory are governed by Inter-American Convention on Letters Rogatory of which Costa Rica is a signatory. The text of the convention can be found at this link.

Court settlements and arbitration judgments are also enforceable using exequaturs. The law in Costa Rica supports out-of-court settlements strongly, and in the case of an out-of-court settlement from another country where there are assets in Costa Rica, an exequatur can be sought to collect if the settlement or judgment does not violate Costa Rican law.

Many foreigners while living in Costa Rica believe they are untouchable from the laws of their home countries. Some are running away from debts, wives, and child support payments. The truth is, some of the bad deeds from home can follow a foreigner to Costa Rica and legally be enforced by the authorities here.

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And an employer could be just a homeowner

Employers are suffering heavy losses in their labor court battles with employees. Judges are also clobbering employers with hefty awards to the employees to serve as a warning to bosses to stay out of court.

In one labor case, a court decree Friday surprised a retired couple. A judge ordered them to pay thousands of dollars to a guard service. The judge ruled that the proprietor of the service really was an employee and not an independent contractor. The homeowners have contracts between themselves and the guard firm to prove otherwise, but the judge discarded the documents as rubbish.

Another case is unbelievable but true. An employer fired a worker after giving the worker three letters of reprimand for disobeying orders. It is law that an employer must give a worker three letters before firing the individual for disobedience. In this case, the worker sued and won. The worker said the third letter should have read, “We are calling your attention for disobeying an order for the third time, so you are fired,” not what it read: “It is the third time we call your attention for disobedience, and since we have called your attention twice before, you are fired.”

The judge ruled each letter is a punishment and the third letter should not mention the first two. One Costa Rican lawyer calls this kind of law kindergarten jurisprudence.

Why do employers lose and employees win in labor court? Here is an analysis:

There are three elements that make a person working for another an employee in Costa Rica: prestación personal, remuneración, and subordinación laboral.

Prestación personal means a worker must do his or her work personally. They cannot hire others to do their work. Remuneración means payment. Workers receive payment for their work. Subordinación laboral means the worker takes orders.

So in the case of the homeowners, the judge put a lot of weight on the fact that the operator of the guard service did most of the work himself and that the couple contracted directly with him as an individual and not as a third-party corporation.

So the guard was entitled to be reimbursed for overtime, vacation, the Christmas bonus, social security charges and other employee benefits. Usually corporations can only collect the contract amount.

Legally speaking, certain inherent principles apply to legal matters with employees, and these principles are the reason workers win most of the time in labor court.

The protector principle grants workers social protection. Courts act in dubio pro operario. When in doubt regarding the circumstances and evidence of a conflict between an employer and an employee, the court must rule in the favor of the employee. In addition, many times different laws can be applicable to the same situation. In theses cases, the law most favorable to the employee applies.

The non-renounce principle grants employees non-renounceable rights. This means workers cannot renounce their rights under any circumstances. The nature of labor law in Costa Rica guarantees worker rights over any private agreement.

The continuity principle views all labor contracts as indefinite. This means labor law contemplates that contracts with workers do not have an end. They go on forever. This is why when one company buys out another, the law guarantees the employees all

their rights under the new administration. This principle also gives employees the benefit of the doubt when they do something wrong. If a worker breaches any rules, and the employer does not take immediate action to correct the situation, the lack of discipline turns the breach into a right.

A perfect example of this principle is cellular telephone use in the workplace. Nowhere in the labor law is there an article that states employees have the right to use cellular telephone at work. However, most employers do not curb their use, turning the use into a right.

The primacy of the reality principle guarantees workers — no matter what any contract or agreement states, whether it be for an indefinite or definite term, outsourcing or for professional services — that the reality of the circumstances will rule. Therefore, if a judge believes a freelancer is an employee, regardless of an existing contract to the contrary, the contractor will lose in a dispute and have to pay the freelancer all the benefits of an employee with interest and costs.

The reasonability principle gives the benefit of the doubt to the employee. In many cases, employees do not know for whom they work for in a job. They know who gives them orders and who reprimands them, but they do not know the legal entity responsible for their rights. In these cases, the employees can sue everyone they think is responsible and request everything they believe they are due.

In many situations — one example is construction — many companies work together on a job. A construction worker in a labor dispute can sue the construction company that hired him or her as well as the owners of the project individually.

Recent changes to the labor law extended the statute of limitations from six months to 12 months to file a claim against an employer. The statute of limitations is suspended when an employer denies the worker a letter specifying the reason for dismissal or when a worker files a claim at the labor ministry. When an employee files a lawsuit within the proper period, the worker can file for up to 10 years worth of benefits.

The moral of this article is a simple one. Do not play games with labor relationships in Costa Rica. The labor courts are ruthless in dealing with employers who try to skirt the rules.

Complimentary Article in PDF Fomat

Trusts can save the day in many cases in Costa Rica and avoid lawsuits or arbitration. In cases where litigation has already started, using a trust is a great way to get out of court. Most large development projects in Costa Rica — and small ones too — use trusts as the financial vehicle of choice. Literally, the possible uses of a trust is only limited to the imagination of the creators.

Most people — especially expats — think of trusts as they do wills. They are legal documents full of mumbo jumbo to take care of beneficiaries after one’s death. Trusts are much more than this here. They are dynamic legal instruments with many uses.

Here is a quick course. Once taken, pass it on to your legal professional. Most Costa Rican attorneys and notaries do not have a clue how to use a trust in this country.

Fideicomiso is the word for a trust in Costa Rica. There are five basic parts to a fideicomiso:

1.) trustor or fideicomitente,

2.) trustee or fiduciario,

3.) beneficiary or fideicomisario,

4.) trust property or bienes fideicometidos, and

5.) the trust contract or contrato de fideicomiso.

The fourth item, trust property, is the thing administered by the trust. To be valid, a trust must hold some property. Property may be any real or personal property like stocks, real estate, even cash, to name a few examples.

Of course, trusts that are more complex involve more parts, but these are the basic elements of basic trusts. An understanding of them is sufficient for most expats investing or doing business in Costa Rica.

In a nutshell, trust property is put into a trust by trustors, also referred to as grantors, donors or settlors, so a trustee or trustees can administrate the assets for the beneficiaries of the trust, according the terms of the trust contract.

Seems simple, but the devil is in the details, the details being the trust contract. That is why trust lawyers throughout the world make big bucks doing trust work.

Here are three ways to use trusts in Costa Rica:

Example one: a nasty legal matter of the heart: A woman – X – feels she has the right to everything an expat – Y- owns because she lived with him for a couple of years. The law clearly states it takes three years to quality for a “union de hecho” or common law union. However, due to the one-sided laws of Costa Rica regarding disputes between couples, she is successful in throwing the expat out of his house and onto the street with no place to live until the courts resolve the matter. In some cases, this can take years.

Really, the woman just wants a payoff, but the expat does not have all the money she wants. He wants his house back, and he does not want to wait for the courts to decide whether they will give it back to him.

The way to solve this dilemma with a trust is to have mediators, usually the couple’s attorneys, get the two to agree to a settlement amount. The attorneys than move the property into a trust they call Trust XY at the Registro Nacional with the agreement the lady will move out of the house immediately. There are no taxes associated with transferring assets into a trust.

Once the expat pays off the amount agreed to, the trust ends and he get clear title to his house back.
In this case, X and Y are the trustors as well as the beneficiaries. The attorneys are the trustees, the house and the payment amounts are the trust property, and the signed agreement is the trust contract.

Example two: building a condo project with little or no money: Two people get together, one owning a great building site close to the beach and another with building skills. The two go to the bank offering to put the land into trust for a construction loan. The trust also receives the title of the completed condominiums. Upon sale of the units, the two business people pay to the bank the agreed upon proceeds of each sale, and the bank transfers the deed out of the trust to the new owners.

Example three: trusts work great in a property sale when pieces of the puzzle are missing to complete the sale, as in when permits or other bureaucratic red tape is missing. Sellers wishing to sell put the property into a trust, and buyers wishing to buy put their money. They write a trust contract connecting transfer of the property and the payment based on completing the missing components. Once all the pieces come together, the trustees transfer the property to the buyers and pay the sellers.

Most banks in Costa Rica work in trusts. Banco Improsa is the most well-known in real estate development. Banco de Costa Rica is also very active and does not require their bank lawyers to write the trust contracts, which in many cases can save a lot of money. The cost to set up a trust vary wildly, so customers should shop around.

Trusts are incredible vehicles for those that know how to use them. Public notaries can hold them to make a trust private between parties. For more security or transparency, banks or trust agents make an excellent choice.

Complimentary Article in PDF Fomat