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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No thanks to the impotent criminal courts

After four long years of fighting hard in the courts in Costa Rica, an expat saved his property investment. He thought all hope was lost, but in his case justice prevailed. Last week the expat had what was stolen from him returned: A mortgage fraudulently canceled by property thieves and an attorney gone bad.

The result of this expat’s long legal battle shows that the criminal courts are impotent in fighting crime. His case proves there is a way to use the civil courts to get back properties that were illegally transferred or manipulated.

Here is the story:

The expat owned a beautiful house located in Escazú. He decided to move back to Florida in 2000 and sold the house to a sociedad anónima or corporation represented by Costa Ricans. The buyer — in this case, the company — could not pay the full price for the property and needed a loan for $100,000. The seller obliged and carried back a mortgage. The amount due was to be paid in a lump sum after five years, and 10 percent annual interest was to be paid monthly.

The company that bought the property sold it three months later to another Costa Rican firm that accepted the mortgage that existed on the home. This is done all the time, selling something with a lien or other encumbrance to another person. It is perfectly legal as long as both parties agree to the transfer accepting the encumbered title. Original creditors do not need to agree to the transfers or approve new debtors, so the expat never was notified of the transaction.

Interest payments were made until 2003 and then they stopped. The expat was in the hospital in the United States and could not come to Costa Rica to see what had happened. He finally contacted a lawyer to check on the status of the mortgage only to find it had been canceled. Yes, canceled.

In June of 2003, a mortgage cancellation document was filed with the Registro Nacional. The document fraudulently showed that the expat had appeared in front of a notary in Costa Rica to sign the cancellation. This happened while the expat still was in Florida.

The expat started two court cases in Costa Rica, a criminal action and a civil one. The two cases have different stories. The criminal case started off with a bang. The property deed was frozen by the court and an annotation was made on the file at the Registro Nacional. Soon after the prosecutor took this action, the prosecutors’ office found that the attorney who prepared the mortgage cancellation had 40 other accusations against him for similar frauds.

They found the attorney to be a hardcore drug addict fraudulently transferring properties and canceling mortgages and other liens to support his drug habit. For one reason or another, the prosecutors’ office lost interest in the case and did no more to move it forward. As of today, the case has not even reached the preliminary audience stage and is surely expired by now.

The civil case started off slowly with no serious action for many months. Finally, a judge in San José ruled in December of 2006 that the mortgage had to be re-registered. This only occurred after the lawyer representing the expat submitted a multitude of legal documents to prove the expat was out of the country when the property mortgage was canceled.

The defendants disappeared. They thought that by hiding they could avoid the case. They were almost right. The civil court could not find them and did not try very hard to do so. The expat had to spend hundreds of dollars paying private investigators to locate the accused to serve them with court papers. Without this extra effort, the expat would have lost everything.

It took one year and nine months to find the individuals that conceived and carried out the crime. They were finally found and served with the civil judgment. This is a legal requirement by the courts here before a judgment is final.

At this point, the expat has paid thousands of dollars to get the mortgage reinstated. The ordeal is not over yet. However, there may be some good news. Now he can execute the mortgage and take the property to public auction. At this auction, depending on how much is bid, he may get his principal back with all back interest and attorneys fees. If no one shows up at the auction, he could even get the property back. This would be true justice to pay him back for everything he has suffered over the last four years.

Civil law in Costa Rica protects innocent third parties in a transaction, whereas, criminal law protects victims. In layman’s terms, this means that if something is stolen from someone and then sold to another person the criminal courts — in theory — should give it back to the rightful owner. The civil courts would let the current owner keep the thing.

However, Civil Law Article 1061 states that if something is never rightfully owned, it cannot be transferred to another person. Doing so is a null transaction. In the case of property fraud, most transactions are fraudulent, so they are null and void in the eyes of the civil court, and rightful owners are protected.

Today, in Costa Rica the criminal court system is a mess. It is ineffective for those using it to fight criminals. Depending on the circumstances of a particular case, it is better to use the civil courts.

In this case, the people who set up this expat and stole from him will never be punished for what they did. The criminal court did virtually nothing and did not even look for the crooks. The only reason the retired man prevailed is because he took the fight into his own hands and paid heavily to get justice.

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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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Foreigners developing on the coast are handicapped because there are little or no guidelines for development. Guidelines for developers come from regulatory or zoning plans. These plans are — in theory — designed to align the land and human activities to the best use of resources without depleting those resources.

In the past, foreigners interested in developing have skirted the rules, especially in the maritime zone. In many cases, they have had to do so because no coherent rules were in place. Today, the Costa Rican government is finally trying to regulate growth and building, especially on the coasts with integral territorial zoning plans. Each one will encompass large areas. These integral plans are coming for areas all over the country.

One very important integral coastal plan on the drawing board right now and of special interest to the government is for the Hermosa, El Coco and Bahía Azul area of Guanacaste. The government wants this plan to showcase its interest in sustainable development and promote investment. This plan includes an area of 200.5 hectares or 495.5 acres.

In Costa Rica a zoning plan for an area is referred to as a plan regulador. In the past, municipalities have had little or no money to create zoning plans. In urban areas this fact means there has been building with no planning. Development with no planning means no organization, and many subdivisions throughout the Central Valley and on the coast are suffering today because of this lack of planning and organization.

In the maritime zone, within the 150-meter restricted area, something else has happened over the years. Private interests that wanted to develop property paid for zoning plans to suit their needs. Many municipalities throughout Costa Rica accepted the privately funded plans to raise their tax bases. In some cases, municipal officials personally enriched themselves working with private companies on these zoning plans. Others just built without permission period.

To get a concession from the country in the restricted area of the maritime zone a regulatory plan must be in place. Concessions are the vehicle people and companies use to make money in the restricted area. For example, to build a condominium or a resort in this area, the country must license the use — through a concession — to the individual or company. Only Costa Rican citizens are allowed to hold a concession. However, this is another one of the rules everyone skirts by using Costa Ricans as puppets when applying for a concession.

The Procuraduría, the attorney general’s office of the country, has tried hard to curb these practices, but officials have not had much success to date. Many people in Costa Rica bend the rules and seemingly appear to get away with doing so.

The reason the Costa Rican government wants the Hermosa, El Coco and Bahía Azul coastal zoning plan in place so badly is because the country wants to prove to the world it knows how to plan sustainable development. The government wants to provide developers a set of rules they can use in planning and get rid of the surprises that currently plague those trying to do something in Costa Rica. This plan is indeed different for the following reasons:

1. The project is being paid for by the Instituto Costarricense de Turismo — the tourism institute — not private companies or local municipalities. The plan is designed to promote local as well as
international tourism as well as investment. 2. It is designed to organize and plan future development.

3. Protecting the environment and natural resources is a core objective of the plan.

4. Increasing the security of concessions for those people who have obtained them is of key importance to promote foreign investment.

5. The taxes generated in sectors where there are integral plans will help the municipalities improve and maintain important infrastructure. This is a serious problem for coastal projects today.

6. Access to public zones will be enhanced for Costa Ricans.

There is also another very important element to the new zoning plans on the coast, one everyone with property in the maritime zone should know. Any structures within the 50-meter zone will be inventoried and probably be torn down. Some structures have already been demolished. This is the public area from the mean high tide line to a point 50 meters inland. Structures within the 150 meters restricted zone also will be inventoried and analyzed. The analysis will be to determine whether or not the structures are legal. Structures that were built without permission and permits also will be torn down.

Many people in Costa Rica adhere to the unwritten guideline that it is better to ask for forgiveness than permission. In the cases where people used this method of building in the restricted zone, it may very well be the cause for the demolition of whatever they built.

Those who have obeyed the rules and followed the correct procedures will have their properties on the coast and in the maritime zone enhanced by the new coastal zoning plans. Hopefully, one of the first ones for Hermosa, El Coco and Bahía Azul area will be everything it is cracked up to be, a serious plan for sustainable development and increased foreign investment.

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A personal trip to the Parrita-Quepos area to look at property and meet with real estate agents turned out to be an invaluable experience. The real estate slowdown is quite evident, but there is good news for well- informed investors. Today’s deep discounts are tomorrow’s profits.

For sale signs are everywhere. Property prices have dropped on some real estate 50 percent or more. Some people have walked away from the houses they were building before completion and assigned them to real estate agents with instructions to sell them for whatever they can get. Some condominium developers are selling their projects out using fractional ownership so they can make some sales and bring in badly needed cash flow.

A.M. Costa Rica published articles cautioning about the coming weaknesses in the real estate market starting in January 2005 when property values were spiraling out-of-control. Later articles predicted that too many condominiums were under construction and this would cause an over supply.

In retrospect, 2005 surely was the topping out of the real estate market in Costa Rica and the beginning of the slowdown of real estate sales. This is true in most market situations. When prices are crazy and people are willing to spend almost anything on the upswing, the market is ready to burst and turn around.

The slowdown started to show its nasty head in 2006 when real estate agents complained of fewer sales and prices leveling off or declining. The events in the United States surrounding the subprime mess where consumers over borrowed on the equity in their home, perhaps to buy a vacation or retirement property in Costa Rica set the foundation for a turn around in real estate here.

This is not the first time this has happened in Costa Rica. Old timers remember Costa Rica went though a similar time in the 1970s. Property values were on the upswing and relative to those times, real estate was expensive and increasing in value rapidly. However, with the onset of the Nicaraguan conflict and the United States embargo against the country, real estate sales abruptly entered stagnation.

Values did not start to rise again until after the end of the United States embargo against Nicaragua in 1990. Costa Rica’s real estate values started to increase slowly at first but gained momentum rapidly in the late 1990s. This culminated into explosive growth and skyrocketing prices from 2000 to 2005.

Today, Costa Rica real estate prices are on the fast decline for several reasons. Here are a few:

North America is in serious financial distress. In the past, when the United States caught a cold, Costa Rica suffered financial pneumonia. This is not as true as it was in the past because Costa Rica is a destination and retirement option for many other types of foreigners not just North Americans. However, even today, when the United States is having troubles so does Costa Rica. Usually, there is a lag time of around a year before Costa Rica suffers from the happenings in the United States. This is also true during the recovery process. Costa Rica needs the same amount of time to begin recovery after the United States markets improve. This means the bottom of this slowdown is just beginning not ending.

As stated in the article “How high can skyrocketing land values go?” New found paradises go through a defined cycle: The phases to the cycle are exploration, involvement, development, consolidation, stagnation and, decline and/or rejuvenation. Given all the development over the past several years, Costa Rica is now ready for its consolidation and stagnation phase. The slow down in the United States has not helped and is probably nudging the country into these phases prematurely.

Today, Costa Rica is at war. It is at war with crime. Crime is everywhere. It runs the gambit from the highest echelons of government down to petty street crime. The problem is the street crime is not so petty any more. Many robberies are at gunpoint or worse, someone is killed. The Costa Rican press is full of stories of students being murdered over a cell phone
while waiting for the bus. The problem is Costa Rica has not declared war on crime. The country is just too complacent letting the criminals run the show.

The country had better wake up sooner rather than later. In the past, Costa Rica’s proximity to Nicaragua made North Americans uneasy about traveling here during the Nicaraguan war. The United States’ embargo put the nail in the proverbial coffin. Most foreigners like to feel safe when they travel — especially North Americans — and when they do not feel safe they tend to avoid a destination in conflict. The increase in crime in Costa Rica and the increasing world’s perception that Costa Rica is not a safe place to visit will stagnate Costa Rica’s growth even if the United States recovers from its financial problems.

For these and other reasons, the bottom of this slowdown is in its beginning stages not at the bottom, as some real estate agents believe.

Now for the good news for savvy investors. Baron Rothschild, an 18th century British financier, is attributed with saying “The time to buy is when there’s blood in the streets — even if the blood is your own.”

This author is bullish on Costa Rica and feels the country will eventually get its act together — of course — in its own Tico time, but it will happen eventually.

There are some great real estate deals these days for investors and for those people looking to retire here in the future. There are even better deals for those with cash. Knowledgeable investors recognize bad times make for good buys. Even though Costa Rica has probably not hit bottom, it is the time to start looking for property. Real estate values have a positive trend over time and real estate values will sky-rocket again sometime in the future as it has done in the past. Markets always do.

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Remember the days of skyrocketing real estate prices in Costa Rica? People thought then there was no end in sight — no limit on how high a piece of dirt could go. Real estate in the United States was crazy, too. Doomsayers here and there were friendless. No one would listen to their tales of a looming crises.

Everyone knows now that the doomsayers were correct. The bubble burst. Some of those who bought properties in Costa Rica are now hurting back home. As predicted, they cannot pay their obligations there or here. Adjustable rate mortgages were the devil’s work fueling the subprime mess.

Many sellers carried back mortgages on real estate here so they could get the highest price possible from buyers. Smarter sellers made all cash deals. The smart ones knew many buyers were shopping overly hungry in a vast supermarket and ready to over spend.

Some of those sellers with mortgages now have to face foreclosing on the buyers just as some of the financial institutions in the United States have to foreclose on their subprime loans.

There is a relationship. People in the United States were borrowing too much money because borrowing money was too easy. Easy come, easy go. In other words, buyers who borrowed easy money came here and paid big bucks for overpriced real estate.

Many real estate agents are in denial and jump to say that real estate is still selling like gangbusters because Costa Rica’s market is the world and not the United States. This is correct. Costa Rica’s market is the world, and there is a huge market of wealthy buyers in the world. However, real estate is no longer skyrocketing uncontrollably. Buyers are fewer and more cautious. Many of them are smarter than the frenzied buyers of only a few years ago looking for a good deal.
Financial institutions calculate risk and have legal teams to go after deadbeats. A poor seller who carried back a mortgage for an over zealous buyer does not have a legal team. They’re lucky if they have a decent lawyer. Some of the sellers took their loot and mortgage back to the United States thinking there would never be a problem collecting the debt.

Sellers who have buyers defaulting on a mortgage now have to decide what to do and how to go about collecting.

For those sellers, there is a little silver lining in the crisis. Debt collection has become its own law in Costa Rica instead of being parts of other laws like the civil code, the civil procedures code and the law of the judicial power. The new law No. 8624, called “Ley de Cobro Judicial” is a replacement for many antiquated procedures that bogged down the process allowing debtors to prolong debt collection and sometimes avoiding it all together.

The new law, published in La Gaceta Nov. 20, will take effect this May 20. A new specialized court will handle all collections eliminating different courts for amounts less than $1,200 and others for amounts over $1,200. Only a fax number or an e-mail address will be valid for notifications.

Under the new law, once a debtor answers a demand on him or her to pay, a hearing is set. At the hearing, the judge will analyze the paperwork and listen to witnesses. With the information at hand, the judge will make a verbal decision. This is in deep contrast to what happens today where a judge can take months — even longer — to make a decision. Many roadblocks a debtor could throw into the collection action will be a thing of the past.

The spirit of the law is to turn the current long procedural process requiring loads of paperwork into a verbal and fast judicial action.

This new law is also an opportunity for investors. There is profit in buying foreclosure real estate at auction.

Some of the rules have changed too. Deposits to participate in an auction are going to increase to 50 percent under the new law from the current 30 percent. When an auction is ready for the docket, three dates are set instead of just one. Under the old law, only one date was set. If the auction failed, it took months to get a new date.

The new law is more efficient. Three auction dates are set to deal with auctions when there is no winner. The first starts at 100 percent of the asset value. The second starts at 75 percent, and the third starts at 25 percent. If it happens there is no successful auction after three tries, the creditor will be forced to take the asset as payment of the debt.

Sellers who sold and gave buyers mortgages when Costa Rica boomed are not doomed. The new “Ley de Cobro Judicial” can help collect those mortgages and maybe even get the property back if the debtor does not pay. The new law is also a serious new resource for savvy investors.

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Beach house is on its way down!

If they have property in the maritime zone, expats can look forward to a hard time this year from municipalities up and down the coasts. If that is not enough stress for 2008, the Ministerio de Ambiente y Energía will be in line to add more tension. Some expats may be losing their comfy beach houses if they are located in the wrong places.

Municipalities over the past couple of years have awakened. They are now in a fret and furor trying to make up for lost ground. The first attack is tearing down structures within the 50 meters zone. This has gone on now for a couple of years. A visit to Guanacaste over Christmas shows the momentum increasing. The first 50 meters on the coast is the public zone. All the people of Costa Rica have rights to this land, but for years some have built or encroached on this zone. The Costa Rican government has complete sovereignty to protect the area for the people. Municipalities do the policing.

In some cases, targets include certain high profile Costa Rican landmarks owned by Costa Ricans, like the Mar y Sombra restaurant in Quepos. In other areas of the country, expats are first on the destruction list.

One hotel owner in Paquera received notice in August to tear down a 50-year-old house. He loved this beach house and that is where he stayed when visiting the country, not in his hotel. His argument that the house existed way before the maritime law became effective fell on deaf ears.

The owner received official papers stating if he did not tear down the house, he and his legal representative would face criminal court action.

What made him mad is not that he had to tear down the structure. He said he respects the country’s laws and wants to contribute to its development. He is mad because his Tico neighbors with houses on the adjacent beach did not get the same legal notice.

More maddening is that as he began tearing down his beloved house, the inspectors came back and added other structures to the list. Now it looks like the municipality is going to pour salt into his wounds by increasing his taxes this year.

This poor expat has his personal troubles with his municipality. However, he is lucky, others have much bigger problems.

Most concessions in the maritime zone need to be renewed every 20 years. This means updating all the paperwork and resubmitting it for approval. Those doing so are finding the rules of the game different. The rule of thumb in Costa Rica is when things work well, change them to return to havoc.

It is the Ministerio del Ambiente y Energía’s job to determine what areas from 50 meters to 200 meters above mean high tide can and cannot be transformed into a concession in the maritime zone. This department of the government did not do its job for many years in protecting environmentally sensitive spots. The pendulum has swung from doing little to overkill.

In one concession in Guanacaste up for renewal, the Ministerio del Ambiente y Energía says there is not one concession but four and that many condominiums there are built on land that is protected because of environmental concerns. The concession holder is in a quandary. He does not know what to do. Costa Rica law states a Costa Rican can only own one concession at a time. Will the concession holder lose the other concessions? Will he need to tear down existing structures to adhere to the law?

Now the biggest scare of all for 2008. Costa Rica wants its cut on maritime property over and above the measly pittance it receives in taxes The country has figured out concessions are sold for mega
millions of dollars to international trend setters and the country gets zip on the sales. The legislature is discussing this fact, trying to come up with ideas to get a piece of the mega bucks.

In 2008, municipalities will tear down more and more structures close to the beach, including homes and businesses. The Ministerio del Ambiente y Energía will rigorously apply rules with a vengeance to make up for lost time when officials were not doing their job, making new concession applications and renewals wearisome. These events promise a frustrating year for expats and developers living or investing in the maritime zone.

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Today many property owners seem to be drunk on blue sky.

Blue sky is not a brand of guaro — an alcohol derived from pure sugar cane — or other intoxicating beverage, but an addiction to the recent skyrocketing real estate prices. Most are familiar with the term. It means the intangible portion of a price above what is reasonably supported by the current market.

Those with real estate training use the term to represent the difference between the price a seller puts on their property and what the market probably will bear in price.

Sellers can be found sitting on out-of-the-way properties counting imaginary dollars, drunk on “blue sky” waiting for a movie star or Arab prince to come along and pay an outrageous price for their land.

It seems many expats are on a blue sky high, and some of them are killing themselves waiting for their dream to become a reality. Many are land poor — meaning they own land but lack the capital to improve or maintain it. Some are literally starving to death because they have no income. Other expats have lost all their money in one or another investment scam over the years and all they have left is their land.

Blue sky is deadly for those who want to transform the status of their property from “for sale” to “sold.” Like a princess-in-waiting from a lack of suitors, over-priced properties sit lonely, isolated from potential buyers because unobtainable prices create a lack of enthusiasm in the market.

A real estate agent can help bring property prices and owners down to earth — or they can be the culprit, enabling the drunken seller to stay inebriated on blue sky. Many real estate agents share the same affliction as property sellers. Some of them are still working illegally here, waiting for a big commission before scooting out of town.

There are responsible real estate people in Costa Rica and a good real estate agent, or a smart buyer, can bring a seller down from his blue sky high.

One cure is a dose of reality from an independent property market appraisal. A property market appraisal is different from a property appraisal.

The meat of a property appraisal in other parts of the world is the sales comparative or sales comp. A real estate sale creates this number. When a property changes from a caterpillar to a butterfly — from “for sale” to “sold” — it leaves behind the sale comp, usually in some form of public record. Verified sales comparatives are almost impossible to find in Costa Rica.

Why are there no verifiable sales comps to be found here? The answer: People do not want to pay property taxes based on the actual sales prices. Most buyers usually pay a much higher amount for a property then they declare in the transfer deed.

Without accurate sales prices, how does one find anything that resembles a sales comparative? Most do not find them.

The best way to determine the probable selling price is to use a property market appraisal.

In Costa Rica, a market appraisal is more than a stroll around the neighborhood and a check of the local multiple listing services. It is a document that defines a micro-market, the immediate area in which the property is located, and compares it to a macro-market, the extended area in which the property is located to determine where buyers are most likely to invest their money, place their property bets. It can be part marketing plan, part property appraisal.

A real estate expert representing the seller should ask a property owner, “Do you want to be a seller — or do you want to sell?” If the owner prefers to sell, the real estate expert should promote the use of a property market appraisal to define the market and price for the seller. When the agent is working for a buyer, the market appraisal is an excellent foundation on which to formulate an offer.

An independent and neutral third-party market appraisal in Costa Rica offers focus in a sometimes hard to define market. Saying “goodbye” to blue sky and “hello” to a property sale turns equity into cash.

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