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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Watch out for this guy

A whole lot of money is being made by those selling condos up and down the coast of Costa Rica.

There are as many weird deals. Some condominium projects are skirting the law. This explosion is due to the “Ley Reguladora de Propiedad en Condominio” or condominium law, published in La Gaceta on Nov. 25, 1999. Apartment buildings, commercial places like malls, office buildings, and — unbelievably — even cemeteries use the condo law to divide up property.

Here is how it works:

When a property is divided up under the condominium law, the mother property becomes the “finca matriz.” Finca means farm in Spanish. Most properties, even small lots and houses are referred to as a farm in Costa Rica. The word matriz is a feminine noun in Spanish meaning, womb, original, or master. It is used to refer to the finca as the mother.

Each individual property inside the mother becomes a “finca filial.” Filial means the same thing in Spanish as it does in English: of or relating to a son or daughter, or bearing or assuming the relation of a child or offspring to a parent.

When a property goes condo, each “finca filial” gets registered at the National Registry separately, with a unique number. In other words, you get a real piece of property with real property ownership rights.

The basic requirements to use the law are as follows:

A.) A legal document needs to be prepared with the general description of each floor, apartment, or condo with its intended use, along with the same kind of explanation for common areas. This document is submitted to the Registro Nacional or national registry for approval.

B.) The document needs to outline the total value of the condominium, including the proportional value of each property component (condo).

C.) The project developer needs to adhere to all the generally accepted licensing requirements and obtain all the required building permits.

D.) Plat plans referred to as “catastros” need to be prepared and submitted for approval by the catrastro department of the national registry.

E.) General guidelines, referred to as the Reglamento de Administración y Condominio or condominium and administration rules for the owners, need to be drawn up and submitted with all the above items.

F.) The request to divide up the land is made in a deed, signed in front of a notary public.

The general guidelines are very important. This document is where the framework of how each person or family who buys a unit needs to act in order to offer everyone a quiet, peaceful place to live.

When buying into a development, it is important to know the rules because they may include restrictions on having children, pets, and parties, along with maintenance and up-keep mandates.

When someone does not follow the rules, they can get a written warning letter initially, but can end up being downright evicted. Yes, even an owner can get thrown out of his own place.

The rules or guidelines are managed by a general assembly. This body is the ultimate authority in the condo. Every owner is a member of the general assembly.

This group works like a mini-democracy, and through voting, original rules and regulations can be amended or changed. Costa Rican law requires three legal books. They are called “Actas de Asamblea” or Assembly Minutes, “Actas de Junta Directiva” or Board of Director Minutes, and “Caja” or Cash, used for organization accounting.

Now, here is where it gets tricky or interesting, depending on one’s point of view. Beach property inside the maritime zone in Costa Rica can not be owned.

However, developers are building condos on the land called concession land. The holder of a legal concession over the maritime zone can build a project and go condo under the condominium law.

It is a relatively safe investment if the project has all the correct permits from the local municipality, the tourism ministry (ICT), the National Housing Institute (INVU), and the Health Ministry.

Even though the land is leased or “in-concession,” owners of each condo share in the licensing agreement obtained by the developer, with the Costa Rican government as a sub-leasee.

However, this is a complex issue. All concessions are required to be held 50 percent by Costa Ricans, and the rule of thumb is 51 percent. This means majority ownership, or controlling interest must be held by one or more Costa Rican citizens. Having this ownership or control in the hands of one person or a small group could be dangerous to the whole because it could contribute to a takeover or unwanted sellout. Something like what happens on Wall Street everyday.

This particular scenario has created a new real estate type in Costa Rica, called a condo hotel where the venture operates most of the time as a hotel and part of the time as a condo. It is somewhat similar to time-share rentals. The law requires this kind of an operation to work 70 percent of the time as a hotel and 30 percent of the time as a condo.

Now, the best for last.

What happens when a project just does not qualify as condominiums. Well, some developers are still physically dividing properties into lots and selling a 99-year rental contract over the space. One can build on this area. Or the same developer offers to build to suit buyers’ needs. This scheme does not exist here legally, but real estate people sell property based on it everyday.

More importantly, local law and jurisprudence holds any contract over 10 years as abusive. In this kind of scenario, one never holds title to anything, just a trumped-up rental contract. Let us say the real owner of the property goes bankrupt or dies and the property ends up in probate. What happens?

Good question. No legal case to date has tested this case in court.

A mortgage or title insurance cannot be obtained because the land is never owned.

Another flaky deal is where one just gets stock or shares representing a piece of a property, again, with no legal ownership of property.

Purchasers need to be careful when buying a condo. They need to know the structure used which created the project. They need to read the rules and regulations before moving in with their 10 dogs. And they need to be sure they are buying true legal title to property and not someone’s way of circumventing the law.

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Original 31-year-old plan for Nosara

Costa Rica is characterized by many old timers as the land of the “wanted and the unwanted.” Some who come here are wanted criminals by other nations and others just do not fit in somewhere else, so they come to this country to live.

Want to make a million dollars in Costa Rica? Come with two and maybe you will leave with one. This advice, given to newcomers for over 30 years, should now have an inflation adjustment. Bring $5 to $10 million to leave with one.

These statements are no joke. This writer has personally seen it happen over and over again in 33 years. Those who are lucky get to leave. Some just die along the way, trying to get their original nesteggs back, fighting the legal battles that ensue.

Even the best-looking real estate or financial deal may have hidden pitfalls.

There are many examples of this from Costa Rica’s not so distant past. Nosara is one, developed by Alan David Hutchison. Potrero-Flamingo was another, and Playa Grande of Guanacaste yet another. The original developers of these projects are long gone. Most are dead.

Nosara, now a Costa Rican tourism jewel, was nothing more than pasture totaling 1,110 hectares (2,718 acres) from 1969 to 1972. One man and a well-known Costa Rican law firm combined three fincas (farms) to create two companies to sell land to foreigners. He placed classified ads in U.S. publications, including the Wall Street Journal, to find buyers. He knew something then that no one else did in those days.

The lands legally came into being only 10 years earlier in 1961. The Costa Rican government in those days sold for one colon (less than one U.S. dollar) areas of Guanacaste, including what is now known as Nosara, to the Instituto de Tierras y Colonización (Institute of Lands and Colonization) to be redistributed to those living there for small sums, as kind of a homesteading plan.

The developer bought up those parcels for almost nothing, combining properties into sections and then slivering them off as small subdivided pieces and sold those lots to the many buyers answering his ads. He even offered fantastic payment plans, making the purchase of a lot so attractive it was irresistible.

He promised an incredible development with golf courses, tennis courts, manicured landscaping and the like. Since most of the land was open pastureland for cattle grazing, it was easy to see the vision painted by those selling the project. Many people bought into the dream.

One day the principal just picked up and left. With the money, of course.

The teen-aged sister of this writer was working for the developer as a summer job so she could be close to the beach in those days. A wonderful time for her, until one day it all ended, for her and all those buyers.

Many of them bought the property for future investment so they did not live in Costa Rica. When they came back, they found a nightmare. The jungle had reclaimed the region. Few could even make out what lot was theirs.

Now 30 some years later, the Nosara Civic Association and the Surfside property owners’ association of Potrero are still trying to organize controlled development. Many other organizations do the same throughout Costa Rica in similar development projects gone bust.

What is the point to this story?

The point is, today there are even bigger super projects being marketed for a piece of Costa Rica. However, today, developers have Web sites, multi-colored brochures with pictures enhanced in design programs like Photoshop, to entice buyers. They also have FedEx and DHL to pick up deposits anywhere in the world so one does not even need to see a property to snag it. Some of these projects are selling out fast, with the owners collecting literally millions and millions of dollars.

What was true 30 years ago is true today. A project has a development plan or it does not. Fancy promotion to sell land in Costa Rica can be someone’s way to make a lot of money. How can one know for sure?

Well it is hard to know for sure about any project.

Using common sense helps, but only when combined with true due diligence. This term means doing a careful investigation of the information in any offer, including, but not limited to, having access to financial and accounting information, feasibility and environmental studies to discover the risks and value to any transaction. If a development cannot supply you with any and all information you request, back off.

There are many good investments in Costa Rica. Finding them is the trick.

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