This is the time to have a trusted surveyor second check to see if there are overlaying maps on any property owned in Costa Rica. If there are contradicting maps, the uncertainty could soon cause big trouble.

Around three years ago, the Registro Nacional and its Catastro or plat map department started a plan to crosscheck properties. Before this time, there was little or no checking done. Now Registro workers are using sophisticated equipment, including NASA photographs to check map overlays.

Here is a true story that happened recently.

There was a guard watching a property for some expat property owners. A little old man kept coming by saying to the guard, “You are living in my house.” The guard thought nothing of it until one day a lawyer showed up with the police and told the guard to get out. The guard was not easily intimidated, so he ran everyone off with his machete.

The old man stopped coming by, and the guard felt at ease. However, in the last few weeks the attorney showed up with the police and said he now owned the house and served the guard legal papers. The peon – a term used in Costa Rica to mean a manual laborer – could not read or write, so he called the lawyer of the expats who owned the property.

As it turns out, there is a map registered almost 30 years ago that covers 700 meters that was subdivided off the property. However, this map was never registered as a deed.

In Costa Rica, anyone could make a map, and up until now could probably get it registered at the plat department. This is the very reason the Registro Nacional and the Catastro department are merging their efforts to help legitimate property owners.

In the case of the guard, the legal papers called him a squatter and said he needed to get off the property in four days or be thrown off by force. Since he could not read or write, he did not notice the person that served him the papers did not sign or stamp them.

A week of hell broke out. First, the officer who served the papers had to be found to sign and stamp the legal documents. Second, the legal owners of the property had to be found to sign all the paperwork to prove the guard was really a worker, enrolled in the Caja social security system and had workmen’s compensation.

Lastly, a lawyer had to draw up the legal paperwork to prove that the expats really bought the property and had a legal certified map for the land.

This whole ordeal is just a ruse to get possession of the house in which the guard is living. If intruders do get possession, to remove them would be a long, drawn out, expensive court battle.

As it turns out, the very old map does not even involve property close to the house where the guard lives but somewhere else down a long country road.

In another case, in another area of the country, a map showed a walking bridge crossing a river to an expats property. The bridge was washed away years ago. The owner of the property on the other side of the river sued the expat to rebuild the bridge.

A long court battle ensued. In the first decision of the court, the expat was told to rebuild the bridge. The appeals court overturned the ruling, stating that mother nature destroyed the bridge many years ago and it was too late to complain about it now.

Expats can do something about this problem of maps overlaying each other, but it does take a surveyor in most cases. Workers in the plat department at the Registro Nacional do not like outsiders in their midst. However, with this said, it is not impossible for a person to take the map of their property to the catastro department and ask if there are any other maps registered on top of the document or anywhere else on their property.

Usually, the normal procedure is that surveyors – referred to as topographers in Costa Rica – have access to the computers and can actually go in the computer room and look for themselves.

If a problem is found, the Registro Nacional will do an investigation on any abnormalities – in most cases – and nowadays will cancel maps that are not correct. Actually, that is their goal, to purge old maps that never turned into true deeds and only keep the maps that have been registered properly and have a legal deed attached to them.

Expats need to be aware to be a jump ahead of the scammers and have a current copy of the plat map that represents property along with the deed of purchase.

Again, a trusted surveyor can check to see if there are any other maps that have been registered — even a little map — if it exists on an expat’s property. If one is found, owners should get it canceled.

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Lots of people came to Costa Rica during the feeding frenzy in the past decade to invest in property. Today, many of those that invested are licking their wounds because they jumped into the shark-infested waters unprepared. Most of them looked at investing here through kaleidoscope eyes.

Projects are not the only thing on hold in Costa Rica. Many expats lives are on hold too. They bit off more than they could chew when they invested in this country. During the days of skyrocketing prices, they did not save their pennies for a rainy day but chased prices up into the stratosphere and paid ridiculous prices for land and buildings. Some expats bought homes, but many others bought one or more parcels to speculate the market would go up even higher.

Today, everyone knows this was not the case. Now, they know the mania was a signal the market was going to implode as markets do to correct themselves. The market in Costa Rica is doing just that, correcting itself. Owners of property today put a price on something for sale hoping for the best. However, few get their asking price and settle for something less than their expectation.

Lucky are the people that made small investments. Some were so intoxicated with the delirium that they coaxed other friends and family to invest with them, and now all those they brought into fold are darn mad. The leaders of the groups do not know what to do. They do not know where to hide. Some even talk about suicide as a way out.

The good news is the Costa Rica market will correct itself. The bad news is it will take some time. The peak of the market was probably 2006 and 2007. The market came to a screeching halt in mid 2008, much in parallel with the United States. The banks in Costa Rica stopped lending money to developers during that time. This was another signal of the downturn.

This means the country is only one and a half years into the downturn. This is no time at all in a real estate down cycle. Real estate analysts believe property markets run in around 15- to 20-year cycles. Four to five of the years are in recession or a downturn and the rest slowly creeping up again. In others words, Costa Rica is probably at the very beginning of its downturn cycle with another three to four years to go before property values start moving up again.

This is not very good news for expats who are trying to sell and worse for those that have invested their entire nest eggs into speculative Costa Rican real estate purchases. However, it is good news for today’s investors. Real estate markets tend to run from undervalued to overvalued. Logic suggests that if the country is only at the beginning of its downturn, property today is probably a good value.

This author believes this to be the case. Property values in Costa Rica are a good value in this market. For anyone thinking of Costa Rica as an investment, buying property for the long-term — emphasis on the word long-term — is probably a good idea.

For those wishing to invest, cash is king. Walking into a negotiation with cash at hand is the best way to buy real estate here. For all the reason cited above, many expats and Ticos alike need cash and are willing to give a buyer a great deal if they have that commodity.

Cash talks, but if an investor has a good amount of currency but not all that is required to buy something, eager sellers will accept a mortgage or a trust to carry back the balance.

There are many reasons to buy property. Land is one of the best investments a person can make. Buying property in Costa Rica in an undervalued market is good for investors for the additional following reasons: Costa Rica is a great place to retire. The country has great weather and it’s close to the United States so retirees are only a quick plane trip away from loved ones. There are also various direct flights to European hubs as well for retirees from that part of the world.

Yes, there is lots of crime here but there are no missiles flying overhead. Security can be generally handled in layers. Gated communities offer the best options in this area.

Medical care is getting better all the time. The country is slowly building an infrastructure for the graying societies of the world. The country wants to position itself in the long-term as a retirement haven for retirees. This is another plus for long-term property values.

Costa Rica is a great place to land bank money. Land banking is what very wealthy people do to preserve wealth. Many people from all over the world land bank money here. This country is an exceptional place to do this because it’s currently politically stable and it probably will stay that way for the foreseeable future.

Keeping assets in currency is not a very good idea. Currency markets are in such a flux these days and there is talk the dollar is going to collapse. Land banking money is probably a much safer place for it than a real bank since most of them are on the verge of bankruptcy.

Costa Rica appears to be a good place to invest in today but how about all those that have lost their shirts investing in the past during the peak of the last boom real estate market. What do they do now? How do they survive? The answer lies in common financial sense. Robbing Peter to pay Paul is not the answer and usually ends in bankruptcy. Looking hard at and accepting a financial predicament is difficult but may provide unexpected solutions.

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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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Having a business — despite the effort, paperwork and bureaucracy — can certainly pay off. A small entrepreneur may dream about earning so much success that the local business goes global and becomes a landmark around the world.

However, do schools in Costa Rica teach future business owners that what pays them is their clients’ preference? And if they do not go to school for business, do owners forget they have been keeping every business they have visited open by being a client there and that the success of their business depends on their customers’ satisfaction?

Although it should be almost instinctive to think of customer service as the most inherent component to any business, Costa Rica has a long way to go, not only in providing clear and timely customer service policies, but also in educating its citizens to demand the satisfaction their money is paying for.

Latin American countries are not famous for providing customer satisfaction, and that varies from culture to culture (including exceptions), but they have always been a few steps behind developed nations. However, culturally, why do most Hispanic nations share the notion that when one has a business, suddenly one gets to run the show, and the peskier one gets the more business-like one appears? Well, some possible answers come to mind.

First of all, coming from a Catholic-colonized background, these cultures have been educated to obey anyone who seems powerful. Business owners are looked at as authority figures, as more important people than the average person. Owners and managers are treated with the same admiration and respect as priests, nuns, pastors, ministers, deputies, presidents. Therefore, when Latin American consumers face unfair, insulting treatment by any business in town, their instinctive response has been to quietly take it gracefully (as social subordinates), and never complain.

Secondly, many Hispanics, especially Ticos, are afraid of drawing attention to themselves. They tend to be shy, passive and nervously friendly people. Standing up for oneself is culturally frowned upon in Costa Rica; people who stand their ground are usually labeled as negative, confrontational, dramatic and even spiteful.

Besides avoiding scenes, Ticos are masters of hypocrisy. They can fool anyone with their nice tone and smiles. They would rather act behind the scenes than gathering the courage to be upfront about issues with people.

Therefore, Costa Rica has become a paradise for sneaky, abusive and fraudulent businesses that are still going strong, to the point that almost no establishment is safe from complaints.

The saying, “the customer is always right” seems to be the one motto missing in the training programs for customer service positions at any workplace.

Another theory might be that Ticos employed for assisting clients simply got the first job available, even if they were not qualified for it. One would think that any sensible business owner or manager would find out enough information about a prospective employee before trusting them with such a crucial position for their business, but just like so many other aspects of Costa Rican culture that seem to run backwards, owners do not care or value customer service providers in their establishments. It is actually one of the worst paid positions in any company, which would explain the last possible theory: customer service providers are so unhappy about their working conditions that they get theirs by taking it out on the customers, hopefully contributing to ruin sales.

Costa Rica seems to be waking up from its passivity. Once Costa Rica started getting acquainted with customer satisfaction policies — assuming it happened gradually due to the booming growth of U.S. companies in the country — the Ley de Promoción de la Competencia y Defensa Efectiva del Consumidor – N° 7472 (competition promotion and effective consumer protection act) was created Dec. 20, 1994. However, extensive informative campaigns concerning its regulations and services have never been implemented, and it still keeps many consumers in the dark about what to do if they become victims of unscrupulous service providers.

For that reason, a small group of conscientious journalists, among them Hazel Feigenblatt, Armando Mayorga, have decided to create their own blogs online devoted to posting customer complaints about treatment in banks, restaurants, appliance stores, cable companies, governmental companies, transportation, scams, among others. Ms. Feigenblatt even has a page for English-speaking customers. Interestingly, most consumers rant about their experiences in detail in the blog site, but admit not expressing their dissatisfaction or demanding better treatment to service providers while it was happening. Despite that, Ticos’ perception of clients as subordinates is definitely changing, and they are learning that customers are actually the ones who run the show.

Although there are extensive reports about most establishment categories, anomalies experienced at banks and restaurants top the list. The following are some of the most outrageous situations people pay to suffer daily in Costa Rica, according to the complaints registered by the consumer protetion Web sites:

Banks

Unnecessary long waits. Customers have reported waiting up to four hours for a simple transaction in public banks, mainly due to having less than half of their staff working. Long lines are also true for some private banks.

Administrative mistakes never or reluctantly resolved. Some managers or supervisors often excuse clerk’s mistakes like depositing wrong amounts, giving back wrong receipts, applying unjustified withdrawals, giving or offering deceiving information to get clients to sign contracts or pay unnecessary, non-refundable fees, among others. Besides standing by clerks’ incompetence, they even dare to blame clients for not paying attention at the situation. Others opt for playing the fake customer-service card by apologizing, making countless promises and then cowardly avoiding follow-up calls and ignoring e-mails.

Ridiculous commissions and interest rates. While some public and private banks are famous for charging commissions as high as $7 for print-up statements, others randomly raise the credit interest rates up to 30%.

Discrepancies with infamous Law # 8204. Following governmental efforts against international and local fraud/laundering, banks recently launched publicity campaigns for updating personal information in bank account records, and have been punishing customers who fail to comply by closing their accounts.

However, the most serious aspect of this law is that it does not mention or describe the rights or duties of people who do not work and still have bank accounts (students, wealthy people, housewives, etc.).

The law grants banks the liberty to decide what to do with the accounts of unemployed customers, and not surprisingly, those people are being told by banks that they cannot fill out the form required by the Superintendencia General de Entidades Financieras (SUGEF) to update their data, and will have their accounts closed as a result.

Banks are only servicing customers who can abide by the new law. What upsets several customers is that the law is being imposed on every account holder, not only on suspicious ones. Besides being a waste of time, paperwork, and bank resources, they feel that banks are treating all clients as criminals until proven otherwise, instead of striving to select and apply the law only on suspicious ones and keeping the rest happy.

No security guards past office hours. Complaints about how easy banks make it on criminals that commit paseos millonarios (mugging people and taking them to different ATM vestibules to empty their bank accounts) on their customers by not having one security guard at their offices after hours. Many people have fallen prey of this type of crime, and several have even been killed. Banks eventually opted for closing automatic teller service at 10 p.m., but that has only made criminals operate earlier (a woman was attacked and robbed at 7 p.m.)

Restaurants

Bugs and hair in food. As insane as it may sound, cockroaches have been found cooked and fresh several times inside served food at renowned restaurants. Flies were also found in cheese and chili containers, and a long hair was found inside a pizza. It needs to be said: do any of the bug-infested restaurants know how crucial fumigating food-service establishments is for their prosperity? There are plenty of exterminating companies that use eco-friendly substances safe for kitchens. They do not even need the staff to evacuate. Therefore, no excuse is viable for not fumigating a restaurant.

Questionable promotions and fraud/stealing. Misleading information about promotions as well as low quality in promotion dishes are common complaints, and credit card fraud and plain stealing from clients’ purses by staff members have been reported at some restaurants.

Bad food. Old, sour coffee and slightly decomposed lasagnas were reported at one prominent outlet.

Long waits. Long lines are common complaints about fast food restaurants, as well as regular restaurants, even when food has been sent back.

Rudeness, homophobia. Whether it has been rude treatment, bad food, long waits or bugs in food, one aspect most restaurants share is their lack of apologetic effort. Apparently, some waiters and delivery people are trained to put on an uncomfortable facial expression, walk away silently or respond rudely when atrocities are pointed out to them. A pizza chain’s staff recently was reported as mocking, ignoring and insulting gay customers for which they subsequently apologized. The company promised to include human relations in the staff training.

Specifics of the various accounts and the names of the outlets are listed on the Web sites. However, A.M. Costa Rica cannot substantiate individual complaints.

Customers do have legal options when experiencing abuse from businesses. After the 1994 consumer protection act was created, the Ministry of Commerce added the Comision Nacional del Consumidor (a national consumer commission) to its jurisdiction, in charge of receiving, processing and penalizing consumer complaints. According to the agency’s Web site, reporting steps go as follows:

1- An unhappy customer can contact the agency toll free at 800-266-7866, at consumo@consumo.go.cr, and at fax number 2284-8821 for specific instructions and information about the complaint.

2- According to the recommendations received during step 1, the consumer may be asked to visit the agency office (Avenida 3, between calles 30 and 32) with a detailed written complaint, along with the following documents: receipt / car-repair slip / contract / warranty, full name of the reporting person or company as well as a physical address where to notify them, and any other relevant document.

The Web site states that resolutions may take from 30 days up to two months, depending on the type of complaint. However, consumers have also been complaining about the lack of efficiency of this institution, from never answering the toll free line to never resolving cases. The staff seems to only follow up on high-profile complaints. Despite the latter, the commission has processed a considerable amount of complaints and penalized several companies since its foundation, slowly changing the customer service landscape in Costa Rica.

Other entities where consumers can report abuse are Defensoria de los Habitantes and Autoridad Reguladora de Servicios Publicos. The Poder Judicial is in charge of serious cases that include suing for damages, and consumers must have acquired legal representation prior to visiting their offices.

Since all institutions listed above conduct all procedures in Spanish, translators will be required for expats who are not bilingual.

An effective initiative to make businesses strive for excellence is to have them compete for a spot on an A-List of the best rated businesses Denver Channel 7 maintains such a list on its Web site for its community and rates viewer experiences in different city establishments weekly or monthly. Surely, that will keep service providers on their toes, and customers healthy and happy calling the shots.

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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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Mortgages are becoming more and more available in the local market for expats who want to borrow money to buy property. There is a lot of money available for financing from local financial institutions. Private parties also have money to lend, but usually the interest rates are higher.

What most foreigners do not know about borrowing money in Costa Rica is how the foreclosure process works if one should default on a loan. Unscrupulous private lenders, attorneys and real estate people take advantage of the ignorance of homebuyers and, in some cases, use this knowledge to steal back properties they have sold.

On the other hand, deadbeat debtors can betray honest creditors with Costa Rican legal magic and procedural sleight-of-hand tricks.

In Costa Rica, a mortgage is a hipoteca. In English, there is a similar word, hypothecate. In Roman law it meant the most advanced form of a pledge. Today in civil law it means a lien or a mortgage. A mortgage applies to real property whereas a lien applies to movable property or chattel. In the foreclosure process, the procedures are very similar. However, it is easier to hide chattel, and some debtors do so.

A mortgage in this country is a right granted over a piece of real estate to guarantee payment of an obligation. Mortgages are most common in the purchase of property but can be a source for financial capital for other uses. When the maker of a mortgage cannot pay, the creditor forecloses and goes to public auction, called a remate.

First mortgages are supreme. Any mortgage after the first are usually worthless here. In the case of an auction based on a first mortgage, the judge will erase anything behind it when turning over the property to the winner of the auction.

This is what happens in a foreclosure:

A lawyer files a petition with the court attaching a national registry certification of the mortgage along with providing other requirements based on the country’s civil code. If the court does its job correctly, it should set an auction date and request the lawyer in charge of the case to publish the designated date in the local judicial newspaper.

The court should send a notice to the national registry annotating the property about the foreclosure. Smart lawyers request the court to prepare the documents for publication and the annotation for them to pick up, and they deliver them to their destinations. Otherwise the court will use its snail mail system. In Costa Rica, these snails are really slow.

When the auction date arrives, the creditor can suspend the act up to five minutes before the judge starts the auction process. This usually happens when the parties reconcile or otherwise agree to an out-of-court settlement.

If only the creditor shows up, he or she can take
the property back in payment of the debt. The creditor can attach other property of the debtor for interest, legal expenses and court costs. If the creditor does not want the property, he or she can request the court to hold other auctions until there is a successful one.

The starting bid at an auction is the amount due. Each subsequent auction reduces the opening bid amount by 25 percent until the starting bid is zero.

If bidders show up, they must deposit in cash or by certified check 30 percent of the auction base to bid. Creditors cannot bid but can raise the base of the auction upwards to cover interest and costs.

The winner of the auction must pay the balance of a winning bid to the court in three business days after the auction. Shill bidders sometimes show up at the auction, deposit the required 30 percent deposit and then never pay the balance causing the judge to call a void auction. Debtors can use this ploy as a delaying tactic so they can gain more time to look for funds to pay a creditor.

If everyone plays fair — it does happen on occasions — the highest bidder pays the court, the judge approves the event and prepares the court documents necessary to turn over the property to the new owner. If there are any tenants living in or on the auctioned property, the judge also prepares the paperwork to evict them.

Many auctions happen in Costa Rica on business days. Some of them are real bargains. Others turn into nightmares because there are hidden problems just waiting to show their ugly heads.

When a piece of property is going to foreclosure, it is common that the debtor’s attorney will start a litigious nightmare for the creditor. The first thing a debtor’s attorney tries to do is to look for a trumped up way to file a criminal case against the creditor to suspend the auction. This simple legal ploy can hold up a legitimate foreclosure for years. In other cases, crooked notaries just cancel the mortgage with a bit of flashy paperwork.

There are other financial instruments to borrow against property like mortgage certificates and trusts. Financial institutions prefer a first-degree mortgage. To borrow money, it is best to use a reputable bank. To lend money to others, it is better to use financial experts that know the ins and outs of the game.

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Yes, there is more paperwork

Real estate buyers need a good checklist to stay out of trouble when buying property in Costa Rica. However, most people forget about what needs to happen afterwards. Here is a checklist for after the closing.

First, the property needs to be transferred at the Registro Nacional. This is the notary’s job, but many do not rush to get it done. Many drag their feet for days, weeks and some even months. This is dangerous. An unscrupulous seller can sell a property to someone else, or even sell it repeatedly. Sure, that is illegal, but it happens, and the first buyer has hell to pay to get the property back. When property is purchased in Costa Rica, transferring it to the new owner immediately is a must.

The Registro has been a mess lately. Transferring property can take time. The most important step is to get the paperwork presented. In Costa Rica, the first in line is first in right. First in line, means, having the Registro stamp the paperwork with a date and a “tomo” and “asiento” number.

Yep, amazing but true, in a multiple property selling scam, the first to get the paperwork stamped at the National Registry is first in right. Go figure.

Second, when the property shows up transferred at the Registro and is in the name of the new owner, one needs to get four original certifications — five originals in case the property is part of a condominium — of a certificación literal and a catastro of the property and a personería of the owner, if the owner is a company. All property should be in the name of a company and not in the name of an individual. However, if the owner is an individual, a certified copy of the identification document used to purchase the property is required.

One copy of the documents goes to the electric company and another to the water company to change the names on the billing accounts. Many people never do this and find that one day they need to get the service changed or modified and they run into a brick wall because the institutions will not make changes to accounts not in the name of the correct owner.

The third copy goes to the municipality where the property is located to change the municipal account information. Municipalities collect property taxes and other fees on properties. At the municipality, it is necessary to fill out a form, too, updating the declared value of the property. Most people do not fill in the real value.

For a condominium, a copy needs to go to the condominium association so administrators can update their records.

Phone lines are a different story. Before Sept. 29, 1995, phone lines were an asset and owned. Now they are leased to users. It is difficult to get the phone company to change the name of an account. However, it can be done by filing a “gestoría de negocios” with the phone company.

If one buys a property with a phone line, he or she should get a special power of attorney from the previous owner of the line so changes can be made to the service.

Without a power of attorney, the phone company — in its wisdom — wants a new owner to turn in an existing line and be put on a waiting list — which can take years — to get a new line.

Most new property owners just keep the existing line under the name of the previous owner. It is a good idea to be put on the waiting list so when another line comes available, the new owner can get another line in the correct name.

The left over copy should be filed for future reference or for when one of the institutions calls and says they have lost their first set — which invariably happens. Its part of living in Costa Rica.

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