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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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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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Expats in Costa Rica who rent to others need to know the law and the important exceptions. Property owners also need to know that the law is not the same for all kinds of property. Many expats prefer not to rent to Costa Ricans because they fear the local rental law due to their lack of knowledge or language ability.

On the coast, expats rent very short term — daily, weekly, and occasionally monthly — to vacationers coming to the country. Usually, they collect their rental fees in their home country or online over the Internet. Some do not declare the money they collect here nor elsewhere. This scenario is a nice source of income for many and for those who do not report the income, tax-free money — at least tax-free until they are caught.

Some expats who live here temporarily rent their homes to others when they travel for extended periods. Usually, they use a rental agent who takes care of the monthly bills and finds short-term renters for a commission. Today, that commission averages about 20 percent off the gross rental revenue. Many of the expats who fall in this group do not report the income they receive either.

Usually, the people who fall in these two categories do not mess around with contracts. Article 7 of the rental law excludes the short-term vacation rentals from the usual rules. Rental laws do apply to the second scenario, even though people rent short-term — less than three years — to other foreigners all the time and just trust the renters will honor agreements. However, it is important to note, a renter in this case can call foul and stay the legally mandated three years with the full support of the law.

Many foreigners build rental units for the exclusive purpose of renting to other foreigners and in rare cases to local people. They are concerned someone will get into their property and not leave. Here are the facts:

The “Banco Hipotecario de la Vivienda, the “housing mortgage bank,” each year determines the threshold for de interés social, so-called “social interest” property. This year the amount is 24,610,000 colons. At today’s ever decreasing exchange rate of 492 colons to a U.S. dollar this translates to a little over $50,000. Yes, any dwelling worth $50,000 or less is social interest property, and the law treats this kind of property differently than homes worth more than $50,000. Land value is included.

Here is a list of tenant rights for a house declared of social interest: 1.) A renter cannot be forced to pay any more than one month’s deposit and the deposit cannot be higher than one month’s rent. 2.) A tenant can always stop an eviction process by depositing the amount owed in court. 3.) When a rental contract ends, a property owner cannot force out a tenant unless the property owner or the property owner’s immediate family is going to move into the dwelling or the property owner intends to demolish the construction to build a new home worth at least five times more than the exisiting construction.

In the case where a tenant is evicted unjustly — for example a property owner lies about who moved into the home or does not build another one — a tenant can get the property back and get one year of rent as damages.

In the case of an eviction and the renter cannot pay, the person can always play sick or come up with other flakey excuses to postpone eviction. One older woman, some years back, delayed her eviction for several years.

Property of social interest only applies to houses, condominiums or apartments. The term does not apply to businesses or offices.

Renting property considered of social interest to anyone is full of pitfalls. And that is why many expats decline to rent to Costa Ricans. Article 74 of the rental law is another interesting exception, and one that really works for expats looking for an additional income. The article exempts up to two apartments or office units built on a property owner’s lot that share a common entrance or a common area from the normal three-year rental contract term. A property owner only needs to give a 30-day notice to a renter to leave. Social interest property does not apply in this case.

There are other exceptions to the rental law, all covered by Article 7 where the mandatory three-year rental term does not apply: short term rentals in tourist areas, temporary spaces rented for events, parking and vehicle storage areas, areas rented for outdoor advertising, dwellings rented to guards or people watching a property, and houses lent to someone where there is no remuneration.

There are two types of eviction processes in Costa Rica: a judicial process, meaning a case in court, and an administrative process.

In every judicial process, there are certain documents required to continue the case. The most important of which is an appraisal of the property by an engineer or architect to determine if the property is social interest property. If it is not, an eviction can move along quickly. In Costa Rica, this means it may take less than a year.

Sometimes a tenant can use the owner’s own estimate of value that has been filed with the municipality to have the property considered of social interest. Owners frequently low-ball values in order to reduce their municipal taxes. A fake statement of value filed when property is purchased also can come back and bite the owner.

Administrative processes apply to renters covered by one of the exceptions. For example, a tenant does not want to move out of an apartment considered Article 74 exception as explained above or even a hotel room. In this case, one must file a complaint at the security ministry in San José, and a department of this ministry decides if the police should toss out the renters.

When renting, it is important to know to whom one is renting. Despite the fears of renting to Costa Ricans, many times foreigners can be the worst renters because some of them are crooks elsewhere. Expats should check references and credit before renting to anyone.

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Here is a yearly reminder. Education and culture taxes — Timbre de Educación y Cultura — are due next Monday, March 31.

Many people, including professionals, sluff off filing form D.110 and paying these taxes. However, paying them is required by Ley 5923, and every company in Costa Rica listed at the Registro Nacional is required to pay this tax. A company’s net capital amount determines the tax to be paid.

The tax amounted to quite a bit of money in 1976, the year the general assembly enacted the law. Today, the amount is almost insignificant and is a nuisance tax to most.

The law has not changed significantly since 1983 when law 6879 modified it by increasing the tax 200 percent. There are important aspects to the law that have not changed. For example, Article 6 of the law requires the tax department, Dirección General de Tributación, to publish the names of companies that do not pay the tax on a deadbeats list in the official newspaper, La Gaceta. Article 7 allows the tax police to collect the tax using various means outlined under the different tax laws.

In actuality, the tax department does not publish the deadbeats list nor goes to great effort to collect the tax even though the law requires it to do so. Practically speaking, the now minimal tax does not justify the effort or expense. This said, people owning companies do get collection notices for this tax on occasion and this can be a bigger nuisance. Any collection process in Costa Rica means there is an attorney involved and they get their cut, so they can get pretty pushy.

The tax is for education and culture, as the name of the law suggests. The money collected goes to the Universidad de Costa Rica, continuing education programs and the national museum system. The purpose of the tax is one good reason to make the extra effort to pay it.

There were some interesting changes made by the tax department in the past calendar year worth special mention.

Legal books and the whole rigamaroo surrounding legal books changed or better stated: old rules that have existed for a long time became important again. For several years, legal books could be thin and stapled. Not so any more. They need to be thick and glued giving book makers more work. The downside to this is they will not fit in a file folder and are easier to lose. They also must have a standard pre-printed form on the first page of each book. Inactive companies can only legalize three minute books — called “acta” books — and not all the books which include accounting ledgers.

The fuzzy logic behind a tax department memo May 14 to taxpayers is that inactive companies do not hold taxable assets, thus no accounting is required.

Multi-million dollar properties held by inactive companies do not pay taxes to the Dirección General de Tributación except for the Timbre de Educacion y de Cultura, a maximum tax of $18.30. Attorneys transferring these properties from one company to another under report their value avoiding transfer taxes too. So there is no checks and balance, so why make people fill out accounting books.

Now that the tax department’s computers are working better, filing an income tax form for an inactive company can make it active. When a company is active, this puts it on the tax rolls when in fact it may not owe income taxes. Filing an income tax form is not the only thing that can make a company active. It may show up as active because an input operator made it active by mistake.

It is important to check a company by going to this link http://196.40.56.20/ruc/#consulta
and typing in the company’s identification number or legal name and see if the company is “con obligaciones,” with tax obligations, or “sin obligaciones,” without tax obligations.

If a company is “con obligaciones” when it should not be, one must file form D.140 to remove the company from the tax obligations list. To do this, one must fill out the form, get a certification of the company from the Registro Nacional and file this paperwork at the tax office along with a copy of the legal representative’s identification.

Expats with a company in Costa Rica need to file and pay their Timbre de Educacion and Cultura by Monday of next week. Most banks will accept the form and payment. Penalties and interest accrue after the due date. Checking one’s company obligations is also a prudent item to put on this week’s do list.

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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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Legal technique gives landlords a boost

One does not have to be a bad guy

Owning property in Costa Rica comes with many decisions. One is whether to rent or not to rent when one is away for long periods.

Rental laws are very clear. Any contract automatically gives a renter a three-year rental term. No contract, no matter how well written, can change the law. The renters law, Ley de Inquilinato, specifically protects renters regarding term as well as in many other areas. Rent is synonymous with lease involving real property. There is no difference under the law.

The fact that the rental term cannot be changed is a problem for many people. Most property owners prefer to take advantage of rental income when planning a lengthy trip. However, owners do not necessarily want to stay away three years at a time.

Commercial real estate owners are in the same proverbial boat when renting such property. There are many reasons a three-year rental period can be a hardship. One example is if there is a lucrative potential sale possible.

In addition, any buyer of property must respect any rental contract in place at the time of purchase. Most buyers are not aware of this fact. This is true even if the property is obtained in a foreclosure.

Is it legally possible to get around this law regarding rental term should one really need to do so?

Yes, there is a creative solution to the problem.

Some ways that do NOT work are: 1) not signing a contract or 2) using a trusting handshake. Any type of rental receipt, including ones written on bubble gum wrappers, are considered sufficient evidence that a rental contract exists. As for a trusting handshake, well a man’s (or woman’s) word just is not as good as it used to be.

Here is the secret: Transferring the usufruct right to another person or company for a desirable shorter term and then let that person or entity make the rental agreement.

Now if one wants to flit off to Australia for one or two years and rent the house in Costa Rica to help pay the expenses, it can be done. A commercial real estate owner can rent a property for a shorter period, so if a buyer comes on the scene, the sale would not be lost because the new buyer has to wait three years to get rid of a tenant.

What is usufruct?

Usufruct is a legal term from the Roman Empire (in Latin, usufructus), meaning “using the fruit.” It is the legal right to use or profit from another’s property.

Costa Rica’s Civil Code allows the owner of a usufruct of property the right to rent it, but any rental or lease agreement is only valid for whatever the term of the usufruct. This is true no matter what a rental contract states.

Article 23 of the Renters Law specifically regulates this fact. Here is the text of the law translated into English:

The holder of a usufruct can rent a property, all or in part, in accordance with the conditions and term of the holder’s usufruct right.

The last lines of Article 23 state:

A rental contract to the contrary is void.

For this creative rental scenario to work, it is mandatory that the usufruct right is registered at the National Registry. To do so is not expensive and easy to accomplish using a professional who understands the process.

This all may sound complicated and not worth the effort, but in fact it is not rocket science or brain surgery and is truly easy to achieve.

The only real trick is finding an adequate legal professional who really understands the law and the benefits.

Benefits can include significant tax advantages where rent payments can be captured in companies losing money to reduce tax debt. This additional element reduces one’s options even more when looking for a competent professional. In Costa Rica, accountants usually know little to nothing about law, and lawyers know roughly the same about accounting.

In summary, there are creative, legal and tax effective ways to limit rental terms in Costa Rica using usufruct rights of ownership, so a tenant has to leave when the owner wants him or her to leave. It is not necessary to be a “bad guy” when renting property here, just a smart one.

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1995 law finally having impact

Slogans like this dot the landscape because now landlords have the right to jack up rents and evict those who won’t pay. This says ‘No eviction without a fight.’

Many lawyers have made a fortune over the last year desalojando, or evicting people from their happy homes and businesses because of a change in the rental laws which happened over eight years ago.

Much of the tearing down of buildings you see throughout Costa Rica, especially in the older communities, is also due to these events.

Before 1995 Costa Rica’s rental laws were designed to protect tenants 100 percent, which made it almost impossible for a landlord to throw out even the worst deadbeats or get a fair rental price for the property. These old laws were created in the early part of the 1900s because the world wars made for a difficult time for most Costa Rican citizens, and the Costa Rican government felt an obligation to protect them. A stricter law, protecting landlords, was passed in 1988, but was almost immediately found unconstitutional by the Sala IV, Costa Rica’s constitutional court. So everything went back to the way it was in the old law.

The phrase representing the legal entitlement called derecho de llave, or key right was widely used in Costa Rica. This legal right was commonly sold, representing a tenant’s time in a location. This was especially important to businesses where a key right could be worth tens of thousands of dollars, and in very special cases, hundreds of thousands.

The new law that changed everything appeared in La Gaceta, Costa Rica’s public records bulletin, Aug. 17, 1995. This law was almost a complete re-write of the old law, giving important new rights to landlords.

Many tenants had rented places for decades. In those cases, the contracts were automatically changed to four-year leases with one more month added to the term for every year a person was in a property — to a maximum of 12 months. For example, a person renting under the old law for 12 or more years would get an extra year over and above the mandated four-year term. This meant all old rental contracts ended on Aug. 17, 2000, and turned into rental agreements based on the new law with the legal three-year term, which ended this past Aug. 17.

Since the new law states contracts are automatically renewed if a landlord does not give a tenant at least three months notice, most of the landlords rushed to evict old tenants in the first months of 2003. This flurry of evictions is now flowing out of the courts, as full eviction judgments against old tenants. But many more are still in court with tenants fervently fighting how they were notified of the eviction. This is the key legal point to the process.

Most of these evictions have prospered, as one can instantly see by driving almost anywhere in Costa Rica, and in downtown San José especially around the areas between Calle 2 and Calle 10. Much to the unhappiness of those business owners paying almost nothing in rents for years, their buildings are falling like flies making homes for parking lots and, in some cases, nice, new buildings.

As with most laws in Costa Rica, there are those who try to circumvent the rules. One new trick is for a renter to lease a place and pay one month’s rent and then stop paying until such time as he or she knows the official eviction notice is signed. Then the renter just moves out quickly after months of free rent.

In this kind of a case, a not too well known legal tactic is to request that a judge make an inventory of the rent-avoiding tenant’s belongings in the initial suit and to hold those personal assets as guarantee in the court proceedings. Since most of these people do not want their TV and boom-box stereo system confiscated, they hit the road quickly without going to the end of the legal proceedings.

Depending on which side of the fence you are on, landlord or tenant, these new laws which have taken many years to begin to enforce, may be good news or bad news. Whatever your perspective, the laws are changing the face of the country and creating investment and business opportunities for those who have a long-term vision for Costa Rica.

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