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You Can Loan Money There and Secure Property Here

by Garland M Baker on January 8, 2007

Technique opens up other sources for cash

Can a person or an institution lend money anywhere in the world in any currency and tie up assets here? The answer is yes, and to do so is not hard but a little technical.

Many foreigners would like to buy property in Costa Rica but do not have any credit in this country. Or they would prefer to work with their lender back home.

As the world shrinks, some lenders are looking for ways to lend money to real estate buyers in Costa Rica. But they do not know how to register a security interest here.

Some private party lenders want to get involved in ventures in Costa Rica. Many that have done so in the past but did not tie up their investment with a guarantee lost the investment to the unscrupulous.

The facts are clear. It is easy to register a loan against real estate or personal property in Costa Rica if it is done by means of a public instrument recognized by Costa Rica. This simply means a document written in a notary book of a country that uses them or a Costa Rican consulate’s notary book in countries that do not have notaries with protocol books.

If the money is lent in a country where attorneys can be notaries and they have notary books, called protocol books, as they do in Costa Rica, the process is simple.

The security interest is recorded in the foreign notary’s official book. The notary then creates an affidavit, gets his or her signature authenticated by the Costa Rican consulate of the country where the loan takes place and then gets the consul’s signature authenticated here by the Ministerio de Relaciones Exteriores y Culto here in Costa Rica.

Then the document is filed with the Registro Nacional just as if it were created in Costa Rica.

The key is the notary book because any document written in one makes it public. Article 28 of the Civil Code requires all security interests be public in nature to be valid in Costa Rica.

In Roman law, a notary was originally a slave or a freedman who took notes for public record. This position evolved into that of one of an attorney and notary. Unlike the United States and other countries where Anglo law is followed, documents prepared or authenticated by a notary guarantee the identity of parties to any transaction.

A security interest is defined as an interest that a lender takes in a borrower’s property to assure repayment of a debt. There are three kinds of security interests in Costa Rica: A mortgage called a hipoteca, a pledge or chattel mortgage called a prenda, and a mortgage bond called a cédula hipotecaria.

A hipoteca in Costa Rica grants only an interest in real estate property. A prenda cannot be made against real estate property but it can be used to secure anything else of value. A cédula hipotecaria is like a mortgage but can be used as a negotiable instrument.

For countries, like the United States and others that use civil or Anglo law, security interests can be registered in Costa Rica if taken to a Costa Rican consulate and the consul puts the transaction in his or her own notary book.

As for the currency, Article 48 of the Organizational Law of the Central Bank of Costa Rica states a loan agreement can be created in any currency of the world. Article 49 of the same law states any money lent needs to be paid back in the same currency.

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