Costa Rica Expertise LLC

By Garland M. Baker
Special to A.M. Costa Rica

Why do so many who come to Costa Rica get hoodwinked, bamboozled, hornswoggled or just downright screwed?

It is because they come to buy a dream and do not think or do the proper homework before jumping into a project or investment.

Yes, there are many good deals in Costa Rica. There are also many good real estate agents, attorneys, and advisers who can guide a newcomer in the right direction. However, there are also bad ones. Some people, without legal Costa Rican residency, move to Costa Rica, hang out a shingle, and start selling property and/or investment schemes.

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There is no required real estate broker’s license necessary to sell property in Costa Rica. A professional organization does exist and has worked hard trying to legitimatize an association, but to date it has not been successful in requiring brokers to have some type of a license.

On the investment front, the Superintendencia General de Entidades Financieras, the regulating agency overseeing financial transactions, is trying hard to curb investment scams. However, they have many failures to their credit where people have lost entire fortunes due to the agency's failure to act in time.

Many people trust attorneys to assist them with their property transactions and some lawyers are impartial representatives who earn the fees paid to them. Others are not; they are just out to make a buck.

One particular practice many attorneys in Costa Rica do is illegal. They prepare an escritura or property deed of sale with a low fictitious value and then charge a client full legal fees for the sale. This act is prima facie, evidence of fraud. The perjury is committed ostensibly to save on taxes paid to register the deed.

The amount lost in transfer tax revenues is incalculable. The Costa Rican legislature is crying for more taxes on everything, with an incredible new tax hike in discussion right now, but does nothing to close this tax-evading tactic.

Sure, everyone likes to save money on taxes, but look at the downside for a newcomer regarding this practice. This is a true case scenario.

A retired couple buys a beautiful piece of property on the beach for $250,000. The attorney registered the sale for 100,000 colons, or about $285 at the time. The attorney is sloppy and does not register the property. Some crooks come along and file false documents in court against the original owner, causing a legal foreclosure on the property. The retired people are devastated and file a legal action against the lawyer at the local bar association, seeking compensatory damages for the loss of the property, which today is worth $500,000.

The judge recently notified the retired couple he could not consider the price they really paid because the transfer deed was for 100,000 colons. He further stated, in a scolding manner, they should not have taken the advice of the attorney to falsify the amount, to save on taxes, and that it was their responsibility to know the difference.

Most people coming to Costa Rica do not know the laws. They rely on professionals for good advice.

In another case, a real estate agent recommends a potential client to invest in his development. He says not to worry, his attorney knows the ropes, and tells the client to transfer all his funds to a trust account where the real estate agent would have carte blanche access to the funds for the development. No guarantees, no security, just promises are offered to the poor soul caught up in this pipe dream.

Too many give too much power to people they do not know. They do this because they get absorbed in the romance the country offers and are swayed by the fancy footwork of others selling dreams. And some are motivated by simple greed.

Garland M. Baker has been a resident of Costa Rica since 1972 and is now a naturalized citizen. He provides multidisciplinary professional services to the international community. Reach him at [email protected] Baker has undertaken the research leading to these series of articles in conjunction with A.M. Costa Rica. Copyright 2005, use without permission prohibited.

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