Costa Rica Real Estate Fraud – Help! They stole my property

At first glance you may imagine that this article is about the theft of personal property after all you might expect to have a camera, laptop, or similar item stolen — however can you even conceive of the notion of having your real estate property stolen from you. Most of us would not even think that this could happen.

However, in Costa Rica it can and does happen. I will point out how it happens and what you can do to minimize your risk.

Costa Rica is certainly not alone in trying to get a grip with this serious problem, a quick Google search reveals over 78 million pages including the Mortgage Fraud and Real Estate Fraud, the California Real Estate Fraud Report, you can see the FBI’s fraud page here and even YouTube has 2,810 video regarding real estate fraud.

In Costa Rica all title to property is centralized and recorded in the Property Section of the National Registry of Costa Rica. The Mission Statement of the National Registry is “to protect recorded rights offering legal security”. Every property owner places their trust in the National Registry to ensure that property titles are safe and secure.

In order to file a property transfer in the National Registry the general public must rely on the services of a Costa Rican licensed Notary Public. In Costa Rica a Notary must be a licensed Attorney.

Both the National Property Registry and Costa Rican Notary Public are under the umbrella of the Costa Rican Ministry of Justice. This structure should make us all feel nice and cozy. After all it is the Ministry of Justice which is overseeing the security of our most valued possession, our property.

However, making that assumption could be a costly mistake. I was recently asked to represent a client who had discovered that a property that was recorded in the National Registry and which they had owned for twenty five years was sold out from under them.

In the past we have all read about isolated cases of property theft in Costa Rica however the problem is bigger than most people imagine. In speaking with other victims of property theft a specific pattern used by property theft gangs began to emerge. In most of the cases there appears to be complicity from officials within the National Registry and the Notary Public that drafts the property transfer deed or both.

Even in those cases where there is no direct involvement of government officials there is negligence on the part of the National Registry system in perpetuating the problem due to their inability to act promptly. If a property owner is the victim of a property theft the sole recourse is to file a criminal complaint against the individuals that generated the fraudulent deed.

However these cases in Costa Rica take years to work themselves through the judicial system. It is not unusual for these cases to take five to seven years to resolve. As such, the property owner is victimized twice. First by the criminals that stole the property and then a second time by the inability of the judicial system to promptly and efficiently revert the criminal acts and return the property to the rightful owner.

Two simple words “Public Faith” (Fe Pública.) A Notary Public in Costa Rica as an officer of the state has Public Faith which has been delegated to the Notary Public by law. This means that any manifestation made by a Notary Public must be accepted as true unless proven otherwise in a judicial proceeding.

As such, what happens when a corrupt Notary Public introduces a fraudulent document into the National Registry recording system? Nothing! – The recording officer must take the manifestations of the Notary Public as true and record the document. Allowing that fraudulent document to enter into the recording system exacerbates the problem because the National Registry also has administrative “Public Faith”.

This means that when you request a Certificate of Title on a property recorded in the Property Section of the National Registry that report has the full “Public Faith” of the National Registry that the information contained there is absolutely true and correct.

If you are familiar with the term “garbage in — garbage out” it is an appropriate fit for the scenario that I just described. If the Notary Public submits garbage in the way of a fraudulent deed and the National Registry records it and then turns around and issues a certified title report on that property — guess what? You were just handed more garbage. The irony in this is that this garbage is being validated by the Ministry of Justice which has the oversight body for both the National Registry and the Notary Public.

The victims then begin to pile up as innocent purchasers relying on the certificate of title issued by the National Registry begin to purchase the property without knowing of the initial fraudulent transfer.

The Public Notary system in Costa Rica is adopted from the civil law system and it is used throughout Latin America and most of Europe. However, there are two types of Notary Systems, the territorial system and the open system. In the territorial system a country is divided into different districts and a single Notary is awarded the right and privilege that goes with it to act as the Notary for that district. This system is used in Mexico and Panama for example.

Costa Rica on other hand adopted the open system. This means that all Attorneys that elect to be a Notary may do so. The only additional requirement in Costa Rica to become a Notary is that they pass a Notary specialization course. With over 17,000 Attorneys in Costa Rica the Notary pool is huge. Compare that with Panama where only 23 Notaries are licensed in the entire country.

1. The Notary Public simply lies indicating that a particular property owner personally appeared before him and sold the property. This is a case of a couple that I interviewed. The couple owned a residential home in San José and while they were travelling in Thailand a Costa Rican Notary Public indicated they were in his office selling their home. After three years that case is still pending resolution.
2. The Notary Public revives the dead. In another case the Notary Public simply indicated that the corporate representative of a corporation that owned some land personally appeared before him and sold the property. The problem is that the individual had died 5 years before!
3. In some cases the Notary Public is also duped by the criminals and not an accomplice in the crime. In these cases the criminals have assumed the identity of the property owner and falsified their identification documents. They then appear before the Notary Public pretending to be the property owner and producing the fake identification documents.

In one case the criminals rented a property and then assumed the identity of the property owners with identification cards and all. They then tried to get a mortgage loan from a third party using the property they had rented as collateral and without the knowledge of the property owner.

Currently, the Economic Crimes Division of the Prosecutors Office of San José has at least 400 active criminal investigations regarding property theft.

Most of the targets of property theft are absentee foreign owners in areas that have high property values. There are some steps you can take to make your property less appealing to property thieves and those include:

1. Keep your undeveloped property well fenced and with signs indicating a local contact number.
2. Check your property title every couple of months to ensure that no registrations have been filed against the property.
3. Visit your property every couple of months to ensure that no one has taken physical possession of the property.
4. You can place a lien or administrative warning in your favor against the property to make the property less attractive for property thieves.
5. If you intend to purchase land and then leave the country then purchase in an area or a community where your neighbors or a property administrator can keep an eye on your property while you are absent.

The Costa Rican government needs to place closer attention to this problem and implement policies and procedures to deter and punish this activity.

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Written and copyright by Attorney at Law – Roger A. Petersen. Roger has been an attorney since 1992 and is a member of both the Costa Rican and Florida Bar. He practices law in San José, Costa Rica and is the author of the best-selling book The Legal Guide To Costa Rica which you can order from Barnes & Noble here or from Amazon.com here. Attorney Petersen’s website can be found at Petersen & Philps Law Offices.

If you would like to speak to Roger Petersen about hiring him to be your attorney in Costa Rica, please help us to help you by using the simple form below:

Andrew Makarik

to@welovecostarica.com

Andrew Makarik is the main editor of WeLoveCostaRica, a fan of this sunny country. He is also a loving husband and a has a lovely daughter. By being a devoted family man and the biggest Costa Rica fan, he wants to make more people feel at home there. WeLoveCostaRica unites people and helps them find new home or a new travel destination. This website is a friendly community where everyone can find not only information, but also new friends and travel pals. Andrew is also passionate about IT and programming, so he himself maintains a friendly atmosphere in this cozy environment of WeLoveCostaRica.com.