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I will be helping my mom purchase a property in CR in the near future. After researching I see that there is Stewart Title in Costa Rica. I also understand that when buying , a good attorney will research to make sure title is clear. So what does title insurance offer if the attorney has already researched ?
Another question I have is , I can see clear title necessary when buying land or a single residence. So maybe title insurance would be useful. But what about the condos being sold by these big developers, wouldn’t title be practically clear since they are selling brand new construction ? So would title insurance be needed ?
Also, is there more than 1 title company to use ? if there is , is there a variance in cost among them ?
Any insights into this field ? Thanks.
When we obtained a mortgage via Stewart Title, purchasing title insurance at closing was part of the deal. Subsequently, our Costa Rican attorney told us that we’d wasted our money, that Stewart’s title policy offered us nothing that wasn’t provided for otherwise. Sadly, I can’t reconstruct his argument, so that’s all the help I can offer.
Charlie:
Costa Rican Real Estate legal system offers a better security than some of the systems available within the US. That is the reason why, if a proper due dilligence is performed, you don’t need title insurrance.
But try to explain that to international banks!. The reason why Stewart title exists in Costa Rica is because foreing banks require title insurrance.
A good attorney is what you need. Now, maybe the title insurrance is best in Costa Rica to avoid the bad work of some attorneys. Simply because in most of the cases gone wrong, attorneys will not assume their responsibility, whereas ST will pay the insurred amount if anything happens (if the small letter does not exclude).
But again, what I mean is, if the attorney knows what he is doing, title insurrance is not necessary in Costa Rica.
The labor of the attorney and the title insurrance apply both to new and old properties. The problems are related to the land, the title, the owner, undisclosed legal issues, not to the age of the property.
Regards,
José Rafael Fernández
AttorneyThanks for the replys. It seems logical that US lenders would require the title insurance if one is using a lender here in the US. Do most persons get loans here in the states to buy out there, and if so , does anyone know what lenders do this ?
I thought that maybe most people buy cash since I hear that it is difficult to borrow from CR banks.
I assume your one of the good guys , an honest real estate attorney, I will keep you in mind. I have had some irresponsible dealings with professionals down there , but that is the learning process of assimilating into a different country and culture.
Attorney Jose Rafael Fernandez is a completely bilingual Costa Rican attorney and a very, very dear friend of mine whom I have known now for over seven years.
Out of the hundreds of attorneys I have met over the years here in various business and investment matters, there are two attorneys in Costa Rica that I would consider to be THE most trustworthy – Jose Rafael Fernandez is one of them.
If you search this site for “Fernandez” you will find the dozen or so articles has written for our VIP Member and his email address…
Scott Oliver – Founder
WeLoveCostaRica.comBefore we left the U.S., I talked to a number of lending institutions (banks, S&Ls, credit unions) about financing property in Costa Rica. I got a consistent, universal guffaw from them all.
There’s virtually no way for a U.S. lender to enforce his interest should you default on a loan for property in Costa Rica. The security is the property and they’re not used to doing legal work here. They’d have to set up a whole bureaucratic infrastructure just to foreclose on your loan or mine. So the answer to that one appears to be a resounding “NO!”.
Virtually all banks operating in Costa Rica offer home mortgages. The question is about the terms and the process of applying and getting approved. The ones we talked to directly were very bureaucratized, very conservative, and very slow. Some, for instance, will not loan to borrowers over 64 years old. Others want three years of original bank statements, income proofs, etc. Dunno about you but we don’t keep all that stuff.
Stewart Title offers a service in which they take the same documents you’d provide a U.S. lender and send them to a bank in Texas for underwriting. The Texas bank then makes a recommendation to loan or not to a bank in Costa Rica that Stewart has recruited. Stewart charges about $300 for the application process, but the kicker is that the deal includes them issuing a title insurance policy at closing at a cost of one percent of the loan. We decided to go that way and are not unhappy.
Thanks for the info everyone. I will definitely keep the attorney info, I may have to use one in the next few months ahead.
I would like to reply to Mr. Fernandez’ message because we recently had some problems with this issue.We bought land in Playa Petrero in 2003 and did not have to pay Title Insurance on it. We built a small house on the property and then decided to sell because the area around us had become busy and we wanted more “quiet”. So we sold it, and proceeded to buy land south of San Jose in the mountains. Again, we did not have to pay Title insurance on it.
Then a friend in Tamarindo said to come look at some beautiful lots in that area, so we flew over to see. We loved the lots, and bought one.
Now our attourney is saying we need to buy Title Insurance on this land because it is near the beaches. He already checked to see if the land was unencumbered, which it was, and yet he says we still need to buy this insurance. His fee turns out to be more than 1% of the amount.
We also decided to get married in Costa Rica this last Sept. He was going to charge us $900 to provide us the service and paperwork. We were going to cancel, and he brought the price down to $750. We went ahead with it, even though it went against the grain to pay that much. We found out recently that it only costs about $85 for the paperwork.
With that, and now another $800 for Title Insurance, we are beginning to feel as though maybe he’s taking advantage of our “foreign ignorance”. Do lawyers there typically charge this much for these types of services? He is a very nice person otherwise, and we like him. We’re not sure if we should keep him though. I would appreciate any feedback you have on this.
Diane
Diane,
We purchased several properties in CR using an lawyer in SJ, Armando Guardia, a Tico educated at Washington U in NY. We did not buy insurance because he had background knowledge of the property. Any beach property, I would buy insurance because there is a 10 year window for someone to step up and file a claim on the land. Ck with your CR Lawyer. This is probably why he suggested the insurance.
Enjoy CR.
BrianDiane:
Again I insist that title insurrance is not necessary in Costa Rica, provided your attorney can read and interpret what public records show. (And do not be amazed if you find several that can not)
On the matter of the properties “close” to the beach, the thing is a bit complicated.
In Costa Rica you can find 3 coexisting Real Estate regulatory systems.
One, for “normal” land
Two, for beach front property
Three, for land without title.Normal land has a unique number called Folio Real that is the key number to access all legal information for that property on-line, and up to date.
On beach front the problem is that the Cities are in charge of such records, and they are not precisely “kosher”. Before buying beach front, your attorney should excersise EXTREME care, and personally review Citie’s records. This land is only given in concession to citizens. It perpetually belongs to the State.
Land without title is the more difficult to deal with, since there are no records anywhere, is a situation of mere posession. Whomever say owns the land has to prove he has been on the land for at least 10 years, or that he bought the posession of previous posessors. It can be titled through a process in court called “informacion posesoria”
Regarding legal fees. You should expect to pay somewhere around 1% in all Real Estate transactions, as legal fees, that is normal.
However, there are thousands of attorneys in Costa Rica, and in finding one to represent you, the goal to keep in mind is a win/win situation, where a business relationship is set for the long run. At least that is how I see it, but a lot of foreigners find themselves in the situtation of being targeted by professional of all kinds, as “gringos with dollars”. In my oppinion that is not very intelligent, since they might get one deal, but it would be the last and only.
Of course you will find attorneys with different set of rates per their labor. Find one you feel confortable with.
José Rafael Fernandez
AttorneyDear Jose,
Thanks so much for your lengthy and informative reply. I really learned a lot from your message. Thanks to Brian, too. I realized that I didn’t make it clear in my original message that the property in Tamarindo isn’t “on” the beach but about a mile inland from the beach. Does this change things in terms of whether it’s “normal” property? When we bought the property in Petrero we had a Folio Real and there were no insurance fees so I suppose it was considered “Normal” . It was about 4 blocks from the beach. That’s why I thought our property in Tamarindo would be the same…”normal” with no Title Insurance fees.
I do understand that each lawyer will ask their fees differently. The one we have now seems very competant, however his fees seem extremely high to us, compared with our first encounter with the buying process. He explains everything to us well, but we still don’t know if he’s overcharging us on work we may not necessarily require. As I mentioned, he is very personable and nice, and I enjoyed our time with him. But the fees seemed much higher than we have experienced before.
Would you say that being a mile from the beach would require “Beach Front” real estate regulatory systems, or “normal”.
Diane
Brian,
Thanks for your reply. The property we are buying in Tamarindo is a mile inland from the beach, so it’s not really beach property. Our lawyer seems competant, and said there were no encumbrances or liens on the property and that everything checked out fine. So this is why I was confused about the Title Insurance.
We do enjoy Costa Rica. It is such a beautiful country and the people are wonderful. Hope you enjoy your times there as well!
Diane
In the states, when one buys property, the atterney hires someone to do a title search to checkout the backround of the property and the “chain of title”. If there is a problem with the title it should show up there.
In addition to that you can buy Title Insurance for problems that you can not see, like misrepresentation, fraud, etc.. The banks that loans you the money requires you to buy them a policy (lenders policy), however the owners policy is optional.
I,ve always heard that getting into a legal battle in costa rica is a nightmare, so if your putting a lot of cash down, isn’t it a good idea to protect it with title insurance, if there is a problem with the title or land that one cannot see by doing a title search?
Getting into a legal battle anywhere is costly and time consuming.
Many people complain about paying legal fees. Lawyers are paid for their time, knowledge, and expertise, which produce the desired result.
Dealing with clients who are at a distance will take more time. Clients who are unfamiliar with the “system” or whatever framework the engagement with the attorney must operate within requires more time to explain, answer questions, await client decisions and directions.
I wonder if CR attorneys carry malpractice insurance similar to US attorneys? That would certainly help me decide the issue of title insurance.
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