Is There Hope When You’re Invested In A Costa Rica Land Development Project and You Discover It’s Going Nowhere?
I generally receive several of these inquiries per month from people that purchased in a Costa Rica land development project and are now realizing that many of the promises made by their developer were not carried out and by now most likely will not be carried out.
In some of these cases the buyers have title to a piece of property even though none of the infrastructure that was promised was ever built. However, in many of these cases the buyers only have a purchase agreement with no title to the property at all.
These purchase agreements are simply promises to deliver title to something in the future. Well the future is here and nothing is being delivered.
Of course hindsight is 20/20 but for those considering purchasing in pre-construction projects in the future let this serve as a guideline of what not to do. I realize that most North Americans (U.S. & Canada) look at Attorneys with hesitation.
In North American culture you only see an Attorney when you are in trouble or you need to get out of trouble. So you generally do not associate the need of an Attorney with a real estate transaction.
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This is the first big mistake that foreign buyers make in Costa Rica. You need somebody locally to protect your personal interests before you sign and commit to anything. Once you have signed and delivered money to the developer or promoter it is extremely difficult to revert the situation.
Why? Because in Costa Rica the judicial system does not work in favor of victims. On the contrary you will probably feel victimized a second time once you have to deal with the local judicial system.
When I hear some foreign land promoters talk about Costa Rica all they talk about is selling “their product.” For them selling lots in Costa Rica is just about selling a product to a consumer.
For those of us who were born in Costa Rica this notion is insulting and is truly being culturally ignorant about the country. The fast in your face approach of North America often clashes with the slow and personal idiosyncrasies of Costa Rica.
This comes into play during the permitting process of land development projects. In Costa Rica everything is slow and permitting projects is no exception. If you are purchasing land in a development and they do not have the necessary permits approved then you are looking for trouble unless you are willing to take the risk.
When a buyer insists on proceeding under this scenario it is reasonable to at least set up an escrow account and have all funds held in escrow subject to the developer meeting certain conditions.
This mechanism has saved numerous buyers from financial ruin as they were able to recover their funds when the developers did not deliver. If there is something that shady developers detest it is escrow and attorneys that represent the buyers.
Why? Because they get in the way of selling their “product”.
If a buyer is being offered free closing costs or free legal transfer fees — wake up — you all know there are no free lunches and this is no exception.
Once the damage is done and the developer has a big chunk of your cash and you have nothing in exchange, what can you do?
The first thing that I find very useful is to organize with the other lot owners that are in the same position as you are. I have seen certain lot owners set up an association and a website to stay informed. This also helps spread the cost among all the lot owners.
In these circumstances I generally see three things that happen.
- Blind hope. Many buyers continue to believe in their developer and will continue to hang in there until the developer can turn it around. That may work if the developer owns the land outright with no liens and encumbrances and they are still around trying to get the project moving.
- Betrayal and vengeance. Some purchasers will feel betrayed by the developer and salesperson that got them into the land investment in the first place. Some will want to file lawsuits against all parties involved.
- Give it up. Others simply will give up and take the loss and move on. Which path each person takes is certainly a personal decision depending on their own personal circumstances as well as a review of the circumstances and legalities of the property where they purchased the lots.
I have seen situations where the developer had mortgaged pieces of property that had already been sold to lot purchasers.
Those that seek out legal assistance will encounter two scenarios.
- A civil lawsuit to enforce the purchase agreement that you have.
- A criminal fraud action against the developer to force them to refund your money.
In Costa Rica civil lawsuits can take an average of 7 years to litigate to conclusion. So if you think you will be dead by the time you get relief then re-think that strategy.
It is common in Costa Rica to look for a criminal angle to these cases since the criminal courts are more expedient then the civil system. By expedient I mean 4-5 years instead of 7 for civil claims.
However if you go the criminal route I highly recommend you hire a very experienced criminal attorney to draft the complaint and oversee the case.
In theory any person can file a criminal complaint without an Attorney. However when you have prosecutors that are overwhelmed with case files they will try and drop any case they can if you give them the chance to do so. Presenting a poorly drafted and organized case sure makes it easy for them.
I hope you were not expecting an easy fix. As I pointed out at the beginning proper due diligence is the key to avoiding being in this position in the first place.
For those of you that do not have title to the property and have paid the entire price up front your choices may be limited if the developer does not cooperate to transfer title in your name. Your only option is to file a lawsuit to put a lien on the property and thus safeguard your investment.
Those of you that do have title and are expecting the developer to complete the investment in infrastructure that could be a very long wait.
If the developer is financially insolvent and there are no funds to complete the infrastructure then there will be little recourse for you since filing a lawsuit to compel compliance does not make sense against a developer that has no assets or funds to comply.
Every case is different so research your options based on your specific circumstances.
Costa Rica Attorney Roger Petersen
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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.
To speak with Attorney Roger Petersen about hiring him as your Costa Rica attorney, please contact them using the information below:
Escazu, San José, Costa Rica
Tel: 506-2288-2189 Ext. 101 or 2288-6228 Ext. 101
You can email Attorney Roger Petersen by clicking here.
You can visit the Petersen and Philps Law Offices Website here.
You can visit the CostaRicaLaw website here.
Andrew Makarik
to@welovecostarica.comAndrew 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.
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