How many times have you heard if it sounds too good to be true, then it is too good to be true. Human nature universally causes all of us to seek “the deal”. Fraudsters and scammers readily understand this and use it as a vehicle to promote and further their schemes. If you engage an ex-pat in a conversation that also lives in Costa Rica about the scams they have heard of you will get story after story about being victimized or about scams they know.
Like most crimes of opportunity, fraud is cyclical and every few years, Costa Rica floats to the top of the offshore charts and then falls off again. If you don’t already know it, Costa Rica is again emerging as the “place to be”. Cody L Gear and Associates reports that “we have had countless calls from people who are interested in setting up mechanisms/structures in Costa Rica for tax and other purposes, with several claiming to have friends who have been successful with these mechanisms/structures”. They all want to set up a Costa Rica mechanism/structure to avoid taxes and use the proceeds to purchase Costa Rica property, establish a Costa Rican bank account. Herein lies the initial stages of a scam in the making.
Most purchasers of property are well aware of the legal term “caveat emptor”, “let the buyer beware”. According to West Encyclopedia of Law, 2nd Edition the term has broader implications. West defines caveat emptor as; [Latin, Let the buyer beware.] A warning that notifies a buyer that the goods he or she is buying are “as is,” or subject to all defects.When a sale is subject to this warning the purchaser assumes the risk that the product might be either defective or unsuitable to his or her needs.
This rule is not designed to shield sellers who engage in fraud or from bad faith dealing by making false or misleading representations about the quality or condition of a particular product. It merely summarizes the concept that a purchaser must examine, judge, and test a product considered for purchase himself or herself.
The modern trend in laws protecting consumers, however, has minimized the importance of this rule. Although the buyer is still required to make a reasonable inspection of goods upon purchase, increased responsibilities have been placed upon the seller, and the doctrine of caveat venditor (Latin for “let the seller beware”) has become more prevalent. Generally, there is a legal presumption that a seller makes certain warranties unless the buyer and the seller agree otherwise. One such Warranty is the Implied Warranty of merchantability. If a person buys soap, for example, there is an implied warranty that it will clean; if a person buys skis, there is an implied warranty that they will be safe to use on the slopes.
A seller who is in the business of regularly selling a particular type of goods has still greater responsibilities in dealing with an average customer. A person purchasing antiques from an antique dealer, or jewelry from a jeweler, is justified in his or her reliance on the expertise of the seller.If both the buyer and the seller are negotiating from equal bargaining positions, however, the doctrine of caveat emptor would apply. But remember, this is Costa Rica and the foregoing does not necessarily apply to transactions here. Prosecuting a case for fraud here is both lengthy and expensive. At times it seems as though corruption has no boundaries in this culture.
Most that express an interest in purchasing property in Costa Rica assume that the following are true; the real estate system in Costa Rica is VERY similar and MIRRORS that in the United States or Canada. Houses are readily available for purchase in Costa Rica, and while they may be slightly different, can be easily remodeled. How different from the United States and Canada can the real estate system be if there are real estate firms such as “Prudential” and Century21 in Costa Rica? The internet is a true and valid representation of real estate and pricing in Costa Rica. Services, such as electric, telephone, internet and water are readily available everywhere in Costa Rica. Title insurance and protection against fraud is easily obtained. The SAD truth to all of the above is that all are false!
The reality is; the real estate system in Costa Rica is “wide open”. There are no mandatory licensing requirements or any governmental oversight of real estate agents. There are no “comparables” in Costa Rica of any kind so you never really know if you are paying a fair price. There is virtually no protection against fraud and misrepresentation in Costa Rica. It is more expensive to remodel an existing home than to build and there is not much protection against builder fraud unless you have a iron clan contract. Real estate franchises here mean nothing as they are not bound by strict rules and regulations as in the United States or Canada. They are used purely as a marketing ploy. In Costa Rica utilities and all auxiliary services and common infrastructure services are not readily available in all areas of the country. Even in some of the more affluent areas of Costa Rica it is common for power and water to be “out” for several hours three or four times weekly. Phones in some areas may take literally years to be available. Building permits in some areas are being denied because the local infrastructure cannot support the increased population. In some beach areas, the issuance of building permits may NEVER resume as the infrastructure simply cannot support the number of incoming “gringos”.
NEVER ASSUME ANYTHING IS THE SAME IN COSTA RICA AS IT IS IN THE UNITED STATES OR CANADA, AND NEVER TAKE ANYTHING FOR GRANTED! Statistically almost 40% of all ex-pats who settle in Costa Rica return “home” within five years and well more than 55% of ex-pats who settle on beach areas year round return in the same time frame. Real estate fraud is common, even with title insurance. More than likely you will need an honest, English speaking attorney to assist you with anything you do in Costa Rica.
Finally, do your homework. Prior to investing time and money in Costa Rica retaining a firm such Cody L. Gear and Associates to do a complete and thorough due diligence investigation will go a long way in saving you both money and heartache.
