To use a corporation to purchase real estate in Costa Rica is a pretty common way. The purchase transaction usually goes through a shelf corporation or newly constituted one, called an S.A.
For many years, attorneys recommended foreigners to use a corporation to purchase real estate for several reasons. Those clients took the recommendation so there are now thousands of corporations that own a property in Costa Rica.
Over the years, I have seen many real estate developers using a corporation to purchase real estate for the properties there were selling. Then, they could just transfer the shares of the corporation.
Many property owners bought Costa Rica real estate through a corporation from a real estate developer or a private seller. Later, when they wanted to sell their Costa Rica property again, they ran into trouble.
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Why did that happen?
They ran into trouble because they trusted the real estate developer and his attorney to take care of the closing. The buyers did not find out that something was wrong until years later. They found out that they did not get the title to the property or the ownership of the corporation that purchased the property. Or that something else was missing such as
- the books,
- the appointment of the board of directors,
- the shareholders,
- or even the shares or the corporation.
Many things can go wrong at a real estate closing and many buyers do not use their own attorney for closing on their purchase.
Protection?
Costa Rica corporate book
Once everyone got paid, nobody cares anymore and nobody follows up. Even when the buyer got a bank mortgage when purchasing, I have found that nobody took care of transferring the corporation that owned the property into the new owner’s name. Of course, the owner assumed that the bank would take care of things. Purchasing through a corporation does not protect your title automatically, especially if you are not the owner.
The developer is getting his check at closing, so he does not care if it is wrapped up correctly (bad for future business though). The bank is getting the mortgage on the title and does not care who owns the title.
At a property closing some years ago, I have seen a corporation transferred by a title company and the property was not even owned by that corporation. The company did not own anything.
I have also seen a closing attorney transfer the neighboring property.
Another time, I saw an attorney transfer the title to a corporation but then he did not transfer the shares or the powers of attorney or that corporation to the new owner. This shows that purchasing Costa Rica real estate through a corporation is not always a safe way to do business.
Your due diligence
I am not trying to scare you, I am trying to make you aware of the fact you need to use the right people for your real estate purchase. Do your own due diligence when you purchase property in Costa Rica and do not assume that you are in good hands. When you purchase a property from a developer that is already in a corporation, and you are buying the real estate through a corporation
Check
1. The property is indeed owned by the corporation
2. You get all the power(s) of attorney or that corporation
3. They cancel the existing power(s) of attorney
4. You become the shareholder(s) of that corporation
5. The shares are printed and received physically by you and endorsed by the former shareholders
6. The closing notary public changes the board of directors
7. You get the 5 books of the corporation
a. General Assembly
b. Shareholders Registry
c. Board of Directors
d. Two accounting books
8. You receive the corporate ID (cédula juridíca)
9. Make sure the closing notary public makes all the entries in the books
10. Receive a registered and stamped (visado) survey
11. You get the original constitution of the S.A.
Of course, you can use a corporation to purchase real estate in Costa Rica but do your homework. Always have an independent attorney who specializes in real estate revise everything and pay him/her to be at the closing to assist you. It will be money well invested.
Before you give the check to anyone, and before you sign, make sure all the above is complete.
To make absolutely sure you’re doing all the right things when buying Costa Rica real estate through a corporation, hire an American European Real Estate Group’s affiliate agent.
