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Conflict of Interest Rules in Costa Rica

Conflict of Interest Rules apply to lawyers in Costa Rica, just as they do in the United States, or Canada. The prohibition is contained in the Code of Ethics to which all Costa Rican lawyers must subscribe.

The difference is, in Costa Rica, the decision to act in a conflict of interest circumstance is left to be made as a moral decision by the lawyer, without fear of any practical retribution by the College of Lawyers, while in the United States, or Canada, a lawyer acting in such circumstances would most likely receive a suspension from practice for a period of time, as a penalty for having acted in such a manner.

In Costa Rica, the breach of this ethic usually occurs in the circumstances of a purchase of property from a developer. Most developers have in-house, salaried lawyers/notaries, who are available to act on a property purchase closing without additional expense to the developer.

The property purchase transaction most commonly includes the closing costs as part of the purchase price, if the developer’s lawyer is used to the exclusion of an independent lawyer acting for the purchaser. This is a very dangerous circumstance for a purchaser, who’s legal interests would remain unrepresented in the transaction. A purchaser must have independent legal representation in the property purchase transaction if their legal interests are to be protected.

The only circumstance where a seller’s/developer’s lawyer should be acting as the closing lawyer/ notary is where vendor financing is offered as part of the purchase agreement. In such circumstances, it is common to have two lawyers handling the closing jointly, one acting for the purchaser with respect to the title transfer and the other acting for the seller/developer with respect to the vendor financing.

RICHARD (RICK) PHILPS
Telephone:
(506) 2288-4381  Ext.102
Fax: (506) 2228-7094

Email:
rphilps@plawcr.com

Website:
www.plawcr.com

 


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THE CONDOMINIUM HOA – THE LAW IN COSTA RICA

A common misconception by foreign property purchasers in Costa Rica, is that a regime of By-laws, commonly provided by a developer of individually subdivided and registered building lots, or completed dwellings, is an enforceable legal structure as against individual property owners. Such a HOA entity purporting to regulate the individual property owners and collect fees for maintenance of common areas, is unconstitutional in Costa Rica, as having a purpose which is contrary to the inalienable rights of property owners granted under the Costa Rica Constitution. Abiding by a regime of By-laws in such circumstances is purely voluntary on the part of the individual property owners.

A legally enforceable regime of By-laws in-fact only applies in the circumstances of a development being a registered Condominium in the National Registry and subject to the Costa Rican Condominium Laws. In such circumstances, the owner of a condominium lot delegates all of their rights at the time of purchase, to the named Administrator of the registered Condominium, who has the legal authority to enforce the registered regime of By-laws pursuant to the Condominium Law.

Accordingly, purchasers who purchase property in the circumstances of a development of individually registered lots, believing that all property owners in a particular development will be contributing in some fair manner through a HOA structure, to the cost of maintaining areas, which would be normally thought of a “common areas” in the development, such as private access roads, common area lighting, maintenance of “green zones”, etc. , may find that they are saddled with a greater cost than anticipated in order to have these various maintenance items attended to. This will depend on what their co-property owners in the development are willing to pay in the circumstances.

RICHARD (RICK) PHILPS
Telephone:
(506) 2288-4381  Ext.102
Fax: (506) 2228-7094

Email:
rphilps@plawcr.com

Website:
www.plawcr.com


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The Costa Rica Legal System Explained

The majority of those persons reading this Article will come from jurisdictions where the Legal System is based on English Common Law; places like Canada (except the Province of Quebec) and the U.S.A. (except the State of Louisiana).

Costa Rica, with its legal roots stemming from Spain, is governed by a Legal System consisting of Civil, or Napoleonic Law.

The two Legal Systems, while addressing the same legal issues, such as Property Law, Family Law, etc., are very different from each other, particularly in the procedural aspects of application.

In Costa Rica, the most significant legal figure is the Notary Public. A Notary Public must first be a licensed Lawyer and then after additional university studies and a minimum of two years of legal practice, be able to apply to be a Notary Public.

All Notaries Public are Lawyers, but not all Lawyers are Notaries Public.

While a Lawyer is able to negotiate contracts, or defend a criminal complaint, only the Notary Public is qualified to draft documentation which will be submitted to the National Registry to transfer title to real property, vehicles, etc., draft a Will, Statutory Declarations, Powers of Attorney, and the like, all of which documentation must be recorded in the Notary’s Deed, or Protocol Book.

These functions are, of course, the preserve of the Lawyer in English Common Law jurisdictions. A Notary is also the figure that has the authority to certify copies of documents and authenticate signatures.

Another major distinction between the two Legal Systems, is that in arguing cases in Court, the reliance on previously decided court cases carries little, if any weight in the decision making in the Civil Law System.

All areas of the law are codified in their particular subject matter (eg. Family Code, Penal Code, etc.) and the Judge hearing a particular case is at liberty to read and interpret a particular Article of the applicable code to the facts at hand, with out being bound by previously decided cases on the same facts, or issue.

This, of course, is completely contrary to the notion of Precedents (Stare Decisis), which is fundamental to the English Common Law System.

When choosing legal counsel in Costa Rica, it would be important to choose a Notary Public, for matters concerning property, or vehicle purchases, incorporations, immigration matters, and the like.

RICHARD (RICK) PHILPS
Telephone:
(506) 2288-4381  Ext.102
Fax: (506) 2228-7094

Email:
rphilps@plawcr.com

Website:
www.plawcr.com


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Purchasing Property In Costa Rica

Purchasing property in Costa Rica requires a higher level of due diligence in order to avoid the pitfalls that are presented. A Purchaser requires the assistance of both a skilled Realtor and Attorney/Notary, in order that the proper inquiry is made prior to any Purchase Agreement being entered into.

As Realtors are not licensed, or regulated by the Government in Costa Rica, it is particularly important that a Purchaser do their due diligence of the Realtor that they choose. There are many good Realtors in Costa Rica, but it is important to choose both a competent Realtor and a Realtor who is knowledgeable in the area of Costa Rica where you intend to buy. No MLS system exists in Costa Rica and the knowledge of listings in a particular area are usually only those personally known to the Realtor that you choose.

Although Attorneys and Notaries are licensed and regulated by their professional bodies, it is equally important to choose an Attorney/Notary who specializes in property purchases. Following the initial negotiations to establish the price and a closing date for the purchase transaction with the Seller, the Attorney/Notary acting for the Purchaser, will prepare the Purchase Agreement setting-out the terms of sale. The Purchaser and Seller will sign this Agreement and the Purchaser will usually pay into escrow with their Attorney/Notary, a deposit of approximately ten percent of the purchase price, to be held subject to various specified contingencies being satisfied, following which the deposit would become firm and non-refundable to the Purchaser.

When purchasing an existing house, or condominium which has been constructed and the property has a registered title in the National Registry, the Attorney/Notary will conduct a Title Search of the property in the National Registry to determine if there are any liens, or other annotations on the property, such as mortgages, which need to be cleared from the tile at closing. In addition, a review of the property Survey Plan will be made. If the Survey Plan exceeds ten years from the date of issue, it is advisable to have a Land Surveyor conduct a check of the property boundaries to determine if there are any irregularities such as encroachments.

When purchasing raw land for building, it is particularly important that the Attorney/Notary conduct additional due diligence, such as obtaining a copy of a Land Use Permit (Uso de Suelo) from the applicable municipality to determine the use to which the land is zoned and to insure that appropriate access to the property may be made from a public road, or that an easement exists connecting the property to a public road. Depending on the type of development being considered, inquires may have to be made of the Government Environmental Agency (SETENA), the Government Housing.

RICHARD (RICK) PHILPS
Telephone:
(506) 2288-4381  Ext.102
Fax: (506) 2228-7094

Email:
rphilps@plawcr.com

Website:
www.plawcr.com


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Rentista Residency Application

The Rentista Residency Category (based on investment income) is of major interest to many persons contemplating moving to live in Costa Rica.

This Category requires the following documentation for each Applicant, which must be issued current within six months of the Application date, as submitted to the Costa Rican Immigration Department:

1. An original Birth Certificate, issued by the State, or Province in which you were born, and authenticated by the Costa Rican Consulate which has jurisdiction. In the case of U.S. citizens, the Certificate must be certified by the Secretary of State.

2. If applying with a spouse, a Marriage Certificate issued in the same manner as paragraph #1.

3. A Criminal Records Search conducted by the police in the jurisdiction where you reside and authenticated by the Costa Rican Consulate.

4. A notarized copy of all pages of your Passport (this can be done by a Costa Rican Notary, which saves the authentication process).

5. A Financial Responsibility Letter from a recognized financial institution indicating a monthly income from investment sources of at least $2,500.00 U.S. per month, notarized and authenticated by the Costa Rican Consulate if issued in a foreign country.

6. Registration with the Embassy of your home country in Costa Rica.

Fingerprinting will also be necessary by the Costa Rican Police and the subscription to the Costa Rican Public Health Insurance, following the grant of Residency.

The documentation will have to be translated into Spanish by a recognized interpreter and formalized into an Application by a Costa Rican Notary, prior to submission to the Immigration Department.

An interesting change to the Application requirements for this Category under the new Regulations to the Law, just published at the end of January, 2011, is that the period for establishing a monthly income of $2,500.00 U.S. per month, has been reduced from a five year to a two year period (Regulation Article 76 e).

This has the effect of reducing the investment funding required for this Residency Category from the previous requirement of a $150,000.00 U.S. funded investment to a $60,000.00 U.S. funded investment. This change will open-up an opportunity for many would-be Applicants that didn’t previously exist.

 

RICHARD (RICK) PHILPS
Telephone:
(506) 2288-4381  Ext.102
Fax: (506) 2228-7094

Email:
rphilps@plawcr.com

Website:
www.plawcr.com


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RRSP Fund Opportunities For Canadians In Costa Rica

With the Canadian Dollar at par, or slightly above its U.S. counter-part, the opportunity for purchasing property as a vacation property and/or retiring to Costa Rica, has never been better.

Property prices are generally down in Costa Rica, due to the world-wide economic slump, but this situation won’t last, with some properties in the Central Valley, already on the rebound.

The interesting aspect of being able to utilize your RRSP funds for such an investment makes the whole idea of proceeding to purchase property in Costa Rica that much more attractive.

You now no longer have to borrow money from a bank, or other financial institution, as an equity loan to make such an investment. You are now able to borrow the money from your RRSP fund account, secured by a mortgage over property that you own in Canada, and pay the interest on the mortgage to your RRSP fund, instead of the bank.

This funding arrangement is able to be set-up through major financial institutions in Canada (Banks, or Trust Companies) and must be administered through an RRSP Plan Trust, on an “arms-length” basis, and with current market mortgage interest rates being applicable.

If the property investment is an income earning investment, rather than for personal use, the interest payments may be deducted from the current year’s income of the RRSP fund holder, free of income tax implications, in the same manner as if the funds had been borrowed from a bank as an equity loan.

This program is detailed more extensively in Revenue Canada Bulletin IT-320R3, available online.

RICHARD (RICK) PHILPS
Telephone:
(506) 2288-4381  Ext.102
Fax: (506) 2228-7094

Email:
rphilps@plawcr.com

Website:
www.plawcr.com


Conflict of Interest Rules in Costa Rica

Conflict of Interest Rules apply to lawyers in Costa Rica, just as they do in the United...
article post

THE CONDOMINIUM HOA – THE LAW IN COSTA RICA

A common misconception by foreign property purchasers in Costa Rica, is that a regime of...
article post

The Costa Rica Legal System Explained

The majority of those persons reading this Article will come from jurisdictions where...
article post

Purchasing Property In Costa Rica

Purchasing property in Costa Rica requires a higher level of due diligence in order to...
article post

Rentista Residency Application

The Rentista Residency Category (based on investment income) is of major interest to...
article post

RRSP Fund Opportunities For Canadians In Costa Rica

With the Canadian Dollar at par, or slightly above its U.S. counter-part, the...
article post