Getting your Costa Rica Legalities in order before it is too late

Legal and Financial

This is not a fun or happy subject to write about, however, I felt it was an important topic, and if you are considering buying a home in Costa Rica, you should read this. This article is a true life story that happened to a client of one of the agents in my group. This experience highlights the importance of getting one's legal affairs in order before deciding to purchase property in Costa Rica.

My associate asked for my help and if I would meet with his clients. For Privacy reasons, I will only refer to him as the Client and I have obtained full permission to write about this.

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The client had been coming to Costa Rica for many years and fell in love with the weather, country and of course the warm and loving people. After years of looking around the country, he realized that the Papagayo area made the most sense for him due to the many services, international airport, great private hospitals, pristine beaches, and warm weather. This client purchased the home of his dream here in Playas del Coco just a year ago. After acquiring the property he set his tasks to update the property and house to suite himself. He added a new patio around the pool, built an outdoor kitchen and BBQ rancho with half bath, added lush landscaping to enhance the beauty of the property and the outdoor living area, painted the house and added all new A/C units. He spent a good amount of money getting the house just the way he wanted it so he could enjoy his life in Costa Rica.

Now comes the horrible and unfortunate part of this story. What started out nice turned to tragedy.

The client, in all the years he spent here in Costa Rica, meets a wonderful Costa Rican woman that he fell in love with. They spent almost all their time together. He purchased the house partially because he wanted to take care of her. He did this by giving her forty percent ownership in the corporation that owns the house. All sounds nice, right? Nice guy! He loves her.

Well just after they got the house the way they wanted it the client was not feeling too well. Something was just not right. So the client went to see a local doctor that gave him a complete examination. He had all sorts of blood tests done and, since the client is in his seventies, the doctor asked him if he had ever had a PSA test done or had his prostrate checked by a urologist. The answer was no and the local doctor set it all up for him right away as he could not find anything wrong from the results of the blood tests he ordered. Well, unfortunately for the client, after meeting with the urologist and having the extra blood test completed, it showed that he may have prostate cancer. His PSA count was off the charts. After more tests, the cancer diagnosis was confirmed. After hearing this news the client decided to go back to Canada to get a second opinion. Well, the second opinion was confirmed as well and, sadly, the cancer had already spread to his liver and then metastasized in his brain.

The client, fearing the worst, decided to list his house for sale. Deep down inside he knew what was coming. That’s when the real problems started. He contacted my associate to have the home listed for sale. However, he put an unreasonable price on it that he would never get a buyer. After 2 months of being on the market, the client called the listing agent complaining that the house has not sold, nor had there been any showings. After the listing agent and the girlfriend tried to explain to him that the price was too high for the current market conditions, he said he wanted to talk to the listings agents’ broker (that's me).

The Listing agent asked if I would help his client understand the current market situation and what the next steps might be to get the property sold more quickly. The girlfriend understood clearly what the issues were, so I agreed to a conference call where all of us could discuss this together.

Right off the bat, the client was difficult and defensive. After some time I was able to calm him down. After asking him many questions, we discovered that even thought his girlfriend had forty percent ownership in the corporation she had no legal authority to act on behalf of the corporation. That was his decision as the buyer and he had every right to decide on that. However, the task he did not do was to set up a last will and testament in Costa Rica or set the corporations up for his demise.

After a while, he finally agreed to lower the price to a reasonable level to get the house and property in Costa Rica sold. At this point, he tells his girlfriend to go ahead and sign the listing agreement. I informed him that only he could do this as he had the full power of attorney over the corporation that holds the property and that the listing contract would not be valid without his signature. His response was “well I am going to die most likely in the next few months anyway as the doctors don’t give me much of a chance”.

He kept saying “Oh well my Canadian last will and testament can take care of everything when I pass on. To a certain degree he was correct; yes his Canadian last will and testament will take care of the issues of settling his estate. But he had not put his Costa Rica girlfriend on that will, nor does he have a Costa Rica last will and testament. This can cause all sorts of problems when he unfortunately finally passes.

Whether or not he adds the girlfriend to his will, that is his choice, however he should have added the beneficiaries of his will to his Costa Rica corporation and given that person full powers to act on behalf of the corporation or at the minimum just transfer the shares to them now and he still keeps full power, so when he does pass on it will be so much easier for his beneficiaries.

If he does not do this before he passes away, the quagmire to finally get the house turned over to the estate could take almost a year, if not longer, in Costa Rica alone, and this does not include the probate process in Canada nor the time required to get the estate finalized and turned over to the beneficiaries. When the estate of this gentleman is finally settled in the courts of Canada, then the process of transferring the sixty percent share ownership of the corporation to the name if the heirs will start. This could be a year plus time frame, if not longer.

So when you decide to purchase property in this beautiful country I call home, and you won’t be sorry if you do, just make sure you do your homework and get your legal affairs in order at the same time. All of them, including what must take place in the event of your death. Make sure you have your last will and testament ready in your home country and in Costa Rica and please make sure you set your corporation up correctly. Do not be afraid to talk about death with your legal advisor.

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