How to protect your property

If you have a piece of land or vacant property in Costa Rica you will need to protect it from squatters and fraud. Vacant and empty land or homes present an easy opportunity for thieves and white-collar criminals. When buying, selling, and maintaining your property you must do your diligence to protect your investment.

You can do this by not leaving it unattended and having regular groundskeeping and cleaning. Make sure you have a fence and proper clear signage so that there is no dispute on the land. Always have an alarm system on your house and have it serviced regularly. You may want to have a backup generator for frequent power outages or “blackouts”.

When renting your home:

1. Prepare a lease using a lawyer and make sure it is iron clad, there are system abusers everywhere, so do your diligence

2. Be aware of the landlord-tenant laws in Costa Rica-know your rights and responsibilities

3. Do a thorough inventory and inspection before and after renting.

4. Do a background check on potential renters. Hire a PI or run their ID in the system, trust us, it may save you a headache in the future.

Protecting your home from fraud:

1. You can take a Property Alert service, where they will monitor your property title and alert you if anything has changed in your title given by the National Register. Do your own due diligence on this because the registry takes no responsibility.

2. Check the title of your property online once a month. It takes only a few minutes.

3. Register a Cédula Hipotecaria on your property. This is much like a mortgage you own, to protect the property from being sold or mortgaged by anyone else. Ask your attorney about the Cédula Hipotecaria. If you don’t have an attorney, check the list of legal counsel we recommend.

Be Mindful of Currency

Make sure your rental leases are in Costa Rican colones currency. If you write your contract in any other currency-USD, Euros, etc, then the rate stands for the entire duration of the contract and no increases may be made. So if you have a tenant for 3-5 years and the contract stipulates the rent being paid in USD, you will not be allowed to adjust it for annual inflation. If you write your contract in CRC colones, then you are entitled to increase the rent annually up to 10%. Concerning housing rentals, in Costa Rica, the agreed rent in colones can only be updated at the end of each year of the contract; In the case of rents agreed to in a foreign currency (ie US dollar or Euro), the agreed amount will be maintained for the entire term of the contract, without the right to readjustment.

In Costa Rica, readjustments in housing rentals is a set of rules that regulate all property rental and lease contracts, contained in Law No. 7527 “General Law of Urban and Suburban Leases” (Ley General de Arrendamientos Urbanos y Suburbanos – 7527), specifically to article 67 of the so-called Tenancy Law (Ley del Inquilinato). As tempting as it may be to draw up a contract in foreign currency due to the instability of the CRC colones, be aware that the economy in Costa Rica is strong and the colones has climbed in value steadily over the years. Get legal advice before drawing up any contract. We want to share the tip that only leases in CRC colones can be adjusted for inflation annually.

The 3 year lease!!!

Costa Rica has a unique minimum lease term of 3 years! That’s right, you read that correctly. If you sign a lease with a tenant for 1 year, 6 months, or 2 weeks it is not considered valid based on the General Law of Urban and Suburban Leases, Law No. 7527. The term minimum is 3 years for housing (art. 70). Although the contract indicates a shorter period, as it is a provision of public policy, it is considered not established and the 3 years will apply. Unless your property is registered with the ICT (Costa Rican Tourism Board) and your property is known as a holiday rental or short-term tourism accommodation. Otherwise, your lease no matter the terms is only recognized as a 3-year lease term by the courts in Costa Rica. When drawing up any lease, have an experienced lawyer look at it before signing anything. Make sure for any short-term lease you have the wording “vacation rental” written in your lease and make sure your property is registered with the ICT. This is the only way to protect you from a tenant outstaying their lease.

Basically, if you have a tenant who agrees to stay 3 months but then they decide not to leave, you cannot get them out. Particularly if the tenants continue to pay their rent every month, you will not have much legal ground to evict them. If you have a three-year lease term, you must notify the tenants in writing in advance of the lease expiration that you do not wish to renew the lease. Otherwise, the lease just self renews and you might be stuck with them for another 3 years.

Rent Scams

You manage to buy your dream house in Costa Rica and you hope to spend your winters or retirement there or perhaps you want to move the whole family down. You are not alone! Costa Rica draws dreamers, surfers, celebrities, and retirees alike to its equatorial beauty. Known for its green living, longevity, permanent sunshine, and pura vida (pure life). There are over 140,000 expats living in a country with a population of 5.1 million people. That’s almost 3% of the country comprising mostly people from the USA, Canada, and Europe seeking the sun and laid-back lifestyle of Costa Rica. There are 3 million visitors each year and so many of those that visit get the bug and start to dream of moving to Costa Rica one day.

Not only does Costa Rica attract dreamers, artists, body worshippers, nature lovers, surfers, and thrill seekers, it also attracts schemers, cons, and escape artists. Not to be harsh, but a good friend told me years ago when I first moved to Costa Rica, “Don’t Google the gringos!”. At the time it seemed like a funny aside or maybe a bit of xenophobia or resentment of the gringo invasion. Fair enough I thought. But time has proven it was more of a proverb to live by than a quippy comment. Do not Google the gringos because 5 out of 10 times you will find that your new neighbor has a past they are trying to forget.

Places like Costa Rica are dreamy and otherworldly and hold the promise of reinvention or escape. Most of us are wanderers, seekers, and explorers at the very least or we wouldn’t find ourselves far from home learning a new language and navigating torrential tropical downpours and outrageously potholed moonlike roads with no guardrails. Even the beaches, the world’s finest in my humble opinion belie the power and dangers of the rip. Costa Rica draws seekers who shirk the status quo and you are guaranteed to meet some awesome like-minded people. That being said it is also a haven for crooks and cons due to the anonymity of easy LLC forming here, a complete lack of addresses, and lax laws. One can disappear here or use it as an opportunity to take advantage of a whole new pool of victims.

When deciding to rent to anyone, do your research. Get references, run their background online, use a PI service, or even check with your local bounty hunter to find out if your potential tenants are legit. Rent scams are rampant, particularly in Guanacaste province which attracts the most expats (illegal immigrants depending on your politics).

Here are a few examples of popular rent scams;

1/Pay first and last month’s rent, then don’t pay again knowing that it may take months or even a year to evict a tenant. This is exactly why the new monetario arrendamiento law was created and allows for expedited eviction for non-payment of rent.

2/Provide fake rent deposit receipts. If you are a foreign owner meaning you do not have your residency, then you cannot send or receive SINPE which is an electronic transfer using your cell phone. Only residents of Costa Rica have this banking privilege and it is the most common form of money transfer there. So a tenant may scam you by showing that a deposit was made knowing full well that you cannot receive the funds. Insist that tenants send you a copy of the bank transfer via email each month and that it is not verbal, via text, and that it is not SINPE.

3/There are shady lawyers who will accept payment to bog down the eviction process for clients to get “free” rent. This means that if your rent is $3000/month some shifty unethical lawyers will take 50% on the terms that they will bog down the courts with useless paperwork and defenses buying the tenant time to stay rent-free at your property. That being said, the tenant still has to pay the lawyer the 50% (1500/month in this case) to buy them time. Either way, it’s a bargain for the renter while you do not earn any income for your property.

4/ Exorbitant or fraudulent repair bills can act as a shield or be deducted from paying rent. One horror story I heard was a tenant who claimed the pool wasn’t working properly and offered to call a repair person for the landlord. This seemed like a proactive helpful thing to do. But then the tenant showed up with a pool repair invoice for $15,000, essentially saying they have a $15,000 rent credit. This landlord could not prove the receipt was a forgery and was stuck with these tenants living rent-free while they litigated. For your knowledge, all repairs need be approved by the landlord and no permission should be given to the tenant to undertake and invoice for any repairs to protect you from this scam. If repairs are needed you have 10 business days to attend to them except in the cases of natural disaster.

5/Tenants might accept or agree to a short-term lease such as a “green season” lease at a reduced rate and then claim that your short-term lease is invalid and they are entitled to stay for 3 years under Costa Rican law. Thus getting a real rent bargain and prohibiting you from using your property as you see fit.

My best advice is to definitely Google the gringos and if that doesn’t turn up anything, dig a bit deeper. Check with their references, and go to their former landlords or employers. This can be tricky because many potential renters you will encounter are retired, self-employed, or independently wealthy. But you have to do your research. If they are from the USA or Canada it can be easier to find out people’s info, but if they are from another non-English speaking country consider using a VPN or searching in other languages to optimize your search. It may seem like a hassle or a bit too nosey but it will save you a headache in the long run.