Common Mistakes that Landlords Make

As unbiased as we think we are…we still are subject to our subconscious biases. This is a scientific fact that we hold biases about people whether we believe we do or not. When landlords look over prospective applicants for their rental properties, they are bound by those same biases. Often a landlord will choose a tenant based on how like they are to themselves, or how they can see themselves in that prospective tenant. For example, if the landlord was a young professional who had worked hard to acquire their assets, they may look favorably at an applicant who presents as a young professional. Or if the landlord has a family, they may look at an applicant who is raising a family in a more favorable light. When in fact these characteristics say nothing about whether this potential renter will be responsible, ethical, or reliable. Rather, a landlord will project their own values on someone who seems to have similar attributes to themselves. This is called implicit bias in psychology and this applies to everyone, it is a mental shortcut and is prone to errors. This bias develops in all of us as our brain seeks out patterns in an overwhelming world, and unfortunately, we feel like we just “know” things about a person when we really don’t at all. We all are subject to implicit attitudes and stereotypes and this affects all aspects of our lives.

It is for this reason that perhaps when interviewing potential tenants it is wise to hand that over to a property manager or at least get a second or third set of eyes on the applicants. That way you reduce the odds of your personal biases clouding or informing your decisions about something as important as who you will let live on your property. As we have discovered, making a poor choice in tenants can be time-consuming and costly. Unlike when you hire the wrong person for a job, you cannot just fire your tenant. Tenants have rights and the law in Costa Rica tends to favor tenants due to their inherent perceived (legitimate or not) vulnerability.

We often attribute certain characteristics to someone based on their gender, age, nationality, or cultural/religious orientation. When in actuality those details do not pertain to a person’s character or integrity at all. Perhaps you assume that an older person would tend to be more responsible than a younger person, when in reality age does not account for character. I will give the case of a landlord who lowered their rent to accommodate a single senior man under the assumption that a single tenant of advanced age would likely be more reliable and do less damage than say for example a large family of 5 with pets. It turns out that this senior gentleman not only damaged the property significantly but was extremely difficult to rehome. Those implicit biases were at play when the landlord had made the choice to rent to them. They had projected what their experience was with the elderly in their own family. They may have projected that this senior would take early bedtime, be routine or fastidious, reliable, harmless, or similar elder stereotypes based on the patterns they had seen. Perhaps if they had based their decision solely on credit history, references, and the ability to pay the full rent asked, they likely would have chosen differently.

Another trap landlords fall into the trusted information bias trap. This is the phenomenon where if a stranger tells you a piece of information you receive it with reasonable skepticism but if a friend or “trusted source” tells you the same piece of information you are far more likely to take it as a fact. When it comes to potential renters, we have seen endless scenarios where tenants were vouched for by a landlord’s friends or family, only to find out that those opinions were incorrect or unfounded. Often a landlord won’t even do their diligence about a potential tenant if they are vouched for by a trusted source. Nothing gets ugly faster than when you trust the judgment of someone close to you simply on their word and it turns out they misled you or were misinformed themselves about a tenant’s character.

Do yourself a favor, and hire a property management company to process potential rental applicants. They act as a more unbiased filter for your business and they are more accountable for the results as that is their job to audit potential renters and protect their clients. If you are reading this and saying, “Ahh, I wish I had done this before I was in the position I am now with these bad tenants!” remember this is all a learning experience and there are laws to protect you and your property too.

The Psychology of System Abusers: Why Some People Exploit Rental Agreements

In the rental market, most tenants and landlords engage in honest, mutually beneficial relationships. The landlord has a property they would like to generate income to maintain and the renter needs housing. However, a small subset of individuals deliberately exploit rental agreements, choosing not to pay rent or honor contracts. Understanding the psychology behind these behaviors can help landlords and property managers recognize red flags and take proactive measures.

Why Some People Choose to Exploit Rental Agreements

Several psychological and situational factors contribute to why some individuals refuse to respect rental contracts or pay their rent:

1. Entitlement Mentality. Some individuals possess a deep-seated sense of entitlement, believing they deserve free housing without reciprocating the agreed-upon terms. They may rationalize their actions by blaming landlords for charging "unfair" rent or convincing themselves they are owed something by society.

2. Opportunism and Moral Flexibility. Certain individuals actively look for loopholes in rental agreements and take advantage of landlords who may be inexperienced, overly trusting, or lenient. They justify their actions by exploiting ambiguities in contracts and local tenant protections.

3. Financial Hardship and Rationalization. Economic difficulties can lead tenants to deprioritize rent payments in favor of other necessities. While some individuals communicate their struggles, others choose to avoid payment entirely, rationalizing it as a temporary necessity that they may never address.

4. Pathological Lying and Manipulation. Individuals with narcissistic or antisocial tendencies often manipulate situations to their advantage. They might fabricate hardships, manipulate sympathy, or present themselves as victims to avoid fulfilling their obligations.

5. Cultural and Legal Exploitation. In regions with strong tenant protection laws, such as Costa Rica, some tenants become well-versed in legal loopholes and procedures that allow them to extend their stay indefinitely without paying. They exploit delays in the eviction process and use bureaucracy to their advantage.

The Avatar of a Rent Scammer in Costa Rica

A typical individual who engages in rental scams in Costa Rica often exhibits the following characteristics:

Background: Frequently an expatriate or a well-traveled individual who understands local legal systems and uses them to their advantage.

Personality Traits: Charming, persuasive, and adept at building trust quickly to secure rental agreements.

Behavioral Patterns: Moves frequently, leaving behind unpaid rent, damages, or disputes with previous landlords.

Financial Habits: Presents a facade of wealth but lacks verifiable sources of income.

Excuses: Cites unexpected personal or financial issues to delay payments indefinitely.

Profile of Someone Who Would Attempt to Take Over a Property

A person attempting to seize another's property often fits the following psychological and behavioral profile:

Personality Type: Highly manipulative, with narcissistic or sociopathic tendencies that enable them to exploit trust and authority.

Knowledge Base: Well-versed in local property laws, squatter's rights, and legal loopholes that can delay or prevent eviction.

Strategy: Gradually assumes control by offering to "help" manage the property, taking over responsibilities, and creating dependency on their presence.

Communication Style: Overly assertive, employing intimidation tactics, or subtly undermining the property owner's authority.

Warning Signs: Resistance to signing formal agreements, reluctance to leave when asked, and persistent excuses to avoid accountability.

How Landlords Can Protect Themselves

To prevent rental scams and property takeovers, landlords should:

Conduct Thorough Background Checks: Verify financial stability, employment, and rental history.

Require Legal Contracts: Use legally binding agreements with clear terms and consequences. Get a good lawyer to draft your contract.

Limit Leniency: Avoid verbal agreements or excessive grace periods for non-payment.

Monitor the Property: Regular check-ins and communication with tenants can help identify early signs of potential issues.

Know the Law: Understanding local tenancy laws and consulting with legal professionals can provide a solid defense against exploitation.

By understanding the psychology of those who exploit rental agreements and being proactive in their approach, landlords can safeguard their properties and investments effectively.

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.