What is the Mortgage Foreclosure Process in Costa Rica ?
If you borrow money in Costa Rica the lender will record a mortgage on your property known as an “Hipoteca”. If you fail to pay the mortgage lender they have the right to initiate a mortgage foreclosure process to recover the debt. In that process the court will set an auction date to auction off the property.
To adequately understand the foreclosure process in Costa Rica, a clear understanding of the primary creditor is necessary, since the entire process of the property auction depends on this determination. In virtue of the above, our first task is to determine who will have priority over the property at auction among all creditors if any.
To determine the priority the party that initiates the foreclosure action must file with the court a certification of the property which will clearly indicate all the creditors that have a claim on the property and the order of priority.
Once the above order has been determined, it is necessary to read each document that is supporting the underlying credits, to establish their expiration.
All obligations whose fixed term have elapsed, will be considered expired, contrary to those debts that are established as a revolving credit line which are assumed are up-to-date and are considered as non-expired. We thus have that the expired preferential or superior degree credits will be the ones to appear as first in the priority list.
Based on those findings the Judge will issue a resolution ordering the auction and any subsequent proceedings that may be required.
Thus, depending on this determination, the rules to follow regarding notices, the auction basis, and whether the auction will be carried out free of liens or supporting other liens will be established.
Requesting The Auction
The plaintiff in the foreclosure lawsuit should attach all the necessary documentation and pertinent data of the property given as collateral. Together with the property certifications mentioned above, the certified documents of all mortgage or credit instruments recorded against the property should be attached.
Establishing the Base Price of the Property For Auction
Generally the most common way to establish the property base is that the amount originally agreed to by the parties in the mortgage document.
Court Ordering the Auction
The order of auction will be given upon request on the part of the plaintiff and based upon the documentation provided to that effect.
At the auction bidding begins at the original property basis and if there are no bidders, the second auction is ordered immediately, reducing the price by twenty-five percent from the original.
The auction is held with prior notice being published indicating the auction date. Even if there is an appeal pending in the foreclosure process the auction will be held subject to the ruling in the appeal process.
The Judicial Collection Law unifies the terms of notice and of publication. It requires notice with at least eight business days. This term applies without counting the day of the last notice, the first publication of the edict, nor the day indicated for the auction.
The auction notice will be published two times on consecutive dates in the official Judicial Bulletin.
Once the auction is carried out, in accordance to law, the Court will proceed to approve it, officially register it, and cancel all corresponding liens on the property. The Court will also order that the property be put in possession of the recipient. This task is delegated to the appropriate administrative authority and the police.
Finally, the proceeds of the auction will be liquidated in the order established hereinafter:
b) Expenses related to care, deposit, administration, and maintenance, from the date of the seizure of the property until the day the auction is final. The debtor may not charge fees nor expenses, if he was the depository of the goods auctioned. To that same effect, the executor may only charge conservation expenses.
c) Interests and capital will be paid, attending the order of the Court, when there are several creditors. If one does not appear, and the auction has not been held supporting its lien, whatever corresponds to him will be reserved.
d) The outstanding balance will be delivered to the debtor, unless there is a reason for a legal impediment to do so.