Property Theft in Costa Rica
The idea that somebody would steal your property seems an inconceivable notion. However, in Costa Rica it can and does happen. I will point out how it happens and what you can do to minimize your risk.
The National Registry of Costa Rica
In Costa Rica all title to property is centralized and recorded in the Property Section of the National Registry of Costa Rica. The Mission Statement of the National Registry is “to protect recorded rights offering legal security”. Every property owner places their trust in the National Registry to ensure that property titles are safe and secure.
In order to file a property transfer in the National Registry the general public must rely on the services of a Costa Rican licensed Notary Public. In Costa Rica all Notaries must be licensed lawyers.
Both the National Property Registry and Costa Rican Notary Public are under the umbrella of the Costa Rican Ministry of Justice. This structure should make us all feel nice and cozy. After all it is the Ministry of Justice which is overseeing the security of our most valued possession, our property.
However, making that assumption could be a costly mistake. I was recently asked to represent a client who had discovered that a property that was recorded in the National Registry and which they had owned for twenty five years was sold out from under them. In the past I had read about isolated cases of property theft in Costa Rica but never really imagined the magnitude of the problem until I began to research it further. I talked to other victims of property theft and a specific pattern used by property theft gangs began to emerge. In most of the cases there is complicity from officials in the National Registry and the Notary Public that drafts the property transfer deed or both.
Even in those cases where there is no direct involvement of government officials there is negligence on the part of the National Registry system in perpetuating the problem due to their inability to act promptly. If a property owner is the victim of a property theft the sole recourse is to file a criminal complaint against the individuals that perpetrated the fraudulent deed. However these cases in Costa Rica take years to work themselves through the judicial system. It is not unusual for these cases to take five to seven years to resolve. As such, the property owner is victimized first by the criminals that stole the property and then a second time by the inability of the judicial system to promptly and efficiently revert the criminal acts and return the property to the rightful owner.
How Does Property Theft Happen
How does this happen. Two simple words “Public Faith” (Fe Pública). A Notary Public in Costa Rica as an officer of the state has Public Faith which has been delegated to the Notary Public by law. This means that any manifestation made by a Notary Public must be accepted as true unless proven otherwise in a judicial proceeding. Article 31 of the Notary Code states that “The Notary Public has Public Faith” …. As a result all manifestations made by the Notary Public in documents and instruments authorized by the Notary Public must be accepted as true.”
What happens when a crooked Notary Public introduces a fraudulent document into the National Registry recording system. Nothing ! – The recording officer must take the manifestations of the Notary Public as true and record the document. This in turn exacerbates the problem because the National Registry itself has administrative “Public Faith”. This means that when you request a Certificate of Title on a property recorded in the Property Section of the National Registry that report has the full “Public Faith” of the National Registry that the information contained there is absolutely true and correct. If you are familiar with the term “garbage in – garbage out” it is an appropriate fit for the scenario that I just described. If the Notary Public submits garbage in the way of a fraudulent deed and the National Registry records it and then turns around and issues a certified title report on that property – guess what you were just handed more garbage. The irony of this all is that this garbage is being validated by the Ministry of Justice which has the oversight body for both the National Registry and the Notary Public.
The victims then begin to pile up as innocent purchasers relying on the certificate of title issued by the National Registry begin to purchase the property without knowing of the initial fraudulent transfer.
The Public Notary in the Civil Law System
The Public Notary system in Costa Rica is adopted from the civil law system and it is used throughout Latin America and most of Europe. However, there are two types of Notary Systems, the territorial system and the open system. In the territorial system a country is divided into different districts and a single Notary is awarded the right and privilege that goes with it to act as the Notary for that district. This system is used in Mexico and Panama for example. Costa Rica on other hand adopted the open system. This means that all Attorneys that elect to be a Notary may do so. The only current requirement in Costa Rica is that a Notary pass a Notary Specialization course. With over 25,000 Attorneys in Costa Rica and 9,000 active practicing Notary Public’s the pool is huge. Compare that with Panama where only 23 Notaries are licensed and Chile with 325 licensed Notaries.
In Costa Rica all authorized Notaries must document all property transactions by recording the transfer deed in their assigned Notary Protocol book and then having all parties to the transaction sign the Protocol book. The Notary then has the power by law to create an extract called a “Testimonio” of that entry and certify that the signatures of all parties were placed in the original protocol book. As such, when the document enters the National Registry system it does not bear the original signatures of the parties only the manifestation (public faith) of the Notary Public that the original signatures are in their original protocol book. In my opinion this is a major defect in the system that facilitates fraudulent transactions.
How are the fraudulent documents created ?
1. The Notary Public simply lies indicating that a particular property owner personally appeared before him and sold the property. This is a case of a couple that I interviewed. The couple owned a residential home in San José and while they were traveling in Thailand a Costa Rican Notary Public indicated they were in his office selling their home. After 3 years that case is still pending resolution.
2. The Notary Public revives the dead. In another case the Notary Public simply indicated that the corporate representative of a corporation that owned some land personally appeared before him and sold the property. The problem is that the individual had died 5 years before !
3. In some cases the Notary Public is also duped by the criminals and not an accomplice in the crime. In these cases the criminals have assumed the identity of the property owner and falsified their identification documents. They then appear before the Notary Public pretending to be the property owner and producing the fake identification documents.
In one case the criminals rented a property and then assumed the identity of the property owners with identification cards and all. They then tried to get a mortgage loan from a third party using the property they had rented as collateral and without the knowledge of the property owner.
Currently, the Economic Crimes Division of the Prosecutors Office of San José has at least 400 active criminal investigations regarding property theft.
So How do I Prevent This ?
Most of the targets of property theft are absentee foreign owners in areas that have high property values.
These are some steps you can take to make your property less appealing to property thieves :
1. Keep your undeveloped property well fenced and with signs indicating a local contact number.
2. Check your property title every couple of months to ensure that no registrations have been filed against the property.
3. Check your property every couple of months to ensure that no one has taken physical possession of the property.
4. You can place a lien in your favor against the property to make the property less attractive for property thieves.
5. If you intend to purchase land and then leave the country then purchase in areas or community where your neighbors or a property administrator can keep an eye on your property while you are absent.
The Costa Rican government needs to place closer attention to this problem and implement policies and procedures to deter and punish this activity.