Investing in Costa Rica

There are many small business owners who are expats that seem to be happy with the investment they made, from what I’ve experienced. Anything of substantial value that you don’t have control over, and even then, is super risky. The legal system is not for the faint of heart.   Almost everyone I’ve met that has made a real estate purchase of land or home has a horror story to tell.   The happiest and most satisfied people I’ve met are those who come here to live as simply as possible and those with so much money, losing it is just part of their life. Costa Rica is a place you should research for years before making any substantial investment where you’re depending on the ethics of someone else.

Bridge loans.  That was the answer to my question to the guy I met at an expat group meeting.  A Canadian.  I had asked him what he did for a living.  He explained all about it and i was going to think about it. 
The more I thought about this business opportunity and the more I learned from asking him questions the more I thought this might be a good opportunity.  I learned how one acquired a first place mortgage on the property.  I learned that the broker inspected the property and determined an approximate value of the real estate.  I learned that if one did have to file suit one could expect the court case to end in three to six months.  l learned the best contract lawyer he knew was going to write my contract mortgages.  Hmmm; not bad, the key would be the loan to value ratio and as long as one was careful with where the property was and what it was valued for, one really could not go too wrong.  right?

Well as Paul Harvey used to say on his radio station, now the rest of the story.  The rest of the story is the first time I received a proposed contract from the best lawyer he had made a mistake that fortunately I caught.  Ok, no problem. Everyone makes a mistake once in a while and as the lawyer said, he was in a hurry trying to get this done.  My first loan turned out ok.  No complaints.

The next contract went ok too.  It was on a number of hectares in the Guanacaste area.  On top of a hill overlooking the ocean owned by a company owned by another Canadian.  As the brokers ( he now had another guy working for him ) explained it, the amount of the loan was soooo small in comparison to the number of square meters involved I could not go wrong.  So I went.  I made my second loan.  And for the next 6-8 months everything was fine. 

Then the broker approached me and wanted to place a loan with this same land owner on another piece of land on the beach.  hmmm.  Well why did this guy need another loan?   I listed to the broker go on about it and somehow it made enough sense.  This time it was not a lot of land but it was on the beach and worth every penny according to mr. broker.  So I went for it too.   If your thinking to yourself, he should have known better, your right.   I should have.  But I didn't. 

Everything was fine again for three months.  Then the payments stopped. Then all the excuses and lies started.  He would Refinance in one month. Then another ad nauseam.  It turned out the borrower had defaulted on another loan I was paid off with my loan.  I was not told that by the broker.  I was told he was paying 24% interest and I was willing to loan the money for 14%.   Then the lawsuit started.  Filed, it will not surprise you by the best contract lawyer the loan broker knew who assured me he had done this type of litigation before and it would not be a problem.  In and out of it in a few months.  Until a few months later when he told me he needed to postpone the auction as he had not properly served someone who I had never heard of before who suddenly had to be served ! Only he didn't phrase it that way and I didn't know that until I had another lawyer copy the court file and review it.

Several more years into the litigation I learned that this best lawyer had apparently only filed one lawsuit on a contract before and he was pretty much clueless about what exactly his duties were other than filing a demand ( Complaint in US lingo ).  My other lawyer said, you will still ultimately win.  You will still get your loan money back and the interest due on it, if they get the beach land back.   Thanks to the Court here after the second or third appeal, I learned I will get the penalties  built into the contract upon default as well.  I had assumed those penalties were automatic because it was in the mortgage contract.  I learned later that penalties are not always awarded.    The flake landowner got a new lawyer after he got some sleeze-ball  in Chicago as his new financial backing.   The borrower took told me he was some high powered lawyer there.  Either this scum or the new local law firm they hired are experts at delaying any lawsuit filed.  They tried to reverse the trial court's initial award by selling the property a few years into the lawsuit, to a new company they created that didn't even have a name.  Just 12-15 numbers for a name.  They have now sold it twice more in 2019 to mysterious unknown un-named companies.   This will eventually require some kind of notice which they will use to appeal again and try to delay the final award.   To me this is outright fraud and unethical maneuvering by some lawer in Chicago or Costa Rica, as it is done with intent to defraud the court.   Yet, I am told it is legal.  Just barely.  However, lawsuits are not good things as Martha Stewart would say in reverse.  And personal ethics from lawyers are like gold from goose eggs. 

It is now four years into this litigation.  That broker is thankfully no more.  His greed and conduct over a loan request on the opposite side of the world was too much.   The best lawyer is almost no more on the two loans he began his education in litigation requirements and tactics. 

I have learned that filing a lawsuit in San Jose is even worse in terms of delay.  I had to file a foreclosure lawsuit an another smaller loan and it has been OVER A YEAR and the court has yet to issue an order allowing the lawsuit to be served!!  So here I sit waiting for a simple order from a judge just to start the lawsuit.   I know.  Hard to believe, but true.

So bottom line, this can be a decent business.  Kind of, if you like lawyers.  But CAUTION is the main operative word in a land where one in lucky to find someone ( especially a lawyer ) that they can trust and who really knows what they say they know.  And one can find a loan broker who isn't lying to you about almost anything ( calling it marketing ) and one isn't being manipulated by someone in order to get their own dinero out of another stupid gringo.  This country's law is not based on common law, but on the Napoleonic code.  It is different.  Procedures are significantly different.  Burden of proof is different.  Adventures in lending.