A disastrous title problem on an Escazu building lot
Estimated Reading Time: 7 Minutes
More properties have a title problem than you imagine. Property owners just trust that their attorney does his job when they purchase.
Unfortunately, very few real estate agents check the property title before they list the property. At GoDutch, as well as on the American European MLS, this is a must.
Properties with a title problem will simply not be listed on the websites.
Today, I’m going to tell you about a property in Escazu, that the owners bought in 2007 through a Costa Rican real estate agent.
They purchased the lot into a corporation (Sociedad Anónima) that their lawyer constituted for this. Since they were not going to be in the country for the closing, they gave their real estate agent a special power of attorney to close the purchase in their company’s name. It was then also agreed that the agent would hold the books for them.
Marlene and Edward had bought this small Escazu building lot of 284 m2 – 3,100 sq. ft. and planned to retire in Costa Rica. Once retired, they wanted to build their home on this lot. Then, in 1012, they decided not to move to Costa Rica and sell the property. That’s when they contacted GoDutch Realty and asked us to assist in the sale.
Because all GoDutch Realty agents always check the property in the National Register before we list it, we found that this Escazu property had three problems:
1. The Visado
The survey map or plano catastrado, didn’t have the visado. That’s the approval by the municipality that the property can be built on. When we requested a visado, the engineering department of the municipality denied the visado because the National Register showed a high-voltage power line on the property.
2. A High-Voltage Power Line
The title search showed an easement of a high-voltage power line right through the lot. The power company planned the power line 30 years ago but it was never built. Nonetheless, the title showed the easement, on which construction is not allowed.
Remember, the size of this lot is only 3,100 ft2. So the easement covered most of the lot and they would not be able to obtain construction permits in the future. Their lawyer didn’t check on this easement before the purchase. So they bought the lot with a legal easement even though the power line didn’t exist. Just this legal encumbrance was enough for us to reject listing the property for sale. See below in green the encumbrance servidumbre de lineas “electrical y de paso”
2. A Mortgage
The property still had a mortgage pending when they closed on the property. The was agreed on with the sellers and the buyers would send the agent money from time to time to pay off the mortgage. They had agreed to pay him an additional $125/year for his efforts. The agent would also keep the books of the corporation.
Unfortunately, when the balance was paid, the agent never requested the documentation from the bank and the mortgage was not canceled (See green text “Hipoteca” above).
The agent was not responding to any emails or phone calls and the mortgage was behind in payments, for which the seller sent money to the attorney hired by us.
Finding out the outstanding balance and paying off the mortgage that was in someone else’s name was another steep hill to climb but we finally made it all happen.
We had a hard time, but we did find the former owners. They had paid off the mortgage which the buyer’s attorney should have done. Luckily, they still had the bank’s documents of cancellation and those were submitted to the National Register. This canceled the existing mortgage and cleared the title.
A free and Clear Title
Andres did most of the work, running around from one place to the other. It took us a full year to clear up the title problem with the electrical easement through CNFL, which is the power company. But since this is part of ICE, both companies had to send their own inspectors. This sounds easy in one sentence but I can assure you that many requests, forms, powers of attorney, and phone calls were necessary to get the encumbrance cleared from the National Register.
The Company Books
As soon as we had the clearance from the register, we had a buyer waiting to close. The seller’s agent had the company books, so we had to track him down first. It was a lot easier to just replace the books instead of hunting down the agent. But Marlene wanted to do this the right way.
The trusted agent turned up requesting the payment of $2,500 for rendered services of taking care of the property before he’d return the company books.
The best news: the new owner has his architect designing a townhouse. The new home will match the neighborhood and will soon start construction.
In the past, I have had people question if the testimonials on my websites are real or invented. All our agents always ask both buyers and sellers to write a testimonial. Some do and others don’t.
After closing, I received a testimonial from the owners of this building lot in Escazu. I thought it would make up a good story about a title problem. Below is the testimonial about this textbook example of how NOT to purchase Costa Rica real estate.
Marlene & Edward’s Testimonial
Ivo Henfling is not only amazing but also brilliant, knowledgeable, marvelous support, and an effective communicator! You will be well taken care of with Ivo as your real estate agent.
We came to Ivo asking for help to sell an Escazu property that we had purchased using a very unprofessional real estate agent. The property was mired in red tape and a complicated title problem with quasi-legal actions. Ivo not only readily accepted the challenge but drilled down through the tangle of legal issues, using his exceptional skills to clear the title and allow the land to be put up for sale.
Ivo then acted on our behalf to advertise and sell the property ensuring that we understood every step of the process and communicating frequently with us. Every email inquiry sent was answered within 24 hours regardless!
Ivo exhibited compassion and understanding with his dealings with us and we highly recommend him as a most ethical, honest and highly skilled realtor who thoroughly understands the Costa Rican market.
We welcome any inquiries from persons seeking to utilize the services of this very dynamic and effective realtor, Ivo Henfling
Before you purchase any property in Costa Rica, first read about these 10 Steps on How to Buy a Building Lot. Then hire a knowledgeable real estate agent as well as a trustworthy real estate attorney so you can stay clear of any title problem.
If you would like to enjoy the ultimate real estate experience, just like Marlene and Edward, feel free to contact us at any time.
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I DO want to remind our readers that we appreciate any referrals you can send us. Also, please remember the GoDutch Realty agents when you talk about your home in Costa Rica, we appreciate it.