The Foreclosure Process in Costa Rica
ForbesCR’s success lies in the country’s new legislation. In November 2007 Costa Rica’s Legislative Assembly enacted a new policy for the collection of secured and unsecured, defaulted debts. Loopholes in past legislation permitted delays in the foreclosure and collection processes. Essentially, credit grantors had no recourse. It could take them anywhere from 8 months to 2 years to foreclose on a property. With the new legislation, only paying the debt in full will prevent a foreclosure from proceeding, reducing this period to three, max four months total.
The mechanism is amazingly simple. Three auction dates are set for each property in foreclosure. In the past, the second and third auction dates were set only after the outcome of the first auction proceeding. Because nothing, other than payment in full, can stop foreclosure proceedings, the three dates are set up front, eight business days apart.
Another notable amendment in the policy has provided for court appointed representatives, specialists in foreclosure proceedings, to conduct the auctions. The process is no longer a judge’s dominion as in the past. In addition, for the first time ever, municipal government entities can collect on real property tax payments in default where past legislation did not allow them to exercise this option. When taxes are in default, the property is in danger of foreclosure.
Four years ago, unemployment was at a low level, interest rates were down, and the Dollar to Colon exchange was cheap. This led to banks issuing millions of dollars worth of credit for real estate, personal loans and credit cards. Today, the global economic situation has hit Costa Rica to an extent where unemployment has risen, the interest rates are adjusting higher, and banks are limiting their lending and readjusting credit limits. The new legislation allows banks to attach the defaulted credit card and personal loan debts as a lien on real estate thus another danger towards foreclosure.
Foreclosures in Costa Rica are at an all time high and increasing due to the agility of the new legislation. Since May 20, 2008, the date the law went into effect, a thirty percent increase in foreclosures has been documented. Spring of 2009 there was a fifty (50%) percent rise in foreclosures. Never before has there been such an opportunity in Costa Rica to purchase real estate at below market prices.
The mechanism is amazingly simple. Three auction dates are set for each property in foreclosure. In the past, the second and third auction dates were set only after the outcome of the first auction proceeding. Because nothing, other than payment in full, can stop foreclosure proceedings, the three dates are set up front, eight business days apart.
Another notable amendment in the policy has provided for court appointed representatives, specialists in foreclosure proceedings, to conduct the auctions. The process is no longer a judge’s dominion as in the past. In addition, for the first time ever, municipal government entities can collect on real property tax payments in default where past legislation did not allow them to exercise this option. When taxes are in default, the property is in danger of foreclosure.
Four years ago, unemployment was at a low level, interest rates were down, and the Dollar to Colon exchange was cheap. This led to banks issuing millions of dollars worth of credit for real estate, personal loans and credit cards. Today, the global economic situation has hit Costa Rica to an extent where unemployment has risen, the interest rates are adjusting higher, and banks are limiting their lending and readjusting credit limits. The new legislation allows banks to attach the defaulted credit card and personal loan debts as a lien on real estate thus another danger towards foreclosure.
Foreclosures in Costa Rica are at an all time high and increasing due to the agility of the new legislation. Since May 20, 2008, the date the law went into effect, a thirty percent increase in foreclosures has been documented. Spring of 2009 there was a fifty (50%) percent rise in foreclosures. Never before has there been such an opportunity in Costa Rica to purchase real estate at below market prices.
