by Ivo Henfling
In all my years as a Costa Rica real estate agent, I have had very few clients ask for Costa Rica title insurance. North American buyers are used to take title insurance when they purchase a property but a European or Costarican client don’t even know what title insurance is.
When you purchase a home or land in Costa Rica, you should be purchasing land that is free and clear from any claims, debts or other impediments. Costa Rica's national registry operates under the Torrens system, so with the proper steps you can be certain that your title is free and clear. For sure you don't want the headache of a bad title, so make sure you are informed about your options.
In Costa Rica, we did not even have Title Companies until in 1997 I think it was, Stewart Title opened their offices in Barrio Amon in San Jose. It was a smart move because the same people owned the Century 21 real estate franchise for Costa Rica and the Banex Bank, a private bank in Costa Rica that now does not exist anymore.
Through these companies, they had a great triangle of business while they could convince Costa Rica developers of taking title insurance on the properties they were offering, so the US buyer could feel more confidence in the development. For a long time, it was a great sales tool, until some developers did not deliver and the trust agreements were found not done properly and buyers' deposits were not protected as they should have been.
During the boom, of course other Title companies saw an interesting market and several other title companies started to offer their services. And with title insurance, they started offering other services, like escrow services. They will hold money for you until closing and they will hold title for you in trust if you are a mortgage provider or have other reasons for holding a property title in trust.
I am personally not very crazy about their services because I believe more in a good and thorough title search that your attorney and your real estate agent can do for you if you hire the right ones. A title insurance company will not insure a bad title, so that might be a hint for you if you want to play it safe. Most of the real estate lawyers we recommend on our website carry title insurance with different title companies.
For those who do not understand what Title insurance is, allow me to tell you a bit more about it.
Title insurance or title guarantee is meant to protect you and your Costa Rica real estate from these (uncommon) occurrences:
• Invalid documents executed under expired or non-existent owner
• False assumption of identity of the legitimate property owner
• Falsification of documents, legal power, and other papers related to the transfer of property title.
• Other financial burdens charged to the previous property owner.
• Hidden heirs of previous property owners
• Documents executed by minors
• Invalid documents delivered after the death of the previous owner.
Be aware though that taking title insurance on a property sold to you by a Costa Rica developer, does not particularly assure you the development will be finished. Make sure you do your due diligence on the developer and their financing before you put any money down.
Some Title companies offer complete packages of services for you, offering several services like escrow, closing, title guarantee and others. Personally, due to the burocracy of these companies (and because they will charge me for my commission check and for your check of the leftover balance) I suggest you use a well known real estate specialized attorney – notary public with an SUGEF approved escrow account and you’re bound to be a happy customer.