Property Titles: Can they be made more secure?
Summarized from articles published in the Tico Times
Thomas A. Burke, Real Estate Attorney
Expropriations, land disputes, creeping fences, displaced boundary markers, overlapping titles, title fraud, dishonest professionals, squatters, you name it, the Costa Rican real estate market has suffered the consequences of all of these in recent times. The boom in tourism related real estate, particularly which is fueled by foreign investment has made these problems a matter of the daily press for years now. No less harmed have been numerous Costa Rican citizens, from professionals to the poorly educated, who have lost their savings through investing in real estate, usually for a home or a small business, and found that the Government does not, nor can it, guarantee a sound property title to everyone taking the leap to invest in real estate in Costa Rica.
Isn't it time something is done about it? Well yes, of course. Is there a cure-all for these problems? Not likely, but there is a very ambitious program backed by the Inter-American Development Bank (IADB) being implemented by the Costa Rican Government (GOCR) that promises to revamp the entire legal framework for real estate holdings in Costa Rica. The official name is "Cadastre and Registry Regularization Project". It intends to modernize the whole Real Property Records system, clarify property rights and implement an efficient property tax system. Funding is set for a total of $92 million guaranteed by a law passed in December 2001 approving a loan agreement with the IADB for $65 million with the remaining $27 million to be invested by the GOCR.
How did all this get started? Well it wasn't local public outcry, or Costa Rican government initiative either, as far as I can tell. Actually, one night at a U.S. Embassy reception (a few years ago already) an official in the know explained that the Program could be seen as a consequence of a fair number of U.S. citizens having for over decade suffered the vagaries of fuzzy law and poor enforcement involving squatter invasions of property and/or government expropriations. Some of these investors insisted on their U.S. Congressmen taking a hand in the matter, which resulted not only in political pressure through diplomatic channels, but also in our case as it were, a directive to the U.S. Treasury Dept. to promote the IADB program for Costa Rica we are talking about today. Mind you, this type of program is not unique to Costa Rica, but from what I have heard it may be the most comprehensive in the region. And, although it could be seen as an imposition, I haven’t met a Costa Rican official involved or informed, yet, who doesn't agree it is high time we cleaned out the skeletons from the closet and stepped into the 21st century on this subject.
To get a better handle on why property or land titles in Costa Rica, although generally clear and secure, too often show up lacking in precision or are in conflict with other recorded titles, we need to understand that there is no actual national cadastre or composite of land surveys. This, despite the fact that by law there is a National Cadastre Dept. that processes tens of thousands of plats or plot maps every year. What? Hold on, what I mean is that Costa Rica does not have any form of "mosaic" of all the individual plats or surveys relating to all the individual recorded titles in the Public Records Office. There are a few areas that have been surveyed comprehensively in the past, such surveys are now very outdated, and a few partial municipal efforts in this regard and that is it. So, now it isn't too hard to understand how unscrupulous operators can take advantage of this relatively "blind" side of the justice system in particular and attempt and often succeed in recording less than clear titles to property that may not entirely belong to them.
So, enter the age of Geographic Information Systems (GIS) that can handle the amount of data and updating necessary to support a comprehensive and transparent property record system for one. Other tremendously significant applications in tax administration, public infrastructure, disaster prevention and relief, and environmental monitoring, to name a few will be powered up also.
The Project is being planned for implementation through four main components which include an aerial survey of the entire country, a comprehensive reform of all laws affecting real property rights, a national program for alternative resolution of property disputes, and a support program including personnel training and computer equipment for the 81 municipalities that collect property taxes in Costa Rica.
By far the largest investment of the Program will be the formation of a digital data base of all property surveys, including private plots and public lands. This will integrate aerial survey photos, possibly along with satellite imagery for cloudy rainforest areas, in a GPS referenced geographic information system. This system will allow for cross referencing of all property titles and the later inclusion of land and environmental management data, among other government uses. This first major phase will undoubtedly reveal thousands of cases of title duplication and/or overlapping that will be addressed in first order by out-of-court arbitration in an attempt to swiftly resolve conflicts that will arise regarding property ownership. Many cases however will probably require lengthy court suits when parties cannot come to an agreement.
Just as important is the implementation of a serious and comprehensive municipal property tax system. This tax is probably one of the most under collected taxes in Costa Rica which has notoriously lax enforcement of tax laws in general. It is reasonable to assume that many infrastructure problems in Costa Rica, such as poor local roads, lack of solid waste programs, and the general underdevelopment of local municipal services can be better addressed with an evenly applied property tax. A property tax that is based on real values and includes most if not all owners should also serve as an incentive for greater civic and political involvement by the taxpayer with a real interest in what happens to his/her taxes.
Although far less in terms of financial investment, the Program includes a thorough analysis and proposal of reforms to all property related laws, some of which have strongly divergent principles depending on the time of enactment and the interests defended. This will force the nation to come to grips with some ideologically charged issues of land tenure, possession, use and ownership. If the resulting "rules of the game" are clear, they will improve the country’s overall investment climate.
Perhaps the most idealistic, yet very practical, portent of the Program is the environmental management possibilities it opens. The clear identification of public lands, particularly protected areas, coordinated land use data bases, and a more transparent regulatory system applicable to each type of public and private lands, will unburden and empower both government agencies and non-governmental organizations in their efforts to improve and implement environmental protection programs.
The issues this Program implies and will bring to public debate are many more than those briefly touched upon in these lines. Most significant will be a determined and politically sustained effort to overcome a national development weakness in the area of real estate legal security and leapfrog into a position of regional leadership in a matter of great social, economical and environmental consequence.
Being that the Program doesn't have an active constituency, it has moved along by shear inertia it seems, with the IADB quietly nudging it along now and then, and no current strong political support. Besides the IADB pressure, only two other factors seem to have worked to keep it on track. They are, on the one hand, the few government consultants hired to run the Program since they, after all, have a personal interest in its continuance. And on the other, count in a definite shove now and then from the private sector represented by the Union of Chambers umbrella group and CR Bar Association, particularly, volunteer lawyers putting in the time and effort required to keep at least some public oversight and participation in the mix.
Currently the Program is over budget, years behind schedule and has been cut back to cover only about half of the country with the hope of a new loan by the IADB held out to finish the Program if the first half is completed and functioning. What this means in terms of whether we will eventually have to go with two different legal systems for real estate in Costa Rica will make for interesting reading in the future.
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Thomas A. Burke, LL.M.