New rules to help protect potential homebuyers

Real estate developers who offer future projects or projects in development must now comply with strict rules for the protection of consumers.

Those offering real estate for sale with delivery at a future date to register with the Ministerio de Economía, Industria y Comercio and show they have the financial capability to carry out the project.The decree also covers other broad types of sales to consumers. The decree specifically mentions homes and apartments as well as subdivisions and a host of other commercial and industrial projects.

Costa Rica's recent real estate history is filled with cases where developers promised certain amenities or improvements and never followed through even though some purchasers paid substantial sums.  In some cases, all the developer did was erect a gateway or a welcome center or bulldoze a few roadways.

The new rules also require that purchasers pay for the real estate or services in a proportional way rather than with all the money up front. There also are restrictions on what may be in a sales contract. For example a purchaser cannot surrender his or her rights. Some current contracts required arbitration or require the buyer to hold the seller harmless in case of problems.

Purchasers also have eight working days to back out of the deal. Previously the rule was eight calendar days to rescind.

In the past some developers set up shop, obtained an option on land and began selling lots, houses, apartments or other real estate that they did not really own and which had not yet been built. Some tried to zero finance their projects by accepting substantial sums from purchasers and using the money for development instead of putting the money into escrow.

The decree also requires a seller to provide his or her exact home address and to assume the obligation to notify purchasers of any changes allowing them to exercise an escape clause.

The rules specify mathematical calculations of the solvency of sellers and what appears to be a complex application process. If ministry employees do not think that the seller has the funds to met the obligations, they are empowered to require additional financial guarantees, according to the decree. The decree also said that the ministry will review contracts.

The ministry also has the right to file complaints against vendors who are not registered.

Developers of projects already in the works have six months to comply with the new regulations, the decree said. The new rules are updates and additions to existing laws and rules which mostly covered just time shares, said the ministry.

*Courtesy of AM Costa Rica

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