By: Garland M. Baker B.
Exclusive to A.M. Costa Rica
Editor's Note: While this article was accurate at the time of publication, some information may now be outdated. We are currently preparing a comprehensive update. Sign up for our Alerts to be notified as soon as the revised content is live! Can a person or institution lend money anywhere in the world in any currency and tie up assets here?
The answer is yes, and it is not hard to do, but a little technical.
If the money is lent in a country where attorneys can be notaries, and they have notary books, called protocol books, as they do in Costa Rica, the process is simple.
The security interest is recorded in the official book. The notary then creates an affidavit and gets his or her signature authenticated by the Costa Rican consulate of the country where the act takes place. That signature then gets authenticated by the office of the Minister of Exterior Relations here in Costa Rica and then files the document with the National Registry.
The key is the notary book because any document written in one makes it public. Article 28 of the Civil Code requires all security interests to be public in nature to be valid in Costa Rica.
In Roman law, a notary was originally a slave or a freedman who took notes for public record. This position evolved into that of one of an attorney and notary. Unlike the United States and other countries where Anglo law is followed, documents prepared or authenticated by a notary guarantee the identity of parties to any transaction.
A security interest is defined as an interest that a lender takes in a borrower's property to assure repayment of a debt. There are three kinds of security interests in Costa Rica:
A mortgage called a “hipoteca,” a pledge or chattel mortgage called a “prenda,” and a mortgage bond called a “cedula hipotecaria.”
A “hipoteca” in Costa Rica grants only an interest in real property. A “prenda” cannot be made against real property, but anything else of value. A “cedula hipotecaria” is like a mortgage, but can be used as a negotiable instrument.
As for the currency, Article 48 of the Organizational Law of the Central Bank of Costa Rica states a loan agreement can be created in any currency of the world. Article 49 of the same law states any money lent needs to be paid back in the same currency.
For countries, like the United States and others that use civil, or Anglo law, security interests can be registered in Costa Rica if taken to a Costa Rican consulate and he or she puts the transaction in their notary book.
Many foreigners would like to buy property in Costa Rica, but do not have any credit in this country or would prefer to work with their local lender back home.
As the world shrinks, some lenders are investigating how to lend money to real estate buyers in Costa Rica, but do not know how to register a security interest here.
Some private party lenders want to get involved in ventures in Costa Rica. Many that have done so in the past but do not tie their investment with a guarantee lose the investment to the unscrupulous.
The facts are clear. It is easy to register a loan against property or chattel in Costa Rica if it is done through a public instrument recognized by Costa Rica. This simply means a document written in a notary book of a country using them, or a Costa Rican consulate’s notary book in countries that do not have notaries with protocol books.
Article first published in A.M. Costa Rica on January 8, 2007.
