In Costa Rica, it is very common to find pre-construction or pre-sale projects. Such units are sold before construction has actually begun. In most instances, developers sell units in advance of construction in order to raise the capital necessary to complete the project. Pre-sales also serve as a critical tool for demonstrating viability to lenders or investors. It is not uncommon for pre-sales to occur when the property in question generates a high level of demand.
Prior to 2008, Costa Rica became an unfortunate victim due to a glut of these pre-sell projects that fell through as a result of the real estate bubble. When banks began to freeze credit, numerous retirees, foreigners and investors lost thousands of dollars.
Although a developer may be completely solvent and have a sufficient amount of capital, the lender may still decide to pull approval for lending. This is more frequently the case in Guanacaste and Jaco, where there tends to be a large number of condo projects that remain unfinished. As is the case with any investment, it is always important to conduct due diligence and make certain you work with a respected, professional real estate broker who will keep your best interests at heart.
When you are considering the purchase of a pre-construction unit in Costa Rica, it is extremely important that you review the overall plan for that particular community.
Although a map is an important element, the plan is much more. It should detail all aspects of the relevant project, including:
- Land use
- Goals and policies
- Type of housing
- Open space and recreation
- Use of natural resources
- Facilities and services
- Environmental impact and preservation
It is also important that you take the time to review the Covenants, Conditions, & Restrictions for the community, also known as the CC&Rs. The CC&Rs regulate the way in which the property and the unit are required to be maintained. They also specify who is responsible for relevant matters of maintenance.
When purchasing a pre-sale property in Costa Rica, you should be aware that the CC&Rs are often not properly recorded on the title by the developer. In order to be certain of what you should expect, it is imperative that you insist upon reviewing the title in person. This will provide you with the opportunity to verify the CC&R’s registration. You can also gain critical information regarding disclosures related to the conditions of approval for the pre-sale as well as existing land use located adjacent to the property. You should also be aware that enforcement for the CC&Rs is the responsibility of the homeowner association or the property owner. While it can be a bit time-consuming to cover all of the elements related to pre-construction law in Costa Rica, working with a professional real estate broker in Costa Rica can keep your interests protected.