Car Talk: What to Know Before Buying a Vehicle

June 2, 2006

The acquisition of motor vehicles in Costa Rica is a fairly formal process, and requires that several steps be followed.

For the transfer to be valid and recordable at the Public Registry, both buyer and seller must sign a contract in the form of an escritura before a Costa Rican notary public, who will then send it to the registry to activate the change of ownership. If this formal step is not followed – a mistake often  committed by foreigners – the transfer will not be recordable.

If you are buying a car that has already been registered and thus already has a license plate number, a title search should be performed to be sure that the vehicle can be transferred with no liens, encumbrances, infractions or other problems, and that the registered owner is the one signing it off.

If you are dealing with the purchase of a new car, or a used one that is being imported into the country for the first time, no title search can be conducted. Although you can check some things on the bill of lading and other import documents, the bottom line is that the trustworthiness of the dealer will be the main element you will need to take into account to determine if the transaction should be pursued or not.

As a rule of thumb, special powers of attorney allowing a third party to represent the seller in the transfer should be considered with much caution; although they are fully valid if made correctly and entered into a notary public’s protocol book, they are also often used for fraudulent transactions.

Another common situation in the purchase of used cars is that the seller is not the registered owner of the vehicle. This happens when people want to avoid paying transfer taxes or do not have the funds to pay them, and basically keep possession of the car without ever transferring ownership.

Buyers should be aware that only the registered owner can validly transfer ownership of a vehicle.

It is important to bear in mind that a transfer does not affect third parties – debtors, parties involved in traffic accidents, etc. – until the moment it is filed with the Public Registry. This is why it is so important to register the sale immediately after the transaction has been completed; otherwise, buyers assume the risk of having the recently acquired asset compromised by problems related to the previous owner.

If you are the seller, it is also important to make sure the transfer is recorded via the formal procedures required by law, through a notary public, as any accident involving the vehicle creates liability not only for the driver but also for the registered owner of the car.

 

For more legal advice, contact Lang & Asociados at 204-7871 or visit www.langcr.com.

 

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