New Company Aims to Defend Customers
The old problem of property fraud in Costa Rica has a new – and high-tech –adversary.
A recently launched Costa Rican company says it can not only supervise its clients’ property registration in the National Registry, but also intervene to stop any unauthorized changes before they take place.
Called the Private Property Registry (PPR), the company aims to be a sort of mirror of the government-managed National Registry.
The company carries out nightly checks – via the Internet – of the daily activity in the National Registry, looking for unauthorized changes to its clients’ registry information.
If a change is detected, PPR sends a representative to the National Registry office in Zapote, in western San José, to present documents to freeze the change before it happens.
The firm also accompanies its clients to court to help them fight a potential act of fraud.
While not necessarily common, property theft in Costa Rica can be surprisingly brazen. Crime rings of corrupt notaries and lawyers have been known to steal and sell a piece of property by submitting just a few sneaky forgeries to the National Registry.
Costa Rican law doesn’t require the buyer or the seller to be present for the Registry transaction to take place – a signature will suffice – and victims often don’t find out their property has been sold out from under them until much later.
Eric Scharf, the president of the board of directors of PPR, called the company “the first integrated system of protection against these crimes.” It was inaugurated July 24.
“It’s the first private (property) registry in the world, and the first in Costa Rica,” Scharf said.
The business was made possible only a year ago, when the National Registry began selling nighttime access to its database to companies like PPR, said National Registry Director Dagoberto Sibaja.
Other companies are also using the nighttime access to monitor clients’ properties for potential fraudulent activity, but no other company offers to stop that activity, according to Scharf.
How It Works
When clients sign up with PPR, they prove their identity with photo identification, fingerprints and signature. The clients’ properties are then registered with PPR. Clients also sign over a power of attorney to the firm that allows it to contest registry
Accounts Director Miguel Jiménez added that it’s a special power of attorney that allows PPR only to challenge unwanted registry changes: “We’re not allowed to sell or move or dispose of the property in any way,” he explained.
Every night, PPR uses the Internet to log on to the National Registry database and analyze the daily traffic in the registry to check for changes in its clients’ records.
Any requests for changes to clients’ properties are immediately flagged. First, PPR sends an automatic e-mail to its client, alerting him or her that someone is trying to change the registry of the property.
Second, since it takes two business days to carry out any change in the property section of the National Registry, PPR is able to swoop in and, with the legal authority granted to it by its clients, dispute the registry change before it is completed.
That effectively freezes the process, giving the property owner a chance to find out what is going on.
PPR then guides the customer through that process and, if necessary, through any subsequent legal proceedings.
In the event that an incident does go to trial, PPR said it provides its clients with an electronic paper trail that can be used in court as proof of a member’s intentions.
For these services, PPR charges $0.77 per registry check, which, with one check every 24 hours, comes out to an annual fee of $281.05 per registered property.
Sibaja, the National Registry director, commented that the system probably isn’t fool-proof. For example, though it takes two days to complete a change in the National Registry, in theory a change could be requested at the very end of the first day and granted at the very beginning of the second day, depending on the registrar working on it.
“Some of them are very efficient,” he said, also noting that although any requests for change must be addressed in a maximum of eight days, there is no minimum or “waiting period” for a registry change.
Still, Sibaja said the National Registry welcomes companies like PPR to the fight against property fraud.
“Considering the situation we have today where there is so much property fraud, it’s good that these private companies are offering the service,” he said.
All properties registered with PPR will be searchable through the company’s Web site at www.propiedadsegura.com. Scharf said this has the added advantage of being a deterrent, because potential property fraudsters will likely avoid properties registered with PPR.
The service is so new – and unique –that several real estate professionals consulted by The Tico Times had never heard of it, though they were positive about the concept.
“It sounds like a good option to me,” said Federico Guzmán, a real estate lawyer with the firm Ingeaa Consultants, noting that title insurance companies like Stewart Title can charge 7% of the value of the land they are insuring.
Likewise, Mauricio Castro, president of the Costa Rican Chamber of Real Estate Agents, said it sounds “very interesting,” though he cautioned that private companies need to be watched as well.
Others are more skeptical.
“It seems to me that property owners who pay to have such a service may be a little too paranoid,” said Catherine Fitton, an owner and broker with Jacó Premier Realty.
“The amount of real estate scams and people actually having their properties stolen from them is relatively little to have to utilize services such as that.”
PPR said there were 200 allegations of property fraud reported to the Judicial Investigation Police (OIJ) last year.
One of the country’s more astounding property fraud cases came to light in 2005 when a group of 23 people – including five notaries – were arrested in connection with more than $5 million worth of real estate fraud (TT, Nov. 11, 2005). The group would find unoccupied properties, forge documents and change their official registry with the help of the notaries, and sell the properties to unsuspecting investors.
Scharf said that 500 property owner s have already signed up for the private registry. PPR operates with a staff of 15 out of the sixth floor of the MercedesTower on Paseo Colón, in San José. The company’s capital is100% Costa Rican.
For more information, e-mail email@example.com or call 248-3355.
Reform to Unite Registry, Cadastre
While private solutions are becoming more common in Costa Rica for protecting against property fraud, a project is under way to make them less necessary.
A massive reform of the country’s National Registry and cadastre seeks to survey and map the country and link up the two public records, making property fraud more difficult, say officials in charge of the program.
Now, the property section of the National Registry is just a series of documents, with no graphic depiction of the land those documents represent. Meanwhile, the cadastre, which is supposed to be a complete map of all the properties in the country, is just a pile of discrete site plans – like puzzle pieces that no one has put together yet.
Part of the reform that is under way involves putting together all those puzzle pieces by creating a detailed aerial map of the country. The reform would then link the physical depictions of properties on that map with the paperwork found in the National Registry, providing another layer of transparency – and security –for property owners and potential buyers (TT, July 27).
“I think it’s key for the North American investors,” said Claudio Ansorena, head of the Regularization of the Cadastre and Registry program.
Ansorena added that while national property registries and cadastres are key parts of Latin property law, many foreign investors are used to the Anglo common law system, in which there is no national property registry and local property registries don’t hold so much legal clout.
Other aspects of the reform include the valuation of properties to help local municipalities collect more tax money and the establishment of local zoning plans in 11 municipalities in the northwestern province of Guanacaste.
The reform will cover 65% of the country and cost $92 million, $65 million of which will come from an Inter-American Development Bank loan.
The first phase of the two-phase program, surveying 600,000 to 800,000 properties in the northwestern province of Guanacaste, northern province of Heredia, eastern province of Cartago and Caribbean province of Limón, is expected to be completed by the end of 2008, Ansorena said.
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