Month: May 2022

How To Prepare For Escrow

Escrow is an important element in any real estate transaction. It is used to protect both the buyer and seller throughout the transaction. Knowing how to prepare for escrow will make the process go smoothly and lead to less frustrations.

Due to the money laundering laws of Costa Rica, escrow is actually the most difficult part of purchasing a property. However, once you meet the due diligence requirements, it is a piece of cake. So put on your patience hat.Person signing an escrow document

What is Escrow?

Escrow is a legal arrangement in which a third party escrow company temporarily holds money until the fulfillment of a purchase agreement. Escrow companies are legal financial entities authorized and licensed to hold funds as a neutral third-party real estate and other dealings. Escrow companies in Costa Rica must be registered with SUGEF.

What is SUGEF?

“SUGEF” stands for “Superintendencia General de Entidades Financieras” (Superintendent General of Financial Institutions). This organization audits financial institutions such as banks, savings and loans, and employee credit unions, as well as institutions or persons that handle large money transactions such as real estate agents, escrow companies and even property management companies to ensure they are complying with federal and international financial regulations. SUGEF is similar to the Office of the Comptroller of Currency (OCC) in the United States.SUGEF headquarters in Costa Rica

How to prepare for Escrow

Have your documents ready! Every transaction must be supported with the following documents. Each individual depositing funds into the escrow account needs to provide the following items: All documents must be in English.

  • Copy of your passport or Costa Rican cedula for locals & driver’s license. It must be a color copy and full page of the picture and signature page. Even all four corners must show of the passport and drivers’ license.
  • A “Know Your Client” form filled, printed and signed with ink. This form will be supplied to you by the escrow company. Your signature must match exactly the same signature you have in your passport.
  • The latest tax return/tax filing/tax assessment. This is to comply with FATCA law (U.S Citizens) or CRS Reporting Standard for other nationalities.
  • Bank Verification Letter issued by your bank indicating the age of the account and average balance. If the letter is generated outside Costa Rica it must be apostilled by the Secretary of State
  • Documents that support the origin of funds to be received by the escrow company. This may be, but not limited to, proof of property sale, salaries, dividends, inheritance, or any other document considered to support where funds have originated.
    • Please consider if the origin of funds are salaries and/or savings from salaries you must provide bank statements of the last 6 months showing funds available to cover the transaction.
    • If the origin of funds are dividends payments you must provide proof of ownership of shares*/financial statements (certified by public accountant) or tax filings from the corporation*/and last 6 months of account statements where funds are allocated.
    • If the origin of funds is a real estate sale you must provide all closing documents (sale deed and closing statement) and proof of payment (incoming wire to your bank account).
    • If the origin of funds is inheritance you must provide legal document that confirms inheritance or beneficiaries* and last 6 months of bank statements where funds are being held.

Example of an escrow document

*Legal and financial documents need to be certified and apostilled for the bank’s purposes.   

Please also take into consideration that if the funds are transferred from a company/corporate bank account, the escrow company will need the incorporation documents. Documents coming from outside Costa Rica must be apostilled by the Secretary of State.

When wiring funds they must come from the same accounts you provided for compliance purposes. If you plan to send the initial deposit and final closing amount of funds from different banks or financial institutions, all documentation from each bank/financial institution must be supplied in the beginning process to make the final closing as smooth as possible.

All escrow companies will require you to send documents via a secure link or portal to ensure the safety of your documents.

The last word on setting up escrow in Costa Rica

Escrow companies may seem like a lot of paperwork and headache but they are truly advantageous to both buyer and seller. Escrow tracks the entire purchasing process and gives the buyer a verification when everything is completed. For the sellers, the escrow company ensures payment. Both parties are well represented and taken care of. The process does not have to be difficult. Good preparation and a solid understanding of the process will make the transaction go smoothly.

The Time To Visit Costa Rica is NOW!

Masks off, travel advisory lowered, and spectacular deals on flights…The time to visit Costa Rica is now!View of the Pacific in Costa Rica

Just this past Wednesday, (May 11th, 2022) President Chaves mask mandate removal decree was published in “La Gaceta”, which is a requirement for decrees to become laws. You no longer need to wear a mask in an enclosed space. Masks are only required for medical personnel and patients requiring medical attention.

In April, the U.S. Department of State lowered the travel advisory for Costa Rica to a level 2 of 4. Prior to the pandemic Costa Rica was at level 2. Lowering the travel advisory is positive news in regards to tourism and helping the Costa Rican economy recover. During the first quarter of 2022, Costa Rica has recovered 63% of visitations registered in the same period of 2019.

Speaking of visiting… There have been some amazing deals on flights lately. The list below shows all non-stop flights to Liberia, so you can be on the beach in no time at all!Jet plane flying

Non-stop flights from Europe to Liberia

Edelweiss Air: year-round flights from Zürich (ZRH).
KLM (SkyTeam): seasonal flights from Amsterdam (AMS).

Non-stop flights from the US to Liberia

Alaska (Oneworld): year-round flights from Los Angeles (LAX).
American Airlines (Oneworld): year-round flights from Austin (AUS), seasonal flights from Charlotte (CLT), Chicago (ORD), year-round flights from Dallas-Fort Worth (DFW), Miami (MIA) and seasonal flights from New York City (JFK).
Delta (SkyTeam): year-round flights from Atlanta (ATL).
Frontier Airlines: year-round flights from Orlando (MCO).
JetBlue: seasonal flights from Boston (BOS), Los Angeles (LAX) and New York City (JFK).
Southwest Airlines: seasonal flights from Baltimore-Washington (BWI), Denver (DEN) and Houston (HOU).
Sun Country Airlines: year-round flights from Minneapolis (MSP).
United Airlines (Star Alliance): seasonal flights from Chicago (ORD), year-round flights from Denver (DEN), Houston (IAH), Los Angeles (LAX), New York (EWR) and San Francisco (SFO).

Non-stop flights from Canada to Liberia

Air Canada (Star Alliance): seasonal flights from Montreal (YUL) and Toronto (YYZ).
Air Transat: seasonal flights from Montreal (YUL) and Toronto (YYZ).
Sunwing: seasonal flights from Toronto (YYZ).
WestJet: seasonal flights from Calgary (YYC) and year-round flights from Toronto (YYZ).

If that’s not enough to draw you in… Netflix has been featuring Costa Rica’s incredible wildlife in new TV shows. The show “Wild Babies” presents white-faced monkeys, sea turtles and jaguars all learning to grow up in the Costa Rican Jungle. Most of the content was actually filmed in Santa Rosa National Park which is only an hour and 20 minutes from Playas del Coco & Playa Hermosa! Netflix’s “Our Great National Parks” show features Costa Rica’s very own Manuel Antonio National Park. This lovely documentary talks about the importance of 3 toed sloths along with all the incredible flora located in these ecological havens.

Last but not least, The Costa Rican Institute of Tourism is partnering with the Outdoor Adventure Show, at the International Center in Toronto, Canada to attract adventure loving Canadians to this beautiful country! Canadians are an important factor for tourism in Costa Rica because Canada is the 2nd country generating more visits to Costa Rica, after the United States. The goal is to promote Costa Rica as the ideal destination for all those who love adventure.Tour boat in Costa Rica

The list goes on and on for why the best time to visit Costa Rica is now. The easiest way to find out why, is to jump on a plane and check it out! See you on the beach soon and contact me if you have any questions or are interested in purchasing a place in paradise.

Transfer of Presidential Power and New Decrees

 

On Sunday May 8th, the transfer of presidential power (traspaso) took place. Rodrigo Chaves assumed his position as the 49th president of Costa Rica. Chaves signed 3 decrees that day, one of them being the removal of the mask mandate!New president eliminates the mask mandate

Other decrees included the removal of mandatory vaccination of employees in the public sector and declaring a national emergency due to the hacking of the Ministry of Finance or “Hacienda”.

The new president has put his trust in the Costa Rican people to use logical measures in regards to Covid-19. Removing the mask mandate does not mean stopping the fight against Covid-19 but instead letting the people decide what works best for them. The use of masks and mandatory vaccination will now only be enforced for front line public health care workers.

Rodrigo Chaves also made mention of the additional decrees he hopes to put into place within the coming weeks. The new president plans on strong reforms in the financial management of the Costa Rican Electricity Institute (ICE). He hopes that these reforms will result in a reduction in electricity rates.

Chaves also assured the Costa Rican people that they are working on the processing of decrees that would have the objective of reducing the prices of rice and agrochemicals. As well as decrees to lower costs in areas such as medicines and agricultural supplies.

During the traspaso, Rodrigo Chaves gave a speech to the people of Costa Rica. The following are a few excerpts that stood out and gave an overall feeling of his ideals and what he wants to accomplish during his time as president.

“The outrageous waiting lists of the Costa Rican Social Security Fund, these waiting lists have subjected thousands of Costa Ricans, not only is it a systematic violation of the health system, but they are humiliating for the people for whom medical care means life or death”.

“I assure the LGBTIQ population that we are not going to go backwards in recognizing the rights that they have achieved throughout their struggles for equality and appreciation for diversity, struggles that I respect and that I guarantee will continue unscathed in their victories”

“To public officials I say that the responsibility of their positions bears the weight of giving the country the commitment and dedication to serve their fellow citizens and support them, but they know that abuse and exploitation will not be tolerated.”

Chaves also made mention of his opposition to environmental policies. He confirmed he will not ratify the Escazu Agreement which was put in place to protect environmental defenders.

Many dignitaries attended the event. Such as the King of Spain, the President of Colombia, the president of the Dominican Republic, the president of Panama, the president of Haiti, and the president of Morocco. As well as foreign ministers, vice presidents, ministers, vice ministers and deputies from El Salvador, Guatemala, Cuba, Japan, the United Kingdom, Argentina, Mexico, Canada, the United States, Ecuador and Peru were present. Even the first indigenous cacique women of Costa Rica attended the event alongside representatives of the Costa Rican indigenous ethnic groups.Ceremony of the transfer of presidential power

Chaves has a long road ahead of him taking over an economy that is currently in decline and rising with foreign debt. Hopefully his strategy with decrees will be beneficial and effective.

Cyber Fraud Attacks

Cyber fraud attacks are on the rise. As many of you may have heard, Costa Rica’s Ministry of Finance (also known as the tax administration called Hacienda) was hacked. But the Ministry of Finance isn’t the only one at risk… Criminals have also started hacking email accounts and sending fraudulent wiring instructions to clients involved in a real estate transaction.

Ministerio de Haciendo Costa Rica logoFirst, a little more information on what happened to Costa Rica’s Ministry of Finance. On April 17th 2022, the Ministry of Finance noticed malicious activity and proceeded to shut down the servers. Conti, a group of Russian based hackers, claimed to have hacked the Ministry’s website and taken 1 terabyte of taxpayers’ information. Ransomware had infected the Ministries system encrypting all the information and restricting access. Conti requested the government of Costa Rica to pay them 10 million dollars by April 23rd 2022, or they would release the information. Costa Rica has refused to pay the bribe.

The Ministry of Finance is still working on getting all their servers up and running. The Virtual Tax Administration (ATV) and Customs Information System (TICA) platforms are still out of service. Many obligatory tax filings are being postponed while the systems are being repaired and reinstated. For more information or if you have any concerns, reach out to your Costa Rican accountant or attorney for help.

Image depicting a cyber fraud attacks

Now let’s go over how to best protect yourself during your real estate transactions. Cyber criminals have been hacking the emails of lawyers, brokers, agents, etc to divert funds to the criminal’s bank account. The usual method used by these criminals is by sending an email with fraudulent wiring instructions. These emails unfortunately look very legitimate but there are ways to protect yourself.

One of the best ways to protect yourself is to always call the escrow agent and verify the instructions before sending any wire. Be skeptical, if any information looks off, do not hesitate to call the escrow agent. Keep an eye out for changes in the bank, branch location, account name or number. Also take a very close look at the email address, some hackers are smart enough to use a very similar email address but may change one letter in the email address.

It is important to verify wiring information by telephone (through a secure number) or in person to guarantee the information is accurate and legitimate before sending any money.

image with the word security

Here are some important tips to always keep in mind when doing a bank wire transfer:

  • Communication is key, always stay in direct contact with your escrow agent and make sure to ask for their phone number at the beginning of the real estate transaction.
  • Be wary of “updated/revised” wiring instructions. Always call your escrow agent and personally confirm wire/disbursement instructions. Do not agree to forward wiring instructions to other parties unless these instructions have been verbally confirmed.
  • Do not open attachments from unknown sources or click on any links in emails that look off or strange. They could contain viruses or allow hackers access to your computer.
  • Always confirm the routing number/swift code, the account name that is entitled to the funds, and that emails with sensitive information were received with the escrow agent via phone or in person. 
  • Always use a secure password for all your online accounts and change it frequently. Only use secure wifi networks.

By following the above advice you can greatly reduce the chances of being a victim of a cyber fraud attack.  This digital age comes with many new risks and problems but with the right amount of vigilance and skepticisms you can better protect yourself against fraud. Most importantly, never hesitate to call or meet in person with your lawyers, escrow agents, brokers, or real estate agents. Although it may not be as convenient as an email, you can keep yourself safe throughout your real estate transaction.