Foreclosure process for real estate in Costa Rica, specifically regarding first mortgages.
The foreclosure process involves an abridged judicial process whereby the Creditor files the Mortgage Contract Deed to the Civil Judge of the property’s jurisdiction, with a breakdown of the sums due: principal, current interest and arrears up to the present and future liquidations, process and lawyer fees, and a petition to embargo the property’s title, set a date for three consecutive Foreclosure dates and notify the Debtor. The only defense exceptions acceptable from the Debtor are: total payment has been made, the statute of limitations, lack of validity of the document or criminal fraud. The initial resolution shall order the embargo, three consecutive Foreclosure dates, three legal notices in the judicial bulletin and to notify the Debtor. The Debtor must be notified in person prior to the Foreclosure date. At the Foreclosure, bidders may participate by depositing 50% of the principal and the balance within three days after the award. The Creditor may participate in the Foreclosure by offering the receivable sum: principal plus approved interests liquidations. In lieu of bidders at the first foreclosure, the Creditor may award his/herself the property for the value of the receivable sum.
The following expenses are involved
2.1 Lawyer Fees:
Is a tiered structure based on Executive Decree Nº32493-J of 9/Mar/2005, and two scenarios:
a) Scenario 1:
A third party/bidder awards the property to themselves during Foreclosure (Court auction):
- USD3,000 dollars: @ 10% of first usd30,000 of Principal.
- USD9,000 dollars: @ 7,5% of the sum from usd30k to usd150k of Principal.
- 5% of the sum from usd150K and above of Principal.
- 5% of one-year Current Interests (to be estimated).
- 5% of one-year Arrears Interests (to be estimated).
Note: these fees would be added to the Principal pursuant to the Foreclosure.
b) Scenario 2: Repossession:
If the Creditor repossesses the property at the Foreclosure, or if there are no bidders and the Creditor decides to repossess the property, the Lawyer and the Creditor may negotiate the fees, given the fact, there are no cash proceeds from the auction.
c) The method of Payment:
The usual payment is in three equal parts: first to start the case, second to Notify the Debtor and file the Embargo and third to attend the Foreclosure date.
2.2 Other Expenses:
a) 2,5% Real Estate Property Transfer Tax/Registry fees, based on the Mortgage principal sum.
b) Various: office and operative expenses including but not limited to Registry certifications, Lawyers Bar tax stamps, serving legal Court notification to Debtor, legal notice of Foreclosure in Judicial Bulletin, assistant fees, transportation to Foreclosure, etc.