Buyer Beware of the HOA

Deal Breaker or Paradise Protector?

You have finally found your dream place in Costa Rica. You love the location and the development. It is well built and beautiful, with a view to die for. So let’s do it!

By Randy Toltz

Before you pull the trigger, there is one more thing you need to dig into a bit deeper, and by a bit deeper, I mean truly research. That is the Homeowners Association (HOA), in many respects synonymous with “condominium.”

The applicable law in Costa Rica is Ley Reguladora de la Propiedad en Condominio, (Regulatory Law of Land in Condominium). It covers developments with common areas – known as “condominiums” — and it governs many, if not most, legally registered HOAs. In fact, it includes many housing developments that do not even have “condos” in them.

Double-edged sword

Thus, knowing the details of your HOA is critical. The regulatory condominium law referred to above

is a double-edged sword. It was put in place to recognize and govern the power of HOAs, and it also spells out regulations on how HOAs must operate.

Though the regulatory law is designed to protect the homeowners, if not properly written and managed, it can leave them in impossible situations, and drastically affect their future property values.

So one of the first things you need to do when you find your dream property is get all of the HOA documentation, including bylaws, meeting minutes and financial statements. Ask your realtor to provide copies.

Have your attorney review this documentation carefully. If possible, I recommend also trying to speak with a few of the other owners and find out if there are issues or situations that you need to be aware of.

What can go wrong?

To give you an idea of how badly things can go, I know of one tyrannical condo administrator who randomly imposed a fine of $500 — without any warnings — on an owner’s guest for parking a golf cart in the wrong spot. When it was challenged, the administrator started legal discussions on foreclosure. This was for a one-time offense, with no notice. It illustrates how the law, if misused, can actually grant that degree of power to the HOA administrator.

In another instance, a developer built a faulty septic system. With insufficient space on the HOA property to build a properly functioning replacement facility, the HOA would have to annex adjacent privately owned land. Under the law, to legally execute the annexation would require a refiling of the entire condo development master plan. That would require a 100% unanimous vote by the homeowners and possibly even retitling of each property.

The truth is there is almost no solution. It would cost a fortune, and put everyone at great risk. On the other hand, there is no way to sell a condo that has no legal sewage system. The homeowners are truly stuck in a legal conundrum, with no easy or inexpensive solution.

All but impossible

Requirements such as the 100% unanimous vote are virtually impossible to attain. The 100% vote must include ALL homeowners, not just those who are present at the meeting where voting takes place. Further, if someone votes by proxy at the meeting, there are legal stipulations for the proxy to be issued. If the condo is owned by a corporation, as many are, then a Power of Attorney is necessary, which must be issued within the last 30 days. The cost involved for a POA can be up to $100 or so.

The list of such requirements goes on and on. The point is, it is not simple, and the bureaucracy can make it all but impossible. Consider trying to get 120 homeowners — most of whom do not live in the community full-time — to absolutely and proactively agree on anything.

Paradise plus

Now that I have likely rained all over your parade, I will also say that a well-run and properly structured HOA can make your place in paradise even better. It can be your best assurance that the maintenance, grounds and finances of your community will always be right where they are supposed to be, and your neighbors will all be held to the same standards.

Ideally, the HOA is what enables you to enjoy what you came to Costa Rica to enjoy. The point of all of this is to say, take your time and do your homework. It can make all the difference in the outcome of your time in paradise!

Also, check out whether the person or developer selling you pura vida actually knows what it is. Your dream could be in their hands. Google the developers' names and companies and do your research. It could save you lots of distress in the future.

Get all of the HOA documentation, including bylaws, meeting minutes and financial statements.