Real Estate fraud is becoming a major problem in Costa Rica
Yesterday I had a meeting with an account who was involved in a huge development project on the Pacific Coast of Costa Rica. Anyway, to make a long story short, he asked me if I knew the guy who he had meant in Costa Rica. I shook my head, and my account proceeds to go to this guy’s website. The website was professionally done, looked legit etc etc.
Then my account took me to a another website where it showed this guy had twice been indicted on fraudulently securities in the US, and he was NOW selling real estate investment securities on his Costa Rica website.
When my account asked me if there was anything I could do about it? I responded, "Not Really!"
It is well-known that Costa Rica has attracted an increasing numbers of investors and people who want to retire and/or buy a vacation home/condo over the last few years. However, this has also sparked the increase in real estate and investment scams. It is said, that as many as 30% of all real estate deals may have some type of fraudulent dealings with them.
Most who do get scammed end up leaving with a very bad taste of Costa Rica. Or they think US legal system, hire an attorney, thinking of civil lawsuit and, get their money back. The next thing they know, its two years and thousands of dollars later and are in the same boat they started with.
Before one thinks about investing and/or buying one must realize two critical fundamentals of buying real estate in Costa Rica:
- Costa Rica Law is a complexity of the Rican legal system, which is based on Napoleonic law. In other words, unless blood is drawn, “No (physical) Harm, No Foul. ” So fleecing someone out of money is not that big of a deal as it would be with someone who empties a 9mm clip into some poor soul. So if you get burned, do not expect an army of DAs and Law Enforcement to arrest the person. Going through the courts in a civil matter cost time and money.
- There are NO governing laws for real estate agents as the US has, where one has to take a test to become a realtor, agent or broker. In Costa Rica, anyone can become one and you do not have to be a resident or citizen. No permits, schooling or business license required. And because of this, agents are a dime a dozen and all they need is property, regardless of who owns it.
Getting back – you fell in love with the country, found the perfect spot to build or buy your dream home, now, how can I protect myself? Well believe it or not, there are some simple steps.
Property Itself: Make sure the property does not look abandoned or not taken care of. These properties would be "attractive" for fraud as the owners are not checking their property situation.
Residency Citizenship Cards can help give creditability to the person you are dealing with.
Residency Card: You found an agent who looks to be not a Costa Rican and want to put a proposal on that dream home, asked the agent for their residency and/or citizenship card. Both will tell you how long the person has been living in Costa Rica. You may even ask for their Passport. If they have no card that means every 90 days they have to leave the country and then come back in after 72 hours. A Residency Card will pretty much tell you that person is here to stay in CR. The longer the residency, the more creditably that person has. If the person balks at showing his or her card, time to walk out the door.
Internet Search: Go to Google and type in the persons and business name; see if any claims have come up on them.
Get a Real Estate Attorney: Costa Rica has some great attorneys that understand the system. The US Embassy in San Jose has a list of bilingual attorneys and you can go to our Costa Rica attorney directory. A good attorney will do the due diligence to make sure the property has a clean title with no liens attached. A property with a very long clean history means they have belonging to the same person for decades. Properties were the titles have changed many times in the last few years are ones that raise red flags.
Use Caution: If the property is located in zones with high appreciation values be careful. Real estate in high dollars areas like in the Central Valley areas of Escazú and Santa Ana, to North Pacific coastal areas (Guanacaste like Tamarindo) and to Mid Pacific Coast, like Jaco are the perfect places for a conman to hype their victim on, how much money they can make on this "awesome" condo project that will start construction two years from now.
When all said and done, if you take your time, don't rush things, do your homework, you will be able to have your dream home and/or make money on your real estate investment.
For more info see: Investing in Costa Rica, Costa Rica Squatters, Buying Property in Costa Rica
EDITORS NOTE: The below "ongoing" comments that started in April, 2010, are mostly associated with the controversy of Hacienda Matapalo development project, which is located near Matapalo Beach between Puerto Quepos and Dominical.
LOL ….Please pass the butter.
We can go around in circles on this forever. On one hand I think the owners of HM have proven to have the highest character. On the other hand, I think there is more chance of space aliens landing on earth in 2012 and sitting down to be interviewed by Piers Morgan than there is of HM ever putting up one structure inside the complex. From the looks of it, this thing could end up as toast. That means (potentially) all the money invested by the 300 owners is gone. Opposing opinions welcome.
LOL
They have not closed their doors. That is simply NOT true. You can call the office and speak with a live person monday at 8am. Look, I don't think the project will ever be built, but I do think the owners are trying their best. The question is, how far will their "best" get them. With the current climate for investment in overseas projects, probably not very far.
Q, you are clueless. A little lost time. Five years is not a little lost time. They kept taking money and produced nothing. Where is the money? Where are the employee's? Where are the partners? Scattered
Time to get out of what? Do they still issue refunds?
Stewart Title knows nothing of closings. They are not scheduled.
HM is/has closed their doors. They can't pay the rent, they have no money and they don't own the property. What they accomplished since November 2011 is to stall for time. Time to get out. Didn't their January newsletter say they were closing on lots again for the 200th time? A web of lies.
MS- I am thinking about ligation….I would like to come after you!
Katey…you really should think this through a bit more and base your comments on facts…the fact is, I frequently call their office on a routine basis with questions DURING business hours and have gotten the principles on the phone directly…the second point to consider is this: the relationship between Intermall77/Island resorts trust/Bernstein fell apart because their relationship fell apart….ask this question: why did Island resorts want to finance HM?…because they were large and experienced enough to do so and saw an opportunity!!!…so now that they’re out….what’s changed?….NOTHING!!!!….just a little time lost….and finally: why would Island Resorts Trust be the only company on the planet interested in stepping in???…that doesnt make logical sense….
Lastly, you can not compare HM to other failed projects without first considering: 1. Pre-sales 2. Due diligence on the lengthy and complicated permit process. 3. The Value and location of the land “owned” by the developer…
Is anyone thinking about litigation?
This is all very entertaining, but do you notice how the months of 2012 are slipping by with little or no updates from the Hacienda Matapalo folks. I wonder what’s really going on inside their offices. Do they even go to work on a daily basis? Who could they be calling asking for money? Who would give them money? If you try and get a mortgage for a cheap house in the USA, you have to go threw a bunch of hoops and that’s with perfect credit, let alone having already visited BK court. Can they really find an investor to finish their projects, when so many developments in the Carribean are sitting half done?
HELLO READERS…I must apologize for my twin brother, M.S. who keeps posting these bizarre comments on this blog…he’s been off his psych meds and doesn’t seem to realize that he keeps repeating the same nonsense again and again…jealousy is a strange thing.
Is anyone familiar with a development called Las Olas on Esterillos oeste Beach?
Looks like someone bought a large parcel, with beach rights a decade or so ago, and is now looking to sell of parcels. supposedly, he paid cash, and no debt.
Not looking to understand if this will be the latest greatest thing, just looking to see if this is a legitimate business.
Any info, contact me at bdf958@yahoo.com
Thanks!!
The truth is, short of a major miracle, it would have been MUCH better to invest in the stock market, than to toss your money towards HM. And every single person reading this, knows it. I’m out for good guys. Pick up the pieces on your own. My money is safe. Your money sits on vacant land inhabited with pit vipers that could put you in a grave in less than 2 hours. Go pitch a tent on your land. Just make sure to bring the snake repellant. I love CR, but hate what the developers have done to it.
L…that’s a well informed statement…”no money to pay the lien”…the lien is on a very large piece of real estate..it doesn’t have to be paid off…it simply places the lien holder first in line (after any primary mortgage holder) should the property be sold… That’s why it’s a LIEN!!…and just for the record, I don’t work for HM…I am simply a bystander being entertained by you guys on this blog…simply stirring the pot and enjoying all the useless chatter.
Steve Linder is a God in the world of Costa Rican investment. Notice how his land prices are 1/5th of the HM pricing and he actually has a real development to sell, not a 3-D fantasy world. I think there are a lot of people (who post here) who are so dumb, they would still sign up with HM if they had it to do all over again, just because the web site looks better. Those 3-D images are awful tempting, aren’t they? You can almost see your condo or villa. You can almost smell the sea air. You can almost taste the fresh fish. ALMOST …
There are abandoned real estate projects all over the Caribbean. What has happened with HM has happened in many other areas. It is not that the developers are bad people. It seem they simply don’t have the funds to complete the project. The result is the same for the condo and homeowners. You will possibly/probably end up with nothing. Very sad, but no one is to blame. Just be glad you didn’t pay for your property in full. That would be really difficult to recover from.
HM Homeowners. Let me correct XX. HM filed a Motion to Dismiss Chapter 11. Chapter 11 is a move to reorganize a company. There is no company to reorganize. No money to pay the lien. XX is right. DO YOUR HOMEWORK.
Thank you Steve Linder for your comment. Your properties are great. The whole experience you offer your clients is first class. XX it seems obvious who you work for. Until HM produces something solid, can deliver a title, or do anything other than stall for time everything being said is true. It makes more sense that these comments are coming from HM staff. They are probably very bored of late.
Just as I had expected…MS…you are as becoming increasingly transparent…keep the posts coming….the more you talk, the less credible you become….at first glance, you actually sound a little intelligent and informed, but you can’t help yourself…in the end, more empty and useless digs at HM…
Gee Steve…your email postings and responses are quite entertaining!…you have a very odd way of advertising…if you represent the largest and most successful project in the country, then i would imagine that you would certainly want to live up to your reputation and not waste your time on this sophomoric blog berating other projects and trying to win over clients by empty scare tactics…
I don’t consider the project bankrupt. Those are your words, not mine. I see a great future at HM. Picture the complex 35 years from now as some Fer-De-Lance slithers over the crumbling infrastructure wondering who sprung for it’s sunning bed. As far as doing something constructive, I would, but not sure where to buy snake food. The only living things at HM will have no hands, no legs, huge fangs and like to slither. Imagine stumbling on the project 5 years from now, going on a walk late at nite and then getting injected by 5 cc’s of snake venom. Yikes.
I warned many of our clients about HM. We represent the largest and most successful project in the entire country. see pacificlots, dot, com. We are glad to see that Costa Rica is now thinking about adding regulations to these projects.
Here is a blog posting I recently wrote:”
I thought after writing this response to someone who has emailed me from our website that many of our readers and owners might enjoy these emails:
Here is an email I received today and my comments below.
I just bought a 50 ft x 200 ft building lot in a fully gated and functioning community for $15,000 (with water and hydro already at the lot). How can you possibly justify the prices you are charging for lots? I’d hate to see the home prices.. LOL
Here are my comments:
I am glad you are happy with your purchase. With a quick search of the net I can see that you are a Canadian born in the 1940’s who has been to Costa Rica four times. I also see you have been quite vocal about your opinion on a number of blogs, youtube and facebook based on your user name and email you sent me.
Without additional information about what you bought versus what we sell, you are potentially comparing apples to gorillas. Do you know the difference between property zoned “Finca zoning” versus “En Condominio” zoning in Costa Rica. Is your hydro endorsed by AYA, the public utility for water? Was the flow rate, water quality and capacity of the system certified sufficient to support the number of potential homes in the subdivision? Are you aware of the large number of failed “nearly finished” projects in Costa Rica?
Are there deed restrictions, covenants or building restrictions? Have you had over 20 years of experience in development in Costa Rica and seen what happens ten years after you bought your property in a “private” gated community that you and the XX number of owners are now responsible for maintaining. Did you realize that the minute a gate is put around a development, it is no longer a municipal road, subject to any municipal standards or maintained by the municipality? Are you paying the closing costs? Is it being sold to you in an SA (sociedad anonima). Did you need to hire an attorney at closing? Is it lien free and recorded in the public registry?
Do you know what parcela minima means? Have you ever left your property unattended in a small community? Does your community offer property management, rental management, file your taxes on your behalf each year, file your annual corporate report, keep your lot clear and buildable on your behalf, have attorneys to help you with residency, help you open a bank account? Do you have a building services through the developer or do you have to find your own builder, get permits, engineering, sub contractors on your own.
Failed Sonesta Condo Hotel Project Jaco Beach
Do you have a time limit, can you build your own home if you want? Is your developer/builder debt free? Have you heard of Paragon Properties Costa Rica, Paradigma Properties, Dominical Hills or any of the many other failed developments?
I am happy you think you know so much. I am surprised that with your expertise in your 4 trips from Canada you did not mention where you had purchased. You no doubt compared all the rest of the costs in the equation, the HOA fees, any restrictions, who makes up your community, etc. I suppose you think any 18 x 15 hotel room is comparable simply based on area and the fact that there is a faucet and a bed? How many people are contributing to run your gate in your gated community (at what cost per owner) and what sort of community support do you have. What is the carrying cost of your bargain property. Would your wife want to live there when the entire community is potentially composed of no one else? Is there a community at all? Land is cheap in Haiti, does that make it a bargain too? Do you realize we are the largest residential development in the entire country of Costa Rica, I suppose therefore everyone in our development knows less than you do …. Did you know that Banco Popular has a complete website devoted to bank owned listings in Costa Rica, many in developments with hydro, electric, etc and many of those lots are both larger than you mention and less expensive as well. I would be happy to hear your comments.
To L, gabriel, and MS…you all work for Bernstein or you “are Bernstein”!!!!HOME OWNERS: DO YOUR OWN HOMEWORK, DON’T LISTEN TO THESE USELESS, OUTDATED, AND INACCURATE COMMENTS…HM WITHDREW THEIR BANKRUPTCY FILING…THESE GUYS ARE ON THIS BLOG TO ANNOY AND SCARE YOU…BE PATIENT….MS…ESPECIALLY, HE FLIP FLOPS BACK AND FORTH AND KEEPS CUT AND PASTING THE SAME OLD LINES…MANY WORTHWHILE ENDEAVORS HAVE THEIR ROUGH MOMENTS
M.S. why do you want to taunt people? Why are all of you going back and forth and not doing something constructive. They are bankrupt. People who used your retirement funds, what does your paperwork say. Were they allowed to use your funds? Check with whoever you fund is with. File complaints with the Security and Exchange Commission. Do something but don’t sit here and gossip.
MS…I guess Quepos doesn’t count as an airport!!!…the last time I flew in the central pacific coast, they were operational…oh well, they must have closed down
Well then, Gabriel; since you are so smart and know the property so well, thank god for you that you didn’t invest!!!!…you seem to have a lot of insight and info…just wondering why you have so much to say and so little to reveal about your position…Investor or not?
Why don’t you guys just ask HM for a refund based on them not getting the project done? Not sure what your contracts say, but surely you had an experienced real estate attorney review it before you signed on the dotted line.
I had invested in a condo is Los Lagos…..if anybody has any actionable advice to give, I am all ears. I agree that we need to stick together and share whatever info you learn. So if there is another forum, please let me know. I am rather inexperienced and it seems as though even legally speaking there is not much we can do at this point. Mr. Starkey has hopes that funding will come but how does one really know what to believe now. Thx.
The project does have one thing going for it. You have almost 300 people who are pretty well committed financially, who have only paid a small portion of what they will eventually owe. That’s a lot of money waiting to pour into HM. In my opinion, the problem is the ownership group. It’s as if they are trying to sell you into an Alice in Wonderland 3-D fantasy world. Wouldn’t you think with 300 people on board, they wouldn’t have been able to put the financing package together already. And why hook up with such a “shady” character to put the final touches on things. The whole story stinks, but you have to give them credit for the sales they did. 300 deposits on old farm land loaded with pit vipers 4 hours from the airport. It’s amazing.
For the record I have been pretty much everywhere on the HM property and I really don’t owe anyone any other explanation.
WAY over two years ago these people promised condo keys in two years knowing full well they had at the time zero permits and no development finance. It didn’t pass the smell test then and for my money it still doesn’t.
You do have to know the coordinates of the property to get the google earth topography and overlay the actual site map (not their ridiculous cartoon). So you are correct xx it is a little more complicated than that. What’s not complicated is correlating their timeline to possession and value in 1600 sf Tetira at roughly 150 meters asl with reality at almost $500K. It does not compute. Romney would bet 10Gs on it. Consider today 2700 sf built in Manuel Antonio killer ocean view class A condo can’t move for $490K. Even Los Suenos is soft.
No one wants to see people get hurt. I wish all the option holders the best. In time all things will become apparent. Someone else can have the last word.
OH, and I forgot…that goes for you too GABRIEL…my favorite line of yours is your reference to “google earth and photos”…and how you use them to judge the height and depth and layout of the property…WOW…you’re a rocket scientistand about as well informed and familiar with the property as MS!!!!…Love and Kisses…xx
M.S…..GO AWAY!…you’re info is useless and outdated and the more you post, the more you embarrass yourself…I have no reason to and no intent on reporting to you or anyone else on this blog any specifics about my dealings with HM…Fellow Homeowners: relax, be patient, and most importantly, be careful on this blog…as I said before, you should not trust what you read unless you have clear facts before you that tell you otherwise…Regards, xx
I will give them credit for coming clean. That is the first time I’ve seen them publish something that made me feel something other than a robot was feeding us information. They need to clean up their entire approach including the stuff they post on Twitter. There are over 300 owners and all want to leave North America and go to CR. That’s a lot of potential funding. They did an amazing sales job, but the actual construction of the project has been an abortion. And their rah-rah approach is starting to wear very thin with people, especially when THEY are inside a bankruptcy court. How are homeowners supposed to feel good about that? People would be a lot less nervous without the “spend your Christmas in Costa Rica” crap and instead getting real answers. The twitter feed should be used from this point on for daily updates to how progress is coming. And real updates, not a bunch of fluff. I honestly hope it works out because you guys will be very hurt if it doesn’t. Let’s give them one more chance.
Update: HM has posted their side of the story on their website with the January newsletter. It all sounds reasonable aside from one thing. Why would they take on such a “shady” partner? Why not do business with a more reliable source? It looks like they just took in anyone they could find to somehow finish the project off. I wish it would be built, but i just don’t see it happening. You need real financing, from a real source of money. Not a wing and a prayer guy who allegedly stabs you in the back. What they should do is “slim” down the project, dump the condos/retail center and have everyone just build their own homes. It would be a beautiful project if they didn’t have all the 3-D fantasy stuff going on. Your opinions may vary.
No one has yet reported what HM is telling clients.
If L is correct, then there is no HM. If L is mistaken, it only delays the inevitable. When a company files Chap 11 it at least opens up some avenues (Debtor in Possession finance, creditor haircuts and the like). When that option is thrown out by the court, well it’s time to move on to the next stage of loss.
MS is harsh and lacking compassion. Perhaps that is because she is actually a victim of HM’s improprieties too?
The only thing suspicious is the company you bought your villa from and their 3-D animations. Some of you guys are so dumb, you think that if you kiss HM’s a** enough, somehow they will come through and finish your villas off for you. The walking into bankruptcy court routine is a hint that that probably isn’t going to happen.
Caveat de Emptor …
When you people signed your 401K’s away, did you ever wonder what would happen if the entire project went wrong? Did you ever consider how hard you worked for that money vs. how much real backbone there was to HM? It’s almost as if the money was burning a hole in your pockets. Where were your brains?
Caveat de Emptor
Has anyone discovered a more credible location for HM owners to discuss this situation? Clearly there is some suspicious activity here. Anna McHale, has anyone contacted you?
The sky fell. You keep checking out the website. That is all they got and all they ever had. Who do you think would give them any money now.
I think there is too much negativism here. Everyone is running around saying that the sky is falling. I just checked out the HM website and they say that pre-construction pricing is ending and prices will be going up soon. Maybe the increased revenue from higher prices will allow construction to move forward.
They are Not saying they don’t own the property. Call there. Ask questions. See where you get.
It would seem logical that UTA gets the project. Hard to say what they might do. They could very easily press the reset button recap the deal by starting from scratch although the market in CR seems more than a little soft right now. That to me seems like the most likely route if for nothing else to maintain the work that has been done. Not what the option holders want to hear…
They could do a capital call with the existing owners although I would want definitive proof of funds to complete especially the vertical and most especially anything up the mountain. From the pictures and Google Earth looks to me like it gets pretty steep pretty fast.
The silence from HM is deafening. One situation where no news is not good news.
What are the previous owners of HM telling people if indeed they have lost the property?
Answer me this … If they couldn’t even file bankruptcy right, how are they going to come back and build a project that rivals the original Jurassic Park? Maybe I’m wrong, but the thing of going into bankruptcy court and then getting thrown out of bankruptcy court, is not going to endear them to future lenders. Would you loan them money?
Gabriel, you seem to know a lot. You are correct about the commercial center and anyone involved should contact the SEC. The vine says that is their downfall. By the way. They lost the property to UTA Capital when the Chapter 11 was dismissed.
This is getting interesting. @XX what exactly would MS be jealous of? Being an owner in a project that cannot even file for Chap 11 because in the eyes of the court there is no cogent plan for reorganization? That also comes from the primary creditor UTA that I am venturing a guess will inevitably own the property when the dust settles.
Anyone that bought options owns exactly that, nothing more. If HM becomes insolvent and dissolves then what? BK sale? There certainly isn’t any capital coming to the table now. As far as making HM look bad, they don’t seem to need a lot of help in that department.
Here’s some food for thought. There was to be built on the property a “commercial center”. I suppose that the entity that was the center was to lease the footprint from HM. The friendly folks at HM I understand, sold this through a PPM. Now if those revenues were commingled in any way with HM operations then the SEC might like to know. Add the IRS as a creditor in the dismissed bk filing and watch out for the falling pianos.
http://www.welovecostarica.com
VIP membership is free. Search Hacienda Matapalo and read the article.
Keep talking MS…the more you write on this blog, the more of a jealous fool you appear to be…what’s your motivation behind your words?….you obviously are not an “owner” ????…you keep pointing out to the “owners” that “they” have lost everything….so what’s your position in all of this….?…just a concerned citizen out to make HM look bad?…And make the homeowner’s nervous?…wow, you’ve got a lot of time on your hands!!!
Homeowners, stop and take a breath. Be careful about what MS is writing. When you read his long elaborate and colorful attempts to berate HM demoralize all the owners, ask yourself this question: “who is this incredulous idiot and what’s his intention?