Oh sweet IDA land. the forbidden fruit of real estate in Costa Rica. We’ve all heard the stories about people who have “bought” IDA land and ended up with a great property, titled in their own name, at a quarter the market price. It’s risky, but can pay off big time. How have others done it successfully, and how can you?
First, a little history about IDA land. IDA is a government organization in Costa Rica that takes “unused” land and redistributes it to “settlers”. As an example, consider the story I heard about how the IDA land in Cabuya was acquired. The story is that much of Cabuya was a very big cattle farm owned by an absentee landlord. One day when he became sick, the manager of his farm moved the cattle off the land, at which point, the land became “unused” according to Costa Rican law. That opened it up to squatters, who fenced off portions of it using barbed wire as quickly as possible and moved onto it legally. By the time the owner recovered, his land was lost. Whether this rumor is true I can’t confirm, but it’s an example of what’s possible in Costa Rica. Not all IDA land is given to squatters, some of it is given to poor people who apply with IDA and are awarded the land to settle and improve. However the general consensus is that much of the IDA land in this area was obtained by squatting.
The squatters are given a title to the land as part of a contract with the government to work and improve the land for a period that is generally 15 or 20 years. The title in the Registro Nacional contains a restriction stating that it cannot be sold.
So now YOU want to buy this land from them before their contract has expired, and they want to sell it. The general idea is that you pay some money down now, and in exchange, they sign a contract agreeing to sign over title to the land in the future once their contract is up and the “no sell” restriction is removed. Sounds reasonable, right? Well actually no. here are four ways I know of that you can get screwed in the deal:
1. The Costa Rican government doesn’t want this type of transaction to happen! When you enter into a contract like the one described above, you are basically attempting to circumvent the law and defraud the government. Judges have ruled that such contracts aren’t valid and have set a precedent that they won’t allow them, and have made many examples of foreigners who tried to do this by ruling against them. This means that if the Tico seller refuses to honor the contract, you will not only lose the land, but you will lose your money too! The bottom line is that buying IDA land is a handshake deal between you and a person who may very likely have (legally) stolen the land from the previous legal owner. If you want to do that, you have bigger cojones than me.
2. Normally when you buy land in Costa Rica, the Option to Buy contract is registered with the government, which means that the seller can’t sell the land to someone else at the same time. A contract to buy IDA land is a private contract, and there’s nothing to prevent the seller from selling the same IDA land many times to a variety of suckers who will all lose their money.
3. Each piece of IDA land is normally part of a larger mother finca. Any piece of IDA land that’s part of the original mother finca can end up in a lawsuit that will cause ALL the individual pieces of IDA land to be unable to be released from IDA, and you won’t be able to get your title even if the owner wants to give it to you.
4. If the seller dies before the IDA term has expired, his or her children definitely do not have to honor the contract, and I think most likely will not. You may be seen as the greedy foreigner who tried to take advantage of the deceased parent’s poverty and financial desperation by offering far less than the market value of the land, and they will have no sympathy for you.
So if after reading and understanding this, you are still either a fool or a gambler and want to buy some IDA land anyway. How can you improve your chances of success? Here are several tips:
1. Find Ticos or others living here who know the seller personally and ask about his or her reputation. Most Ticos are wonderful, honorable people. If you can satisfy yourself that your seller is a good person with a good reputation, then obviously it’s more likely he or she will follow through on his part of the bargain.
2. After the deal, move onto the land immediately and start to occupy it. Costa Rican law often favors the side that has possession, so you’re more likely to win in court if you’re living there with your family. But also consider how you’re going to get a building permit, apply for utilities, or sell the land later without a title.
3. Buy from a seller who seems healthy and is unlikely to pass away before the IDA contract expires.
4. Create the contract so the seller’s immediate heirs. wife, husband, kids, etc sign it as well and agree to honor it. If they won’t sign, then they probably don’t want their parent to sell to you at this lower than market rate. Having all these signatures still won’t make it a legal contract though.
5. Pay as little as possible up front, and put the rest in escrow. In some cases, you can help the seller by agreeing to pay for the legal costs to get the IDA property released from its restrictions early. There are cases when IDA land can become fully titled before its contract expires, such as if the seller can prove he had possession for many years before the IDA contact’s start date, through a special legal process done by a knowledgeable attorney.
To sum up, consider two final points. First, while you may have heard many stories of people who have successfully bought IDA land, you have never heard from the many people who have left Costa Rica broke and in tears, having lost their life savings. Second, ask yourself why someone would sell their land for much lower than the market price when they could wait a few years, get their title, and sell it for much more. Either they are desperate and you’re taking advantage of that, or they have no intention of giving up their title.
That being said, there are also legitimate reasons to buy IDA land and ways to minimize your risk. The most common reason to buy IDA land these days is because it comes with a deal for a beachfront property. In order to “buy” this type of land, the way it works is that a trusted lawyer will find someone in his family to take over the IDA title of the land, and then will get it titled and sell it to you. You’ll make a contract with that person to give it to you for quick cash… usually something like $10,000. Many people have done this and as long as the person is someone trusted, there shouldn’t be a problem. It’s a great deal for the person who does this for you… they get $10,000 for doing almost nothing. Legally, they could ignore the contract and keep the land, but you could probably tie them up in court, sue you lawyer, and cause a lot of problems and delay them for years, so they’d rather take the $10 grand. So why pay them so much if it’s so easy? The main reason is that a Costa Rican can only title as piece of IDA land ONCE in his or her life. So you’re buying that right from them.
Contact me for some very trusted attorneys who can help arrange this for you.