Horror Story #1 - Don't give away your ownership rights!

In 2007, the online newspaper - A.M. Costa Rica printed an article entitled, "The Gringo never even saw it coming." The article highlighted the dangers of being naive and too trusting --even of your lawyers.

The Gringo, a U.S. Citizen, had returned to Costa Rica to visit a pacific coast villa he had earlier purchased only to find his lawyers living in the villa which now legally belonged to them.

Despite the Gringo's effort to sue for possession in court,the thieving lawyers won! How?

The Gringo owned the property through a Sociedad anonima, or S.A., the Costa Rican version of the Corporation. This in and of itself is a prudent and commonly accepted way to own and transfer property. However, the mistake was that he allowed perfect strangers to occupy all the corporate officer positions.

Sociedad anonimas, referred to as S.A.s, have a constitution or corporate charter, four directors, a president, secretary, treasurer and a fiscal, stock certificates representing stockholder ownership and six legal books. Most law offices will use their own staff to occupy some or all of these positions. This can be both pragmatic, and dangerous at the same time. Any or all of these staff members could be in possession of a full power of attorney. This gives them the legal right to assign, transfer or sell your assets.

As an owner of an S.A., you must be careful not to assign all the officer's positions to a lawyer's staff, or any strangers for that matter. If you purchase an "Off-the-Shelf Corporation," i.e., a corporation that is already formed, and registered with the Registro Nacional, you must be sure the officers of the shelf corporation are replaced with trusted associates. The only exception will usually be that of the "Fiscal," who will often be a member of your attorney's team. The Fiscal's responsibility is to assure compliance with Costa Rican laws and payment of annual corporate taxes in a timely manner.

Be sure that no one you don't absolutely and implicitly trust holds an unlimited power of attorney. The most dangerous and oft abused power of attorney is Article 1253. This mandato assigns a full power of attorney, also known as a poder generalisimo.

Although the Gringo ignorantly thought he held control of his property, that was never the case. The ownership transferred from the original law firm to a new law firm which proceeded to occupy all the officer positions with members of their own staff along with the dangerous poder generalisimo. The Gringo had nothing to show that he was ever in control. Ownership was transferred through legal maneuvering. The Gringo was out in the cold, while "legal crooks" occupied his villa. Through his naivete and lack of due diligence, he never even saw it coming.

-------------------------

Further educational reading:

What are your choices for setting up your company structure?

http://www.amcostarica.com/041006.htm

Has your lawyer been disciplined and/or suspended by the Colegio de Abogados?

http://www.abogados.or.cr/info_general/quejas/suspencion_disiplinaria.php?search=3

Mortgage Certificates can protect you from fraudulent property transfers
http://www.amcostarica.com/041904.htm