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Title Insurance ?

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Isn't there only one legally authorized insurance company in Costa Rica?

 

According to the CR constitution the government guarantees the accuracy of a certified copy of a property title extract, issued by the Registry. The particular law that states this is Article 73 of the Public Registry Regulation. (Reglamento del Registro Publico, Artículo 73, Responsabilidad del Registro por la información contenida en las certificaciones. El Registro dará fe de la información contenida en una certificación hasta el momento de su expedición. Las variaciones ocurridas con posterioridad a la hora de su expedición no acarrearán responsabilidad alguna al Registro).

 

If a Notary/Lawyer conducts the correct due diligence for the property title research, no Title Insurance would be necessary, as the true state of a properties history will be revealed.

 

I have heard that if a Notary/Lawyer is negligent in such a title search, there is an insurance fund administered by the Dirrecion Nacional Notariado (Notary College), which all Notaries are bound to pay into, which would pay proven claims for negligence arising in this instance.

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Isn't there only one legally authorized insurance company in Costa Rica?

 

According to the CR constitution the government guarantees the accuracy of a certified copy of a property title extract, issued by the Registry. The particular law that states this is Article 73 of the Public Registry Regulation. (Reglamento del Registro Publico, Artículo 73, Responsabilidad del Registro por la información contenida en las certificaciones. El Registro dará fe de la información contenida en una certificación hasta el momento de su expedición. Las variaciones ocurridas con posterioridad a la hora de su expedición no acarrearán responsabilidad alguna al Registro).

 

If a Notary/Lawyer conducts the correct due diligence for the property title research, no Title Insurance would be necessary, as the true state of a properties history will be revealed.

 

I have heard that if a Notary/Lawyer is negligent in such a title search, there is an insurance fund administered by the Dirrecion Nacional Notariado (Notary College), which all Notaries are bound to pay into, which would pay proven claims for negligence arising in this instance.

A couple of days ago (Sunday?), La Nacion had an article about Notarios fraudulenly resurrecting deceased individuals to calim (unlawfully) the real estate of others! Anyone who has been here awhile should be aware of the pitfalls of buying property in Costa Rica. As I understand it the "only" way to protect your property is with a CEDULA HIPOTECARIO -

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A couple of days ago (Sunday?), La Nacion had an article about Notarios fraudulenly resurrecting deceased individuals to calim (unlawfully) the real estate of others! Anyone who has been here awhile should be aware of the pitfalls of buying property in Costa Rica. As I understand it the "only" way to protect your property is with a CEDULA HIPOTECARIO -

Sorry about the error - to continue - a CEDULA HIPOTECARIO - amounts to the placement of a mortgage on your property, by yourself! BY THE WAY - many real estate people well tell you that you don't really need title insurnce, that it's a waste of money - IT ISN'T - My Dad bought a big place in Pennsylvania, and the State of Pennsylvania came along one day with an order for immediate eviction as they were seizing the property!! Seems the previous owner (an official with the State), had "borrowed" the building material for the place! Of course, the title insurance paid for it (of course my Dad had to get a lawyer to "convince them" that it was in their best interest to make the payment)!!

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Title insurance is commonly sold in the United States but not in other countries. For instance in Canada the lenders do not require Title Insurance. Title insurance in the states usually protects an owner or a lender against a financial loss in real property due to title defects and other issues. It is almost universal in the United States because lending institutions require it to lend money. Title Insurance in Costa Rica does not cover acts of fraud. The Notary who handles the transfer of the title, is charged with the conduct of the necessary due diligence to determine the state of the property title. The Costa Rica Notary Directorate manages an insurance fund, paid into by all practicing Notaries, which is used to pay proven claims of negligence arising from these circumstances. A Notary is personally liable for any shortfall, in settling such a claim. About the only thing Title Insurance is good for, is encroachment/lot boundary problems arising from a faulty land survey. If a person had any doubts about the reliability of an existing survey, a new one could be obtained from a professional land survey for less than $500.00 US, for a regular building lot.

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CR Expertise, Garland Bakers view of Title Insurance in CR

11/27/06

Categories: Property and Real Estate, Property Protection

Title Insurance Here Can Cause Misunderstandings

 

Skeptic's view of title insurance - an insurance policy stating not allowed, not covered, no way, no how

 

By Garland M. Baker

Special to A.M. Costa Rica

 

Is title insurance legal in Costa Rica?

 

An Instituto Nacional de Seguros ruling Sept. 29 says that title insurance was not legal in this country but that now it is and has been since July of 1997. However, insurance officials say the legality could change in the future.

 

The decree from the legal department of the insurance monopoly explains title insurance is not insurance but a guarantee or a bond. This finding is a flip flop of the insurance monopoly's last ruling in 1976 that said title insurance is an insurance and that no company in Costa Rica can sell it except for the monopoly known as INS.

 

 

The national insurance company became a monopoly with law No. 12 of Oct. 30, 1924. Only INS can sell insurance.

 

INS further stated that title insurance is an Anglo-Saxon creation and is not necessary in Latin America or Costa Rica because Roman law governs Latin countries. According to INS, the Registro Nacional and licensed public notaries make property transactions safer than in the Anglo world like the United States.

 

In 1997, a representative of a Stewart Title Guarantee Co. asked INS for a new analysis because the company wanted to sell a product called "Guaranty of title for land located in the territory of the Republic of Costa Rica."

 

The legal department of INS ruled in a decree dated July 30, 1997, that a title guarantee is not regulated by the monopoly.

 

The legal opinion said Article One of the Law of Fidelity Insurance of 1931 precludes fidelity guarantees, also referred to as fidelity insurance, from the insurance monopoly.

 

In other words, warranties and guarantees of all types are insurance but excluded by definition from the domain of the national insurance monopoly.

 

The fine print goes on to explain that a title guarantee is really a bond of fulfillment and not an indemnification.

 

Most people in Costa Rica believe title insurance is an indemnification. This is incorrect because indemnifications cover unknown futures losses where title insurance is to cover something from the past.

 

The cornerstone of title insurance in the United States is the chain-of-title. Chain-of-title means the history of all of the documents that transfer title to a parcel of real property, starting with the earliest existing document and ending with the most recent.

 

Different variations of title insurance exist around the world. However, it is principally a product developed and sold in the United States. Title insurance protects an owner or a lender against a financial loss in real property due to title defects and other issues.

 

Title insurance gets a bad rap in the United States because creditors require it to protect lending interests and force borrowers to purchase it even if they do not want it. Many believe it is overpriced.

 

Legal regulators criticize the market because it is full of commission schemes and kickbacks. The industry mimics other business structures paying high commission to brokers and/or resellers. Affiliated business arrangements attempt to legitimize kickbacks or commissions to brokers, real estate agencies and attorneys.

 

Affiliated business arrangements exist in Costa Rica too, and that is why almost everyone is hit with the "buy title insurance" spiel when purchasing property here.

 

In Costa Rica, title insurance is not necessarily insurance over the title of a property but legal insurance to help pay the legal bills to protect the title of a property.

 

In theory, title insurance according to the INS ruling guarantees one's right under Article 1038 of the country's civil code. Many factors can limit a payoff. Knowing the "what is not covered" is more important than knowing "what is covered" with any policy.

 

Is it worth it? Title insurance is full of hype and it is not the same kind of policy as most North Americans purchase in the United States. Read the fine print and understand what the warranty truly guarantees in Costa Rica. Good homework and due diligence can save buyers the additional expense.

 

Garland M. Baker has been a resident of Costa Rica since 1972 and is now a naturalized citizen. He provides multidisciplinary professional services to the international community. Lic. Allan Garro provides the legal review. Reach them at info@crexpertise.com Baker has undertaken the research leading to these series of articles in conjunction with A.M. Costa Rica. Copyright 2006, use without permission prohibited.

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Title insurance is commonly sold in the United States but not in other countries. For instance in Canada the lenders do not require Title Insurance. Title insurance in the states usually protects an owner or a lender against a financial loss in real property due to title defects and other issues. It is almost universal in the United States because lending institutions require it to lend money. Title Insurance in Costa Rica does not cover acts of fraud. The Notary who handles the transfer of the title, is charged with the conduct of the necessary due diligence to determine the state of the property title. The Costa Rica Notary Directorate manages an insurance fund, paid into by all practicing Notaries, which is used to pay proven claims of negligence arising from these circumstances. A Notary is personally liable for any shortfall, in settling such a claim. About the only thing Title Insurance is good for, is encroachment/lot boundary problems arising from a faulty land survey. If a person had any doubts about the reliability of an existing survey, a new one could be obtained from a professional land survey for less than $500.00 US, for a regular building lot.

Title insuranc does not cover against UNFILED DEEDS. Hence, what use is it in Costa Rica!

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