Condo owners: Pay your HOA dues
It takes more than just falling in love with a condo that looks fantastic on paper to make a successful real estate investment in Costa Rica. You'll need to set a realistic budget for your
It takes more than just falling in love with a condo that looks fantastic on paper to make a successful real estate investment in Costa Rica. You’ll need to set a realistic budget for your purchase and look around at existing condominiums, in order to find out about their HOA (Homeowners Association) fees, and also, counting the number of units in the complex will be a major help in your real estate journey.
There is a common misconception that it is hard to collect late fees from condo owners in Costa Rica and that nothing will happen if you don’t pay.
According to condominium property law, condo unit owners are jointly and equally liable for covering all of the condominium’s administrative, maintenance, and operating expenses. Additionally, the administrators are required by law to obtain the maintenance payments from the owners of the units.
So what happens if a unit owner doesn’t pay their HOA’s?
In fact, Costa Rican law controls how well condo maintenance fees are collected, and the penalties for non-payment can be as severe as eviction or property loss.
According to the 20th article of Costa Rica’s Condominium Law (Law 7933), in the event of non-payment, the defaulting owner’s unit becomes collateral for the debt, which entitles the owner to be evicted and permits the unit to be subject to a repossession process followed by a seizure of the unit by the condominium administration to cover the unpaid debts and interest.
The legislation also stipulates that unpaid fees must be paid before any other debts related to the property, thus any funds seized during a foreclosure must go toward the overdue fees first.
The Condominium Law states that any penalties or interest, along with unpaid condo fees, form an embargo against the property, which is a legitimate claim made by one entity against the belongings of another state entity before the settlement of a debt. This embargo will be recorded in the Public Registry.
A certification stating the amount owed must be issued by a certified public accountant. According to the law, this CPA certification has an enforcement order condition, which means this certification alone is sufficient to compel payment and there is no need for additional proof of a debt’s existence.
This debt may subsequently be brought up in a court of law via an executive lawsuit or a collections procedure. It is crucial for condo administrators to keep accounting books up to date and in proper order because the CPA’s certification is based on the condominium’s official accounting records.
The agreement reached at the condo board’s annual shareholder meeting where the budget is outlined, as well as the monthly HOA fees per unit owned, will also reaffirm the non-payer’s financial responsibility at the same time. These two prerequisites must be met before executing a successful executive claim.
Following the law
Less drastic measures can be utilized to recover outstanding fees as long as these sanctions are established in the condominium’s rules. Defaulting property owners can be prohibited from using common spaces like the clubhouse or pool, their voting privileges may be suspended, or interest can be added to the outstanding debt.
The majority of the time, a condominium developer is in charge of creating the bylaws and is the initial owner of all of the subdivided properties. However, the building’s ultimate authority known as HOA, can change those regulations by a unanimous vote of all owners after units have been sold (not just those present for the meeting).
The myth that unpaid condo fees cannot be recovered still exists, in part due to condo unit owners’ and administrators’ ignorance of the law.
Every action, according to Newton, has a reaction. In the instance of unpaid HOA dues, this reaction would be inaction, which might result in you losing your hard-earned property. In light of this, you should ultimately ask yourself: Is losing my home worth a monthly HOA fee? Clearly, the majority of the time the response is NO.
Some important considerations concerning the budgeting or paying of your HOA dues are:
1. Size of the neighborhood
Considering fewer homeowners will be covering the overall maintenance cost in smaller communities than in bigger ones, the greater the condo fee, the better. A gated community with a single entrance that residents enter and exit through, saves on security personnel compared to one with two or more entries. Every guard station requires a minimum of two shifts, plus additional pay for holidays, sick days, and vacation time. You should research this before buying your condo because it can result in a significant monthly expense. At the very least, please ask your Real Estate professional to provide you with the last month’s HOA statement to understand current fees. Do not accept an estimate or a guess. Outlier Legal’s due diligence practice is to request the last three year’s of shareholder meeting minutes to understand the condominium’s financials and how they may affect our clients.
2. What services does the neighborhood provide?
The cost of the condo fees is made up of the wages of the security guards, the keeping of the security monitoring equipment, any common green areas, trash and recycling, special events, the upkeep of the gate and guard house, the maintenance of the swimming pool, gym, playground, and, if necessary, the upkeep of the sewage and waste water treatment plant. The cost of security is the biggest of all and can reach thousands of dollars a month due to the necessity to cover various shifts throughout the day, as well as the requirement to include CCSS and INS for those personnel.
3. Purchasing real estate that is being built
The price of the condo fee or HOA charge will virtually never be revealed unless you specifically ask about it when buying a townhouse or condo from a developer in a gated community that is still under construction or in pre-construction. If the amenities are fully constructed, the developer will pay the security up until 50% of the community is sold, before turning over condo management to the homeowners. The communal areas won’t be handed up until the complex is completely built because many Costa Rican real estate developers save those facilities until last.
In short, do your homework with a team of reputable Real Estate professionals before buying a condominium and please pay your HOA fees once you do. As always, Outlier Legal is here to help.