Costa Rica Private Detective Discusses Costa Rica Real Estate Scams and Frauds

Oct. 11, 2010 - PRLog -- What is the old adage? "If it sounds too good to be true...." Most people who buy real estate or invest in developments in Costa Rica are probably victims of a civil tort known as a fraud in the inducement.

A fraud in the inducement requires proof of: (1) a false statement of material fact;
(2) that the defendant knew or should have known was false; (3) that was made
to induce the plaintiff to enter into a contract; and (4) that proximately caused
injury to the plaintiff when acting in reliance on the misrepresentation. (See Johnson
v. Davis, 480 So. 2d 625 (Fla. 1985); Bradley Factor v. United States, 86 F.
Supp. 2d 1140 (M.D. Fla. 2000)

An examination of the elements to prove fraud in the inducement can quickly be made based on the offers to purchase buildings that have yet to be built and offered at pre-construction prices which normally are substantially less than the post construction price.

Consider that prior to building anything in Costa Rica the developer needs to have acquired all of the necessary permits to build. In most cases this process can take a long time. Many of the municipalities in Costa Rica will issue letters that indicate they will consider issuing the requested permits if certain criteria is met by the petitioner. Of course these letters are in Spanish and the way they are worded give the appearance of permit approval, when in fact it is only an indication that local governing authority will consider issuing the permits after all the criteria has been met. After all is said and done, it is at the sole discretion of the municipality to grant or deny the permit. If the permits are issued no problem, if not there is very little the developer can due but navigate the court system which can take years. If the developer cannot obtain the necessary permits he along with all of those that invested in the project are dead in the water.

Speaking of water, a developer cannot bring water, electricity, sewage nor in any way alter the land without first obtaining the necessary permit for each independent of the other. Although requests for permits can be made simultaneously, granting of the permits are done at different levels and departments within the governing authority. What many developers do is obtain the necessary permits for one unit and advertise that all permits have been issued for the project when in fact permits for only one has been issued,

Misleading? Absolutely! Once the unwary investor transfers his money to the developers account, the investor soon begins receiving additional request for money for one thing or the other. The investor sees little or no progress in the development and eventually learns that the project has run out of money and the development will not be completed.

Is this sufficient to constitute a fraud in the inducement? Yes it is! Can you recover your investment? Yes you can if there is anything left to recover. One thing that can be done is to bring an action against the developers in Costa Rica attaching the development. By doing so the developer cannot dispose of the property without first settling the lien. In the Costa Rica Court system this could take years.

How to avoid losing your money. Prior to investing in Costa Rica, one would be well advised to conduct a due diligence investigation prior to signing a contract and/or transferring money. Cody Gear, visit http://www.codylgearandassociates.com for more details,  who specializes in this type of investigation has saved many investors both money and heartache. Gear is the only board certified fraud examiner in Costa Rica and has been investigating real estate fraud in Costa for a number of years.

Remember "caveat emptor" (buyer beware). It is much easier and economical to do the due diligence prior to than after the deal.

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Cody L Gear and Associates, visit http://www.codylgearandassociates.com for more details, is a charter member of CID and have been providing investigative services in Costa Rica and South America since 1997. We have the experience and education to deliver verifiable, quality information to our clients.