After several years of prosperity, where real estate deals were being closed on a daily basis, the global economic downturn affected Costa Rica real estate markets.
Not only was there a considerable decrease in real estate deals, but also the availability financial services for developers was severely hindered and processes became much more complicated.
This situation has caused not only investors to back off investment deals they had taken for granted, but it has also made it much more difficult for developers to complete their projects and meet their obligations.
There are some developers in Costa Rica where the breaching of contracts is part of their strategy in ‘get rich quick’ schemes.
Case in Point
The real estate development company Zeta Group or Inmobiliaria Zeta, headed by Cesare Zingone, first began construction of a large condo development in Jaco Costa Rica. The project carried the Ramada brand, which was exciting for prospective investors.
The Jaco Bay Ramada Condominiums and Resort of Costa Rica was to feature six local commercial suggested for a medical center, bank, spa, beauty salon, convenience store and laundry and the total investment in the condominium complex, hotel and commercial will be more than $100 million in a total area of 1,000 square meters.
In a classic bait and switch, once investment money began to roll in, the Ramada flag was removed and the name changed to Jaco Bay. The same was done on the development side not delivering what was promised.
The company’s CEO, Cesare Zingone is actively involved in several law suits both to property buyers that did not get what they were promised, but also by real estate agencies that sold Zeta condos to clients on good faith, only to have Zeta Group refuse to pay commissions, in some cases over $300,000 in commissions are still owed. Inmobiliaria Zeta has had numerous issues in the past and the owner Cesare Zingone, has had his fair share of incidents both nationally and internationally.
Consequences of Breached Contracts
There are a few projects in Costa Rica that have had a long history of intentional contract breaches and the legal system benefits those companies that can afford a legal team to drag it through.
Not all developers that have breached contracts are doing it intentionally, many developers have had numerous successful developments but avoiding those with a bad history or reputation is key.
Now that financial suppliers are lending less money to buyers and, cash flow has decreased considerably causing certain projects to slow down or even to paralyze projects.
This situation has left many investors and buyers with nothing other than a piece of paper stating that certain amount of money was paid and that completion and delivery of what they paid for was due for a date that in many cases has already passed.
To make the situation even worse, in some cases the contracts that were signed with the developer were drafted by such party’s attorneys and in many opportunities did not even undergo reviews by third party counsel for the buyer and contain language that offers extensive protection only for the developer. Sometimes, language used is so vague that a situation of breach by the developer is almost impossible to exist.
In conclusion, if you are going through a situation like the ones described here, seek legal advice. In these cases, one must be focused on putting pressure on the developer.
It is important to act quickly when a breach of contract has been detected, because your investment in many cases may quickly change hands making the possibility of recovery much more complicated.
For more information on legal matters please contact GLC Abogados which is an experienced business law firm with a global acumen and a resolute focus on its core sectors of business development, investment, relocation, offshore structures and trade. With a unique understanding of the relationship between law and business, the firm advises individuals, start ups, corporations, financial institutions and multinationals in legal matters related to doing business in Costa Rica.