Posted Jun 2018
Unfortunately, in Costa Rica you are required to use an attorney and primarily a notary public for a significant number of transactions, and therefore it is very relevant to talk about Notary Publics and Attorneys. When purchasing a real estate, a vehicle, or registering a corporation, you must hire the services of a Notary Public.
Whenever I hear a story about a real estate fiasco, at some point, I always hear the phrase: “but I trusted my attorney”. Most of the time, when there is a real estate transaction, there was no independent legal advice provided to both of the parties. Most of the time, one of parties fails to seek independent legal advice and rely solely on the notary public doing the transaction.
So, let’s see the difference between an Attorney and Notary Public.
Attorneys in Costa Rica
To become an attorney in Costa Rica, it is required to graduate from Law School and to take the ethics course and exam.
In order to be admitted to law school in Costa Rica, it is only required to have a high school diploma and to breathe. Only Universidad de Costa Rica (UCR) requires an entrance exam, but it is not an entrance exam to Law School, it is an entrance exam for the University. So, there is nothing like the LSATs in Costa Rica.
UCR Law School is a public school, and it is financed by tax payers’ money. In addition, there are over a dozen private law schools in the country. In my opinion, legal education in Costa Rica is pathetic, regardless whether it is in UCR or a private law school. I went both to UCR and Universidad Latina, and they are not better than each other. Having the opportunity to go to Law School in New York opened my eyes to say that whatever education you get in Costa Rica is a third world education. They do not teach people how to think. There is no debate, only dictation. Most importantly, they do not teach people here to respect the law. A good attorney should learn how to challenge the law, not how to break it. I think the quality of the legal education in Costa Rica is reflected in the illogical legal system we have to deal with.
Once you have completed law school, and have your diploma hanging on the wall, you can then register with the Bar Association to take the ethics course and the exam. This is a joke. When I took the exam thirteen years ago I was only asked one question. They have been getting better over the years, and it has become a filter, but there is still too much to do to improve the legal profession in Costa Rica. When I took the bar exam in New York, it was two days, six hours each day. Believe it or not, they had armed guards at the doors.
At the end of the day, once people are admitted as attorneys in Costa Rica, they come out with a terrible education and no sense of loyalty to their clients. Swearing to protect the laws and the Constitution is as good as nothing.
Your attorney should provide you advice about the elements that must be considered to protect your interest in any given transaction or situation. Notary publics are not supposed to do that. So, when it comes to a real estate transaction, your attorney should make sure that you are engaging in a safe transaction and that the property you are acquiring will fit the purpose for which you bought it. The notary public does not have that responsibility, as long as you agreed on the property and the price, he will put those details in the deed and call it a day.
To become a notary public, it is required to have been an attorney for two years. In addition, it is required to have a post graduate degree in notarial law.
In 1998, Congress passed a law creating additional requirements to become a notary public. The law came into effect in 2003. Prior to that year, any person who was admitted to the bar association was automatically a notary public. After that year, the attorney needed to comply with the two additional requirements. Furthermore, the law created a new set of regulations for attorneys and a branch from the Department of Justice who would oversee the practice of notary publics (Dirección Nacional de Notariado).
Passing that law was a great step to control the notary public profession. It was a response to the great levels of corruption and fraud. Prior to the law, it was a free for all. If you think that things are bad today with notary publics, you needed to be here before that time. Currently, the government is spending millions of dollars to correct the Register of Surveys (Catastro Nacional) There is this plan that has been going on for years to organize the geography of the entire country. Costa Rica’s land area is little over 51,000kms2. At some point, the Catastro Nacional and the recorder of deeds had more than 55,000kms2 registered as titled land. That is an example of how chaotic the land registration system was.
The new law (Codigo Notarial) included a description of the functions and responsibilities of notary publics. A quintessential element for people to understand is that the notary public function is public, like that one of a judge or a police officer. What this means is that, contrary to an attorney, the notary public is impartial, and they cannot take sides. An attorney is supposed to be on your corner and protect your interest, the notary public is only in charge of executing the legal document that requires registration.
Inefficient law and conflict of interest
Section 1 of the Notary Code, indicates that “the notarial activity is a public service provided privately”. Under this premise, the law delegates on a private citizen a service that the government should provide. In this case the private citizen is an attorney, and the service is to record documents of public interest, such as:
Charters of incorporation for business structures (SAs, SRLs, EIRLs) or any other legal structures such as associations, foundations, cooperatives, religious organizations, etc.
There are also some other contracts or transactions that we will not describe here. The point is that there is public interest to record certain transactions, and the government decided to delegate the execution of those transactions on a notary public.
When you are in front of a notary public, do not think of the notary public as a private attorney, think of the notary public as clerk in the front desk of a government office. As a “public employee” the notary public cannot take sides, he/she should be impartial and cannot provide legal advice to any of the parties individually, instead it is required to provide guidance in order to successfully execute the transaction.
As noted lines above, the attorney should represent and protect the client’s interest. The notary public does not have such obligation, as a “public servant” it does not have clients. This is a complicated situation as it is difficult for a notary public to separate his emotions as an attorney or vice-versa. After all, they are also humans susceptible to temptations and errors.
In my opinion, notary publics should not be allowed to also function as attorneys. They should be limited to only provide notarial services. Since notary publics are allowed to practice as attorneys, most of the time they act as the attorney of one of the parties as well as the notary public in a given transaction. So, then you have a transaction when only one party is being represented.
This is a very sensitive issue, particularly in real estate transactions. This is why: imagine a real estate developer who tells an attorney/notary public: “I want you to do my corporation and all of the real estate transactions for the lots/homes I will be selling”. Obviously, the attorney will accept that deal as it means a lot of money. Immediately, the attorney will develop a sense of loyalty to the developer and his impartiality as a notary public will dissipate in green cash and potential buyers will be exposed to a lot of risks.
I have seen instances in which the developer has a clause in the purchase agreement forcing the buyer to use an attorney designated by the developer to do the closing documents. This is illegal. This clause has no validity. It is your right to choose your own attorney, and in Costa Rica it is customary for the buyer to choose the notary public. The first time I saw a clause like this in a contract, I was outraged as it was drafted by one of Costa Rica’s prominent law firms in San José.
In my ideal world (or in my ideal Costa Rica rather) there should be two attorneys and a notary public to execute any transfers of title. The problem with this model is that it increases the costs for the transaction to all parties. Currently, you mostly find only one attorney for the closing, rarely, you will find an attorney for each party doing closing.
So, if you are a buyer, hire your own attorney to review the purchase agreement, the escrow agreement and to also function as the notary public doing the deed. If possible, as suggested above, try to hire an independent notary public. The sellers should have their own attorney.
If you are an individual seller, have your own attorney looking at the purchase agreement and the escrow agreement, as well as to review the deed before closing. It is ok for the buyer to choose the notary public.
If you are a developer, make sure to have an attorney to help you with all the legalities of your development, but when it comes to transfer the titles, you should advice your clients to seek independent legal advice. If they refuse, have them sign a disclaimer.
Please note that I try to share three aspects in these notes:
The legal reality, which is what appears in the law books.
The practice reality, which is what happens out on the street, and it is very different from what the law says.
My personal opinion, which is the way I think some things should be done.
If you go around asking attorneys about the law, if you ask 50 attorneys, you will have 50 different answers. If you ask them about how things are done, they will tell you about the practice reality. If you ask them about my personal opinion, they will tell you that I am crazy.
Tags: legal services