1995 law finally having impact
Slogans like this dot the landscape because now landlords have the right to jack up rents and evict those who won’t pay. This says ‘No eviction without a fight.’
Many lawyers have made a fortune over the last year desalojando, or evicting people from their happy homes and businesses because of a change in the rental laws which happened over eight years ago.
Much of the tearing down of buildings you see throughout Costa Rica, especially in the older communities, is also due to these events.
Before 1995 Costa Rica’s rental laws were designed to protect tenants 100 percent, which made it almost impossible for a landlord to throw out even the worst deadbeats or get a fair rental price for the property. These old laws were created in the early part of the 1900s because the world wars made for a difficult time for most Costa Rican citizens, and the Costa Rican government felt an obligation to protect them. A stricter law, protecting landlords, was passed in 1988, but was almost immediately found unconstitutional by the Sala IV, Costa Rica’s constitutional court. So everything went back to the way it was in the old law.
The phrase representing the legal entitlement called derecho de llave, or key right was widely used in Costa Rica. This legal right was commonly sold, representing a tenant’s time in a location. This was especially important to businesses where a key right could be worth tens of thousands of dollars, and in very special cases, hundreds of thousands.
The new law that changed everything appeared in La Gaceta, Costa Rica’s public records bulletin, Aug. 17, 1995. This law was almost a complete re-write of the old law, giving important new rights to landlords.
Many tenants had rented places for decades. In those cases, the contracts were automatically changed to four-year leases with one more month added to the term for every year a person was in a property — to a maximum of 12 months. For example, a person renting under the old law for 12 or more years would get an extra year over and above the mandated four-year term. This meant all old rental contracts ended on Aug. 17, 2000, and turned into rental agreements based on the new law with the legal three-year term, which ended this past Aug. 17.
Since the new law states contracts are automatically renewed if a landlord does not give a tenant at least three months notice, most of the landlords rushed to evict old tenants in the first months of 2003. This flurry of evictions is now flowing out of the courts, as full eviction judgments against old tenants. But many more are still in court with tenants fervently fighting how they were notified of the eviction. This is the key legal point to the process.
Most of these evictions have prospered, as one can instantly see by driving almost anywhere in Costa Rica, and in downtown San José especially around the areas between Calle 2 and Calle 10. Much to the unhappiness of those business owners paying almost nothing in rents for years, their buildings are falling like flies making homes for parking lots and, in some cases, nice, new buildings.
As with most laws in Costa Rica, there are those who try to circumvent the rules. One new trick is for a renter to lease a place and pay one month’s rent and then stop paying until such time as he or she knows the official eviction notice is signed. Then the renter just moves out quickly after months of free rent.
In this kind of a case, a not too well known legal tactic is to request that a judge make an inventory of the rent-avoiding tenant’s belongings in the initial suit and to hold those personal assets as guarantee in the court proceedings. Since most of these people do not want their TV and boom-box stereo system confiscated, they hit the road quickly without going to the end of the legal proceedings.
Depending on which side of the fence you are on, landlord or tenant, these new laws which have taken many years to begin to enforce, may be good news or bad news. Whatever your perspective, the laws are changing the face of the country and creating investment and business opportunities for those who have a long-term vision for Costa Rica.