Powers of attorney are one of the leading causes of property and other kinds of fraud in Costa Rica. The cases surrounding stealing by means of a power of attorney also are the hardest ones to fight and win. Judges rulings abound where they tell plaintiffs they are out of luck because they gave someone else permission to steal from them. Expats can lose everything to a power of attorney.
Everyone living or doing business in Costa Rica should know the five basic powers of attorney and know when to use them and, most importantly, when not to use them. Many expats give the right to steal to others without even knowing they have done so.
The rules that govern powers of attorney are found in the country’s civil code, Articles 1251 thru 1294. Mandato is the Spanish word for a power of attorney meaning “mandate.” In English, mandate means a document giving an official instruction or command. It basically means the same thing in Spanish. El mandato is a legal act where a principal or grantor authorizes an agent or attorney-in-fact to give, grant, do or perform different kinds of acts.
A mandato is also referred to as un poder, or a power. It is a contract between adults. In Costa Rica that means individuals over the age of 18 years, including foreigners. Organizations like sociedad anónimas and S.R.L.s can also give a power to people within and outside of the organizational structure. Powers can be substituted and delegated to others. They can be given to one or more persons, acting separately or jointly. A mandate can be given to someone even without their knowledge.
Powers of attorney are general, special or judicial. General means they can be used more than once, and special means they expire upon use. Judicial powers are given only to attorneys to fight legal actions in court. Special powers can be written down on anything unless they have to do with an act that requires filing at some institution like the Registro Civil, Registro Nacional or Registro de Marcas, to name a few. Foreigners can give anyone in Costa Rica a power of attorney by going to a Costa Rican consulate anywhere in the world.
The crux of a power of attorney is under what article of the civil code it is created. There are only five articles that assign rights.
One. The most dangerous, misused and abused: Article 1253 assigns a full power of attorney, called here a poder generalísimo.
Two. Article 1254 assigns a power the same as one given under Article 1253 but limited to certain kinds of business or affairs. For example, it can be limited to doing business but not to the transfer of assets.
Three. Article 1255 assigns a general power of attorney limited to conducting business affairs only. It authorizes an agent to: a.) sign contracts and agreements necessary for the conservation or normal use of different goods and property, b.) defend the possession of goods and property in court, c.) rent personal property (not real estate), d.) negotiate trade transactions in the administration of goods, e.) start credit collections, and f.) other acts necessary for the administration of goods and property.
Four. Article 1256 assigns a power but the power is limited to specific matters, for example sending an employee to change a cell phone from one unit to another or to sell a car. However, it can also be used in very special, in Spanish especialismo, affairs like assigning someone else to stand in for oneself in a marriage.
Five. Article 1289 assigns a power to an attorney — and only to an attorney — to represent a party in a legal dispute in court.
The most widely used type is the one under Article 1253. It is the most powerful one. It is the one that gets most people into trouble. This is the reason why. Article 1253 states the following, translated into English from Spanish by the legal reviewer of this article:
By virtue of an unlimited and universal power of attorney for all the business and affairs of an individual, the attorney-in-fact is authorized to sell, mortgage and otherwise transfer or create liens and encumbrances on any kind of property whatsoever; to accept or refuse inheritances, act in court, make any agreement and do and perform any legal acts which the principal might do and perform, except those which, under the law, must be done and performed by the principal in person, and those acts for which the law expressly requires a very special power of attorney.
If someone steals a property using a power of attorney created under Article 1253 and given to them by the owner of the property, no judge in Costa Rica is going to convict the thief. Some expats have gone bankrupt or died trying.
The problem is that many powers are hidden. They are buried in the constitution of a sociedad anónima or S.R.L.
Here is a very common scenario. An expat buys a company — either one that is off-the-shelf or custom made — from attorney X and transfers a property into it, not knowing that attorney X set up the company using boiler plate text giving a poder generalísimo to anyone in the post of president, secretary or treasurer. The expat makes himself president but tells the attorney to put anyone he or she wants in the other posts. The attorney puts an employee as secretary. Years pass. The property skyrockets in value. The employee, perhaps acting with the attorney, transfers the expat’s property to another company and then to another and another. The poor expat could spend the rest of his or her life and an entire retirement and never get the property back.
Powers of attorney can be canceled, resigned and even die. A power given by one person to another can be canceled by the giver anytime he or she wants. A person given a power can resign it anytime. This is not true if the mandate was given to a person by means of a stock or shareholders meeting in a general assembly. In this case, a new general assembly needs to revoke the power given or accept the resignation from the person not wanting the charge. Any power of attorney dies with the giver.