In Costa Rica, it is common practice for sellers, developers or brokers to request prospective buyers to sign an offer, letter of intent, or reservation agreement, often accompanied by a deposit or reservation payment. However, signing preliminary documents or transferring funds before conducting proper due diligence can expose buyers to unnecessary legal and financial risks. These informal instruments frequently lack the detailed protections required for a safe transaction and may create binding obligations without adequately regulating the parties’ rights and responsibilities.
After identifying a suitable property or real estate project, the first and most important step in any acquisition process should be conducting thorough legal due diligence. This review confirms the title status of the property, identifies liens, encumbrances, easements, limitations, zoning conditions, municipal compliance status, and verifies that the registered owner has full authority to sell. Only once the buyer has a clear and complete understanding of the legal condition of the property should any binding document be executed.
The appropriate instrument to regulate a real estate acquisition is a duly structured Sale and Purchase Agreement, not a letter of intent or reservation agreement. A properly drafted Sale and Purchase Agreement establishes comprehensive and enforceable terms and conditions, including purchase price, deposit structure, due diligence period, closing terms, allocation of expenses, and remedies in case of breach. Informal or abbreviated documents often fail to address these essential elements, creating uncertainty and increasing the likelihood of disputes and risks, or leaving important matters to subjective interpretation.
Equally important is the proper handling of deposits and purchase funds. Rather than delivering funds directly to the seller, buyers should strongly consider opening an escrow account with a reputable escrow agent acting as an objective and independent third party. The escrow agreement should clearly define the conditions under which the deposit will be released, refunded, or applied to the purchase price. This mechanism provides transparency, certainty, neutrality, and protection for both parties throughout the transaction.
In conclusion, buyers should exercise caution and avoid signing preliminary commitments or transferring funds before completing due diligence and negotiating a comprehensive Sale and Purchase Agreement. Engaging legal counsel from the outset and using a structured escrow account significantly reduces risk and ensures that the acquisition process is conducted with legal certainty, transparency, and adequate safeguards for the parties involved.