Family Office Capital in Costa Rica: What Protects Client Money

Family offices and fund managers who handle other people’s money ask a sharper question than most lenders: is Costa Rica a sound place for family office capital and client funds, and what actually stands behind a loan? No country and no loan is free of risk. What a fiduciary can do is check the legal framework, the security on each loan and the risks that remain. This guide sets out those checks using Costa Rica’s own laws.

Equal legal standing for foreign capital

Article 19 of Costa Rica’s Constitution gives foreigners the same individual and social rights and duties as Costa Ricans, with the exceptions and limitations set by the Constitution and the laws. Foreigners are also subject to Costa Rica’s courts and authorities. For a foreign fund, that means a loan made here is enforced through the local legal system, which is why experienced local counsel matters.

A public property registry

Under Law 3883, the purpose of Costa Rica’s National Registry is to guarantee the security of registered property and rights with respect to third parties by making them public. Before a loan closes, title, ownership and existing liens can be checked in those records, and a mortgage securing the loan is registered there.

Mortgages that can be enforced in court

Under Law 8624, the Judicial Collection Law, a properly registered mortgage is an enforcement title over the mortgaged property (article 8), and the law sets out the court process for enforcing it, including auction. Enforcement takes time and legal cost, so it is a last resort rather than a plan. Our article on what happens in a foreclosure in Costa Rica explains the practical side.

US-dollar contracts

Law 7558, article 48, makes contracts and obligations in foreign currency valid, effective and enforceable. The same article lets a debtor pay in colones at the exchange rate on the payment date, and article 49 lists exceptions that must be paid in the foreign currency. How those rules apply depends on the structure, so they belong on the list for the fund’s attorney.

A country inside the OECD

Costa Rica became the 38th member of the OECD on May 25, 2021, after an accession process that began in 2015 and included in-depth reviews by 22 OECD committees. Membership guarantees nothing about any loan, but it is part of the country picture an investment committee will want.

The security on each loan

The country framework only helps if each loan is built well. On GAP loans the lender holds a first-lien position, any existing liens are paid off before or at closing, and loan-to-value is conservative: around 30% or less preferred and 50% maximum, using a valuation GAP determines with lender input and acceptance. Title, ownership, access, realistic value and the borrower’s repayment plan are reviewed before a lender decides. See how private loans are secured under Costa Rica law.

The risks that remain

• Borrower default and late payment.
• Valuation: a property may sell for less than expected.
• Liquidity: selling a property takes time.
• Legal and enforcement timelines.
• Currency and country risk.
• Concentration, if an allocation sits in only a few loans.

We cover these in more depth in the real risks of private lending in Costa Rica.

Compliance for family office capital and funds

A fund that lends in Costa Rica as an organized, habitual activity will likely need to register with SUGEF under Law 7786. Registration is an anti-money-laundering requirement, not an authorization to operate. Structures must also respect Costa Rica’s rules on financial intermediation (Law 7558, article 116), and each fund must follow its own home-country rules for client or retirement money. GAP walks capital providers through the SUGEF process and connects them with independent Costa Rican attorneys and compliance professionals.

For the advisor placing the capital

Much of the money that reaches these loans is not placed by the person who earned it. It comes through a wealth manager, a trustee, a family office principal or an advisor to a high-net-worth family, and that person carries the awkward part of the job: recommending a country most of their clients could not find on a balance sheet, and being answerable if it goes badly.

What usually makes that recommendation difficult is not Costa Rica. It is the prospect of having to become an expert in a foreign registry system in order to defend a small allocation. That work is ours, and it is done before anything is put in front of you.

What GAP handles

We find the borrower and we assess them. We check the property at the National Registry, establish what is already registered against it, and arrange for the mortgage to be recorded in first position in the lender’s own name. We establish what the property is realistically worth and set the loan well below it. We prepare the documents, take them through the notary, and stay with the loan afterwards — payments, records and the conversation if anything slips.

What reaches you

A file: the property, the amount, the rate, the term and the loan-to-value, with the reasoning behind each. Your decision is to take it or leave it, and no file is ever pressed on anyone. If you want your own counsel to read the documents, say so and we will send them across — a number of advisors do, and it is a sensible habit rather than a sign of doubt.

On scale, honestly

Costa Rica is a small country. There is a steady supply of sound property-backed files here, and there is not an unlimited one. An advisor who needs to place a very large sum quickly should know that up front, because we will not manufacture files to fill an allocation, and a lender who is in a hurry to be fully deployed is the one most likely to accept a file they should have refused. Deploying gradually is normal here and it is usually the better outcome.

We are lending consultants, not licensed investment advisors, and nothing here is a recommendation about whether this suits a particular client or portfolio. That judgement stays with you and their professional advisors. What we can do is make sure that when a file reaches you, the work behind it has already been done properly.

Frequently Asked Questions

Is it safe to lend client money in Costa Rica?

No investment is risk-free, and GAP does not promise a return. What a fund can verify is the legal framework above, the first-lien security and loan-to-value on each loan, and whether its own mandate allows the investment.

Can a foreign fund lend without Costa Rican residency?

Yes. Nationality and residency do not restrict who can lend through GAP. SUGEF registration depends on the lending activity, not the lender’s nationality.

How does a fund put a larger amount to work?

By spreading an allocation across many smaller first-lien loans under rules the fund sets. See how a fund allocation works with GAP.

Who does a family office or fund speak with at GAP?

Glenn handles conversations with funds and professional capital providers: glenn@gap.cr.

Request the Institutional Lender Briefing

For a two-page overview of loan terms, allocation structures, the review process, the legal framework and the risks, request the Institutional Lender Briefing. To talk first, email Glenn at glenn@gap.cr.

This article is general information. It is not an offer of securities or an investment product, and it is not legal, tax or investment advice. No return, placement pace or outcome is guaranteed. Legal references are summaries of Costa Rican law as published in SCIJ; confirm how they apply with qualified Costa Rican counsel.

WhatsApp us at +506 4001 6413 to get started, call or email info@gap.cr.

Article by Glenn Tellier (Founder of CRIE and Grupo Gap)