Our first blog entry explained why most Costa Rica condominiums are non investable until they prove otherwise. This second entry drills deeper. Certain building profiles carry far more structural financial and legal danger than others. If you recognise any of the categories below think twice before wiring a deposit.
OLDER BUILDINGS WITH DEFERRED MAINTENANCE
Concrete lives a hard life in tropical salt air. Rebar corrodes elevators rust and flat roofs crack after a decade of blazing sun and monsoon rain. In North America codes require reserve studies to set aside capital for these inevitable failures. Costa Rica offers no such safeguard. Older complexes often limp along on patch jobs until a giant repair must be funded overnight. The Tico Times reminds buyers that extraordinary assessments are common because monthly dues rarely include the real cost of big ticket items. Tico Times
SMALL ASSOCIATIONS FEWER THAN TWENTY UNITS
Reserve math is simple. A forty thousand dollar roof replacement costs two thousand dollars per door in a twenty unit building but four thousand dollars in a ten unit building. Smaller HOAs also struggle to attract professional management or to spread risk across multiple income streams. Godutchrealty notes that most Costa Rica HOAs create no reserve fund at all which magnifies the per owner shock when work finally cannot be delayed. Ivo’s Blog by Godutch Realty
DEVELOPER CONTROLLED OR DEVELOPER DOMINATED BOARDS
Some projects stay under developer control long after the last sale. Proxy votes let insiders keep dues artificially low so unsold inventory looks attractive. Necessary capital projects get postponed because they hurt marketing. When control finally shifts to owners the backlog can be overwhelming. Use the national registry to confirm board turnover dates and voting rights. If the developer still appoints directors or holds veto power expect hidden liabilities.
COASTAL FRONT ROW BUILDINGS EXPOSED TO DIRECT SALT SPRAY
Beachfront views bring maximum rental rates and maximum corrosion. Fixtures last half as long next to crashing surf. Pools and pumps require constant chemical balance. Insurance premiums climb fastest along exposed coasts. Ask engineers whether structural columns use marine grade rebar and whether the building follows international coastal standards. If not budget for earlier and costlier replacements.
RESORT STYLE CONDOS DEPENDENT ON SHORT TERM RENTALS
Buildings designed for nightly guests endure hotel level wear. High turnover means heavy elevator use constant plumbing stress and relentless cosmetic touch ups. When tourism dips so does income for owners who fund the HOA. Low occupancy leads to delinquent dues which shifts the cost to those still paying. Review the percent of owners who are current on fees before signing anything.
MIXED USE HIGH TRAFFIC TOWERS
Retail restaurants and offices inside a residential tower draw extra foot traffic that accelerates wear on lobbies elevators and parking structures. Commercial tenants sometimes negotiate fee caps leaving residents to subsidise common area problems. Scrutinise bylaws to see whether businesses contribute a fair share to reserves. If percentages are locked at build time owners may face escalating imbalance as systems age.
CONDOS WITH A MAJORITY OR PLURALITY OWNER
If one investor owns a large block of units that person can steer budgets and elect board members. Their priorities may differ from yours especially if they plan to exit soon. A sudden sale of those units can flood the resale market or lead to fee avoidance while they are listed. Check the property registry for concentrated ownership.
ASSOCIATIONS WITH CHRONIC ARREARS
Even a strong reserve schedule fails when many neighbors refuse or cannot pay. Look at the latest balance sheet and calculate the delinquency rate. Anything above ten percent signals cash flow stress. High arrears often appear in complexes heavy with short term rentals where absentee owners view dues as optional until legal action begins.
BUILDINGS WITHOUT PROFESSIONAL MANAGEMENT
Volunteer run boards may save a few colones in the short term but amateur bookkeeping and lax vendor oversight usually cost more later. Professionals enforce collection policies bid out contracts and plan multi year budgets. Ask to see the management agreement. If there is none owners are assuming every operational duty themselves.
HIGH AMENITY PROJECTS WITH LOW FEES
Infinity pools gyms elevators generators wastewater plants and private wells all need regular expert maintenance. When fees seem low compared with the amenity list expect future special assessments. Compare dues against a similar complex that recently completed a reserve study in your home country. The gap is the risk premium.
HOW TO SCORE RISK IN TEN MINUTES
• Count units. Fewer than twenty adds one risk point
• Check construction year. Older than fifteen adds one point
• Confirm board control. Developer or majority owner adds one point
• Review delinquency rate. Above ten percent adds one point
• Inspect location. Front row beach or estuary adds one point
• Add amenity density. Pool plus elevator plus generator adds one point
Zero or one point means comparatively lower risk pending full due diligence
Two or three points means elevated caution and a detailed engineering report
Four or more points means walk unless lifestyle value outweighs financial risk
CURRENT OWNER ACTION STEPS
• Call a special meeting to hire an engineer for a reserve study
• Adjust dues to meet the recommended savings schedule within twelve months
• Negotiate with banks for a line of credit before emergencies appear
• Publish all financial statements minutes and contracts to owner cloud storage
• Pursue legal collection against delinquent owners early rather than late
PROSPECTIVE BUYER SAFETY CHECK
• Demand the latest reserve statement and bank proof of balances
• Obtain an updated insurance declaration showing full replacement coverage
• Order an independent inspection of roofing waterproofing and foundations
• Verify that commercial spaces contribute proportionately to reserves
• Require an attorney to confirm that meeting quorums and voting procedures comply with Law seven thousand nine hundred thirty three
CONCLUSION KNOW THE PROFILE BEFORE YOU PURCHASE
Not every Costa Rica condo is doomed but certain profiles carry outsized danger for foreign capital. Aging small unprofessional or developer dominated associations run closest to the edge. Add salt spray and high amenity loads and the margin for error disappears. Remember that an undervalued lifestyle play can still make sense if you walk in eyes open and price in the future cash calls. An investment however requires measurable risk controls. If the condo you are eyeing fits several high risk categories move on. Costa Rica offers plenty of stand alone homes townhouses and the occasional well run tower where reserve math pencils out.
Save this checklist share it with fellow investors and stay tuned for our next Costa Treasure deep dive on surviving the coming market shake out.
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