Avoiding Construction Disputes in Costa Rica: Essential Legal Protections for Property Owners

Building your dream home or project in Costa Rica can be incredibly rewarding, but setbacks like delays or disputes can quickly turn excitement into frustration. Understanding your legal rights and obligations is crucial for addressing construction challenges effectively. This guide provides actionable advice grounded in Costa Rican law to protect your investment and ensure a smoother construction process.

The Construction Contract: Your First Line of Defense

A well-drafted construction contract is your best tool for avoiding and resolving disputes. Key elements to include:

• Timelines and Penalties: Clearly outline project deadlines and establish penalties for delays.
• Five Percent Guaranteed Retention: This legal safeguard ensures that 5% of the total contract amount is withheld until the project is successfully completed.
• Dispute Resolution Clause: Include terms for mediation, arbitration, or legal recourse in case of conflicts.
• Addressing Breach of Contract: Be prepared to recognize and take action against breaches.

Recognizing and Addressing a Breach of Contract

Breaches can take several forms, including:

• Project Delays: Completion surpassing the contractual deadline.
• Substandard Materials or Non-Compliance: Failure to meet specifications or the use of low-quality materials.
• Violation of Disability Access Laws: Non-compliance with the Law of Unequal Opportunities for Persons with Disabilities.

Steps to Take if You Encounter a Breach

1. Document Everything – Keep detailed records of communications, photographs of the worksite, and emails as evidence.
2. Send a Formal Notice – Issue a written demand for compliance to the contractor.
3. Escalate if Needed – If informal resolution fails, you can:
° File a complaint with the Ministry of Economy, Industry, and Commerce.
° Pursue legal action through the courts.
° Consider alternative dispute resolution methods like mediation or arbitration.

Vetting Your Contractor: A Critical Step

To avoid issues from the start, carefully evaluate your contractor by:

• Requesting References – Speak to past clients to assess their experience.
• Verifying Licenses – Ensure your contractor is properly licensed and in good standing.
• Checking Compliance – Confirm they are meeting social security and tax obligations.

Protecting Your Investment During Construction

Include Detailed Specifications

Your contract should explicitly define:

• Materials to be used.
• Timelines for each project phase.
• Expectations regarding quality and scope of work.

Use an Escrow Agent

• An escrow account safeguards your payments, releasing funds only as the project progresses according to agreed milestones.

Monitor Progress Regularly

• Conduct frequent site visits or hire an independent inspector to oversee construction.
• Maintain records of payments, inspections, and all communications with your contractor.
• Set an inspection schedule with a professional engineer to receive periodic technical reports.

Conclusion: Stay Informed and Proactive

While construction setbacks can be frustrating, Costa Rican law provides a strong framework to protect your rights as a property owner. By:

• Drafting a solid contract,
• Utilizing the five percent guarantee retention, and
• Seeking legal assistance when needed,

you can effectively address disputes and keep your project on track.

If you have any questions or need more information, let us know! We’d be happy to create a blog or video covering your specific concerns.

Disclaimer: The information provided in this blog post is for general informational purposes only and is not intended to constitute legal advice. While we strive to ensure the accuracy and timeliness of the content, laws and regulations are subject to change. For the most accurate and up-to-date information, please contact our office directly. Some images may be AI generated.