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Do you own a vacation rental? Have you thought about giving power of attorney to your property manager?
When you invest in a vacation rental or any other rental property in Costa Rica and you hire a local property manager to care of your investment, there are a few things you need to take into account if you’re an absent owner.
I have seen hundreds of property managers, family members or friends of the legal owner sign a lease agreement in the name of the owner. There are no powers of attorney from the legal owners, even though the owners are in full agreement.
What is missing is the legal document that gives them those legal powers. Serious problems start when you need to evict a tenant for non-payment or any other serious issue and you will need to take the lease agreement to court and you’re not in Costa Rica yourself.
Have you given a power of attorney to your property manager yet? Should you give your property manager, friend or family member who represents you when taking care of your property in Costa Rica a power of attorney or not? What kind of power of attorney should you give them?
What type of power of attorney?
It is possible to give power of attorney to your property manager. The best is to give a special power of attorney for certain responsibilities. Those responsibilities can be described in what is called a “special power of attorney” (Poder Especial in Spanish). This special power of attorney should be formally and legally registered through your local notary public. You can give a very detailed power of attorney to your property manager or someone you trust. A Power of Attorney is abbreviated as POA and a Special Power of Attorney is SPA.
You should realize how important that is if you represent a corporation that owns the property in Costa Rica. Sometimes there are partnerships in the ownership and it is imperative to the POA to be able to represent both or all if necessary. Or even if the property is in your personal name.
You don’t want to give your property manager a general power of attorney (Poder Generalísimo in Spanish). Then, your property manager would also have the right to sell the property, transfer the title or anything else that you probably don’t want to have your property manager to have the powers for.
Why is a POA necessary?
There are other issues that can become an issue, so let’s cover the special power of attorney to your property manager.
1. Sign a lease agreement in your name, but stipulate in the POA that you need to be kept up to date on every lease agreement and you want to receive a signed copy by both parties every time the property is rented.
2. To evict a tenant on late payments or any grounds that is covered in the lease agreement. Again you will want to be kept up to date on everything that’s going on, so stipulate that in the power.
3. To represent you before the tax authorities when needed. As you probably know, owners of rental property in Costa Rica and vacation rental property are obliged to register with the Costa Rica Department of Revenue (Tributacion Directa) and payment of a sales tax on the rental income.
4. To reconnect the utilities in case of late payment or request new utility connections in the owner’s name.
5. To represent you in the home owner meetings (HOA meetings) in case the property is a condominium. You can give the property manager voting rights if you’d like to.
6. To represent you in any legal battles and hire an attorney for any court proceedings.
Where and when
Murphy’s Law states that you’d better take care of this before you fly back home. In case you need to give a POA urgently, you can always go to the closest Costa Rican consulate, but for sure that is more problematic than leaving it all organized at closing.
Before you give power of attorney to your property manager, ask your own attorney how to handle the POA’s. Ask your attorney for professional recommendations to keep your investment safe. Also, there are some interesting tips to keep your property management company on their toes.
At the American European real estate group, we care for you the property owner, especially if you’re our client. Contact us now to do business.
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