Crazy Legal Lessons Part 1

 

 

Must read if buying real estate in Colombia

 

 

 

By: Yut-Mie

 

 

 

Dear Subscribers/ Readers,

 

 

 

 

In the blog of August 2022, we mentioned that our architects, DOT Arquitectura, who designed cabins and landscaping for our Wellness and Yoga Retreat, informed us that they could not apply for the building permit for our retreat. They discovered some legal issues with our real estate purchase. To this date, almost two years after we signed the first purchase/sale contract, the property is still not fully ours and we still cannot start building our yoga retreat Peñol Colombia / wellness retreat Peñol Colombia.

This blog post may be somewhat legally technical, but if you are used to Dutch law and you are interested in buying property in Colombia in general or El Peñol or Guatapé Antioquia specifically, I highly recommend you read it till the end.

 

 

 

 

 

To recap…

 

We bought a piece of land in the rural areas of El Peñol close to the Piedra El Marial, which is (still) undivided inheritance. We had no clue that here in Colombia that is legally possible, and that in fact, it is common practice in rural areas of Colombia. In Curaçao and Holland, it is NOT possible to buy real estate that is not properly subdivided and legally registered in the name of the seller. The Notary MUST check all previous Property Deeds and the Notary ensures that all documents are in order: that the ownership is legitimate and that all taxes are paid. All payments are executed through the Notary’s Escrow Account. The Notary does not transfer a dime to the seller until the final Deed of Transfer is signed and all government dues and mortgage lenders are paid.

 

 

 

 

Surprise Surprise: Not in Colombia…

 

When we first saw the property back in April 2021, the seller and his son took us and our friends from Curaçao (who introduced us to the seller) to the property. The place was still like “a jungle”. The top part of the lot was accessible via a narrow pedestrian dirt road (see our blog article about the road). The bottom part was accessible via boat or by fighting your way downhill through the steep jungle. They assured us that “our” lot measured 8000 m2. There were 2 to 3 fences here and there dividing the property, but the vendor’s son indicated verbally where the borders were supposed to be.

 

Both also assured us verbally that they would take care of arranging the fencing correctly and make the road to the property car-ready. Our “legal advisor”/“wingman” at that time reviewed the documentation and assured us that all was in good order. He told us that we did not need to get a lawyer, because it would just cost us a lot of money and he could do the work since he has done this for many people in the past and he could do it for much less. I could also read Spanish and had some experience with buying property in Curaçao. When I looked at the deeds he extracted from the registry they looked alright to me and what he said made sense. He was recommended by our friends, so we decided to trust him.

 

 

Promesa de Compraventa

 

Another thing that I did not fully understand at the time is the meaning of the various documents that you need to sign. The vendor gave us a two-page document called Promesa de Compraventa, and I assumed this was the equivalent of our Voorlopig Koop contract (Preliminary Purchase Agreement). In Curacao, this is a “light” document, which gives both parties a grace period to think things over. Surprise surprise again…. even though “promesa” means promise, it is a binding legal document that, in my opinion, should be called plain and simple Contrato de Compraventa, which means Purchase Sale Agreement. Don’t you agree that the name is misleading?

Anyways… I signed the agreement, and I was told that we had to notarize it. When we went to the notary in El Peñol, there was a sign at the door: the Notary died a couple of days before and there was no replacement in town. That should have been a warning right???? Unfortunately, I was too happy with the beauty of the place that I kind of ignored the alarm bells and agreed to drive to Marinilla, a town 30 minutes from El Peñol to notarize and authenticate the contract.

Signing a contract, was a whole new experience, which felt surreal. It requires a fingerprint and a photograph of the contracting parties in addition to the signature.

 

 

 

The document is scanned in the notary database with the picture, signature, fingerprint, and registration number (yeah… I am sure you are thinking about the registration process when people get arrested in a movie 😜) The whole ritual costs you between USD 2.50 to USD 5.00 depending on the Notary and the municipality. What is more costly though is the time it takes: 2x 30 minutes to drive to Marinilla and back and 1-2 hours to stand in line to wait for your turn, 5 minutes to sign and authenticate. There is no online registration option in this process, unfortunately.  

 

 

 

 

Next steps:

 

1. Pay the downpayment of 20%
2. Sell my house and pay 65.5% within the contracted time
3. Pay the remaining 12.5% when I signed Escritura and I had my own deed.

 

The payment had to be direct to the owner, which was another adventure. He did not have a bank account. Not many people own a bank account in Colombia in these parts it seems, because the banks must charge 0.4% Tax on each transaction unless you request to be exempted and you stay below a certain threshold of the number of transactions and total amount per month as explained in this article of Bancolombia.

 

 

So the vendor wanted me to send the money to the account of his daughter-in-law, who was nowhere mentioned in the contract. I asked them to make an amendment to the contract to include her bank information, so I could present this as proof to my bank. At least that proved to be a wise decision because I needed this proof to legally register the transferred amounts as a foreign investment with the Banco de Republica, to be able to apply for my Visa and ID proof. I had no idea about all the documentation and forms the bank requires before that first transfer. It took almost 3 days to send forms back and forth before they were able to receive the money in the account. If you are interested to know more about this process… please let me know in the comments below or send us an email. I am kind of an expert in international transfers to Colombia now 😀!

 

 

Escritura

 

In retrospect, I see now that I had taken a BIG RISK by paying the 85.5% to the vendor and only receiving the Escritura (Deed of Property). From stories I heard, it looks like it is possible to sell the same property more than once and sign an Escritura for the same property more than once. The notary only takes care of drafting the document and authenticating the signatures.

 

 

 

 

I came to know recently that Registro can deny registration if the information is inconsistent with the data in their systems. The first time we tried to register the Deed of Ownership based on the number of meters purchased, it was rejected, apparently because of the undivided status of the property. I was “fortunate” that our “Wingman”, who by the way also worked for the vendor, found a workaround and proposed to register my purchase as a percentage of the percentage of inherited part of the vendor. Instead of the number of meters I now had a % of the undivided inherited property. For this, we had to draft a new Escritura. Thank God I saw that they drafted the first Escritura against a fraction of what I paid, and I told them to change it: I was dependent on the correct paid amount on the Escritura and Certificado de Tradición y Libertad, to apply for the Investors Visa, which I needed to be able to stay more than 3 Months in Colombia and get my Cedula de extranjería.  

 

 

Certificado de Tradición y Libertad

The Certificado de Tradición y Libertad (Registered Deed) is one of the most important property documents. It states the history of the lot and the owners, litigation, embargos, and other important information. After they registered my name on the Certificado de Tradición y Libertad with the % I was so happy that I had the Esritura and officially appeared as owner of my property, that I paid the owner 50% of the final amount in August 2021, even though as per the contract this was not yet due. Bad decision… ☹

 

 

 

 

In my mind, I was ready to request the building permit and we could start building in 3-4 months. The only thing that I thought was missing was to finalize the topography of the full estate to get the exact information registered and finalize the updated Registered Deed.

 

 

Ficha Catastral and Uso de Suelo

 

Wrong again… there are two other very important documents, the Ficha Catastral, and the Uso de Suelo, that have the measurements of the lot that need to match the Registered Deed. The Ficha Catastral is the basis for the yearly real estate taxes and the Uso de Suelo y Norma Urbanistica, is the document that determines what, where, and how you can and cannot build on the property. To give you an idea. The Registered Deed mentioned 250 Hectares, the Normba Urbanistica shows 94 hectares Ficha cat-astral shows another amount. So you can imagine that the only way to determine what is actually available to subdivide and sell is by measuring the lot again with a topographer. This was another adventure. The measurements changed like 5 times in two years. First, they measured 9600m. This was a problem for me, cause they wanted me to either give back land or pay more money.

 

 

 

 

 

I did not trust the measurements, so I paid another topographer with more sophisticated equipment to measure and he measured 8600m.

 

 

 

 

 

Later there were two more corrections because apparently there was a sale of 1.8 hectares to EPM (Empresas Publicas de Medellin) that was never properly registered nor updated in Catastro. In December 2022, I came to know that Catastro of El Peñol contracted a body called Catastro Multiproposito to measure all the properties in the municipality of El Peñol, to get the right basis to charge the 2023 property taxes. Basically, since EPM bought and sold a lot of properties when they created the Embalse, and at that time, the tools to measure were not very modern, discrepancies in the registration were to be expected. Catastro organized an open house for viewing the outcome and what I noticed is that again the border of our piece of land had moved up.

 

 

 

 

Each time the measurements keep changing and the son of the vendor informs me that my lot is still the same, but that only the meters change. I guess calculus in Colombia is also different than in the rest of the world 🤓. Right now, I am still not certain what will be registered in the end once the subdivision is ready and what that will finally mean for what we can build according to the Uso de Suelo.

 

 

Estudio de Titulos

 

My path of spiritual growth shows me time and time again that I have 3 themes to work on in this lifetime:

 

 

 

The lesson I learned in Colombia as a foreign investor:

 

Do thorough research and pay for a real estate lawyer to do a proper “Estudio de Titulos” (Study of all Property Deeds) before signing any documents to buy property in Colombia.

 

 

If, after reading this blog, you are courageous and want to buy a nice piece of property in this beautiful country, I can recommend our lawyer, Marisol Arango, who is specialized in Real Estate Law in Colombia and especially in rural areas in Antioquia. She helped us a lot after we discovered the mess we got ourselves in. I can give you her contact details at any time.

I still have some more “fun” legal stuff to share. So stay tuned for the next blog, in which I will tell you about the embargo on the vendor’s part of the property, which is affecting the subdivision and which is currently delaying all progress with our dream Wellness Retreat New Life Peñol.

Patience is a virtue and in the end, all will work out in line with the Devine Plan and in complete harmony with the Universe. AND SO IT IS …

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