Guaranty Trust – Costa Rica
One of the modern figures of contracting is without doubt the Trust, the opening with which parties can reach agrement, the low registry cost and the security that it offers make it one of the figures of most interest currently.
There are various types of trusts: testamentary, guaranty, shares, administrative, etc.
Here I have undertaken the task of explaining in a simple manner one of the most commonly used:
The Guaranty Trust
• Transmission of property for the obtaining of a determined end that justifies the normal faculties of the “owner” be subordinated to the terms and obligations contained in the contract.
The norm would be to sign a mortgage for the amount that the buyer has left to pay, nevertheless, this has serious implications for both parties for which the contract of trust takes the same effect, without the secondary effects of a mortgage.
Subjects:
- Trustor: The party that has the intent of selling (the seller).
-Trustee: Thir party who has in his power the property during the length of the contract. A bank or a trust third party
-Beneficiary: The beneficiary (buyer).
TRUSTOR: Person who transfers the properties of his personal assets, in fiduciary property. In the example, it would be the seller.
BENEFICIARY: Person for whose benefit the trust is constituted, obliging the trustee to turn over the properties at the moment that the contract establishes. This would be in the seller in the example.
TRUSTEE: Has a restricted right to the property destined exclusively to the end foreseen in the contract (transfer of the property at the moment of completion of the contract). Trusted third party who will have the property registered in his name during the period of the contract.
Principal function of the trustee: Administration of the property for the benefit of the trustor and beneficiary. Responsibilities of father of household with own property.
A neutral and impartial figure.
Gives accounts of this management.
Follows instructions according to the contract without interpreting it.
Can not dispose of the property (sell, mortgage or put a lien on it).
Autonomous Personal Assets
• Separated from the assets of any other subject.
It is untouchable and can’t be interevened with judicially even in the case of bankruptcy.
During the period of the contract the property would belong to the trust.
Advantages:
• Avoids for the creditor in case of non-fulfilment by the debtor, the thorny judicial execution that must be had in the case of traditional guarantees. (Auction).
In case of disagreement it signals beforehand that all conflict will be resolved via arbitration.
Reduction of costs: exempt from payments of rights of registration and registration taxes as long as the properties remain in the trust or return to the trustor.
To Be Considered:
In those cases in which the buyer of the property can not pay the entire totality of the price, instead of establishing a mortgage for the remainder, subscribes to a trust contract, to the effect that until the buyer hasn’t paid the totality the property will not be transferred to his name.
It is here where the trust contract lends ittself to adjustments for the contractual reality, incorporating clauses such as:
• The estate remains in the hands of the trustor (buyer) as holder assuming the obligations of a depository, which is translated in a position of “owner”, for which he assumes rights to “productive use and user”.
The trustor takes advantage of the fruits of the estate and participates actively and unilaterally in its administration, management, and exploitation.
The trustee supervises to prevent damage.
Property taxes are still paid by the trustor.
The possession of the property is obtained by the “buyers” until the entirety of the payments has been achieved.
In case of non-fulfilment, all previous payments are property of the seller, without any arrangements.
The management of permits is managed by the buyer without alleging nullification by the inability to acquire one.
All of this without it being necessary to establish a mortgage on the property, which carries along with it from the point of view of taxes an increase in the fiscal value of the property and the resulting increase in the payment of taxes on the property.