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Buying property in Colombia: scams and pitfalls

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Everything you need to know is included in our Colombia Property Pack

Colombia's real estate market is gaining popularity among foreigners, thanks to its diverse property options and economic prospects.

Buying property there can be complicated though, especially if you're not a local resident.

Our community of customers, along with our local experts, has reported numerous issues. We've listed them all in our Colombia Property Pack.

We’re going to take a closer look at a few of these in this article.

Is it safe or risky to invest in real estate in Colombia?

Colombia’s real estate market has been on an upward trend, driven by increasing foreign investment and the country’s growing economy. Cities like Medellín have become hotspots for foreign buyers looking to invest in property, attracted by the city’s transformation and growing reputation as a safe and vibrant place to live.

However, despite these positive developments, there are significant risks and challenges that are unique to Colombia.

One of the biggest risks in the Colombian property market is the prevalence of informal property ownership.

In many parts of the country, particularly in rural areas and informal settlements around cities, properties are not properly registered, and ownership is not formally documented. This has led to a significant number of properties with unclear or disputed titles. There have been instances where foreign buyers have purchased properties, only to discover later that the seller did not have a clear title to the property.

This can lead to lengthy and costly legal battles, and in some cases, the buyer may lose their investment entirely.

Another unique challenge in Colombia is the issue of “restitution of land” laws, which were implemented to return land to people who were forcibly displaced during the country’s decades-long internal conflict.

While these laws are crucial for addressing past injustices, they have created uncertainties in the real estate market. Properties that were acquired in good faith by buyers could be subject to restitution claims, putting the current owner’s investment at risk. Foreign buyers may not be aware of these risks and may find themselves caught up in complex legal battles.

The buying process in Colombia also presents unique challenges.

The process is notorious for being bureaucratic and lacking transparency. Foreign buyers may find themselves navigating a maze of legal and administrative hurdles, and corruption can be a significant issue. Bribery and fraudulent activities are not uncommon, and foreign buyers may be targeted as they are perceived to have more resources. For instance, there have been reports of notaries or other officials inflating fees or demanding bribes to expedite the buying process.

When it comes to resolving property disputes, the Colombian legal system can be slow and unpredictable.

The judiciary is overburdened, and cases can drag on for years. Furthermore, the outcome of legal battles is not always based on the merits of the case, and corruption in the judiciary can influence the outcome of property disputes.

In terms of government support and regulation, the Colombian government has taken steps to attract foreign investment and improve transparency in the real estate market. However, these efforts have been uneven, and the impact on foreign buyers has been mixed.

While there are incentives for foreign investment, and the government has implemented measures to improve property registration and reduce bureaucracy, enforcement of these measures can be inconsistent.

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Potential real estate buying mistakes in Colombia

The concept of "afectación a vivienda familiar"

When buying residential property in Colombia, one specific issue you need to be aware of is the concept of "afectación a vivienda familiar" or "patrimonio de familia inembargable."

This is a legal designation that a property owner can voluntarily register on their home, which protects the property from being seized for the payment of debts. This protection is intended to ensure that a family is not left without a home due to financial issues.

In the context of purchasing property, if the previous owner had declared the property as "afectación a vivienda familiar" and you are not aware of it, you could face complications. This status can limit your ability to sell or mortgage the property in the future, and lifting the designation requires legal procedures that can be both time-consuming and costly.

This pitfall is not widely known to foreigners and can be easily overlooked during the purchasing process because it is a concept unique to Colombian law. To avoid this, you should conduct a thorough due diligence process.

Ensure that you or your legal representative request a "certificado de libertad y tradición" for the property in question, which is a document that outlines the legal status and history of the property. Carefully review this certificate to check for any annotations regarding "afectación a vivienda familiar."

Furthermore, you should understand that the frequency of this issue varies depending on the type of property and the seller's personal circumstances. However, it's not uncommon, as many Colombians use this legal tool to protect their family home.

By being aware of this particular aspect, you can save yourself from future legal headaches and ensure that your property rights in Colombia are clear and unencumbered.

The risks related to "zonas de alto riesgo"

Another nuanced issue you should be cognizant of when purchasing property in Colombia is related to "zonas de alto riesgo" or high-risk zones.

This is specific to the geography and regulatory environment of Colombia. The term refers to areas that are at high risk of natural disasters such as landslides, flooding, or seismic activity. Given the country's diverse topography and climate, certain regions are prone to these kinds of events.

When considering a property, you should be aware that sometimes properties in high-risk zones may not be adequately disclosed as such. Sellers might not be forthcoming about the risks, or they might not have the information themselves.

Moreover, the local "Curaduría Urbana" (urban curatorship), which is the office responsible for issuing building permits, may sometimes grant construction licenses even in these high-risk areas, particularly in more informal settings or smaller municipalities.

The issue of not knowing whether a property is in a high-risk zone can be quite serious.

If you purchase such a property, you could face not only the potential loss of your investment due to a natural disaster but also the inability to obtain insurance or significant challenges in selling the property later.

To mitigate this risk, you should engage with a reputable local "gestor" or management company that knows the intricacies of the local real estate market. They can perform an in-depth analysis and consult with the local "Departamento Administrativo de Gestión del Riesgo de Desastres" (DAGRD), or the Administrative Department of Disaster Risk Management, to determine the risk profile of the area where you're considering buying property. Additionally, obtaining an "estudio de suelos" (soil study) is advisable to assess the stability and composition of the land.

This pitfall is not as widely known among foreigners and is critical to address given that Colombia's beautiful landscapes can sometimes mask the underlying environmental risks.

Being proactive in your due diligence regarding the location of your prospective property will help ensure that your investment is secure and that you are prepared for any eventualities related to the natural risks inherent to specific Colombian locales.

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“Derecho de preferencia" or preemption rights

Another lesser-known but significant pitfall you should be aware of when buying property in Colombia involves "derecho de preferencia" or preemption rights.

This right is particularly important in the context of communal properties or those with multiple owners, which are quite common in Colombia.

Preemption rights are established under Colombian law, granting existing co-owners, tenants, and adjacent landowners the first option to buy a property if it is to be sold. This means that if you're buying a property that is part of a communal building, like an apartment in a "propiedad horizontal" (horizontal property regime), or land that is part of a larger estate, there might be individuals who have a legal right to purchase the property before you can.

Failing to honor these rights can lead to a legal challenge against the purchase, where the sale can be reversed, or "retracto legal," if you're found to have ignored the preemption rights. This could result in significant financial loss and legal fees.

To avoid such complications, you should have your legal representative carefully review the "escritura pública" (public deed) of the property, which may contain information about any existing preemption rights.

Also, you should engage with the "administrador de la copropiedad" (property manager) if buying in a communal building to confirm if there are any tenants or co-owners with preemptive rights.

Moreover, ensure that proper legal notices are given to those with preemption rights so that they can exercise or waive these rights within the legally stipulated period, which is usually a few days up to a month, depending on the type of preemptive right in question.

It’s worth noting that while this concept exists in various forms around the world, the specific application and legal framework in Colombia can be particularly intricate, especially if you are not familiar with the local property laws.

“Servidumbres” or easements

When purchasing property in Colombia, an often-overlooked pitfall involves “servidumbres,” or easements.

These are particularly important to be aware of because they can significantly affect your use and enjoyment of the property. In Colombia, there are many types of easements that can be registered or unregistered, apparent or non-apparent, and knowing their status is crucial.

An easement in Colombia might give a neighbor the right to pass through your property to access theirs, or it could allow for public utilities to cross your land.

Sometimes these easements are not formally registered but are customary and have been in use for many years, which can give them legal standing. This is a frequent issue in rural areas or in places where informal settlements are common.

Before you proceed with the purchase, you should request a detailed inspection of the property to identify any paths or signs that might suggest the use of the land by others, which could indicate an existing easement.

Also, you should obtain an updated "certificado de libertad y tradición" for the property, which will show registered easements. However, be aware that not all easements might be registered.

Discuss with neighbors and the local community to uncover any traditional practices or unregistered easements that could affect your property.

Finally, engage with a local lawyer who can advise you on the implications of any discovered easements and assist in negotiating the terms or in seeking their removal, if possible.

Ignoring the potential existence of easements can lead to disputes with neighbors or others who may have established rights over the property. These disputes can be lengthy and costly, potentially restricting the development or use of your property, and even reducing its value.

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The issue of "falsedad en documento"

A further pitfall to be aware of when buying property in Colombia is the issue of "falsedad en documento," which translates to falsity in documents.

This can include the forging of signatures, the creation of fake property titles, or alterations to official documents. Such fraudulent activities are particularly problematic in Colombia due to the combination of bureaucratic complexity and occasional lapses in regulatory oversight.

When engaging in property transactions in Colombia, you might encounter situations where the property's "escritura pública" (public deed) or other essential documents have been tampered with or are outright forgeries.

The implications of acquiring property under such circumstances are grave, including potential legal nullification of your ownership, financial loss, and involvement in prolonged legal disputes.

To safeguard against this, you should work with a reliable notary ("notario") who is responsible for verifying the authenticity of public deeds and other legal documents related to property transactions.

Furthermore, ensure that a thorough verification of the seller's identity is carried out and that it matches the information on the property's title and other legal documents.

You should have a trusted lawyer review all documentation. The lawyer should perform due diligence, cross-referencing the property’s recorded history in the "Oficina de Registro de Instrumentos Públicos" (Office of Public Instrument Registration).

In the case of high-value transactions, consider securing the services of a professional due diligence firm that specializes in forensic document analysis to verify the authenticity of all paperwork.

Valorización contributions or charges

Another less obvious pitfall when buying property in Colombia, particularly for foreigners, is related to "Valorización" contributions or charges.

Valorización is a unique form of tax levied by Colombian municipalities for public works that increase the value of properties in nearby areas.

For instance, if a new road, park, or public service is planned that will benefit your property, you could be subjected to a valorización charge to contribute to the cost of the project.

This can be unexpected for a foreign buyer, especially if you are not familiar with the local tax system. These charges can sometimes be substantial, and they are typically not negotiable.

They also might not be evident at the time of purchase, as the projects and the resulting charges can be levied after the transaction is complete.

To protect yourself from unexpected valorización charges, you should investigate with the local planning department ("Departamento Administrativo de Planeación" or similar entity) whether there are future public works scheduled and if your property will be affected by valorización taxes.

Also, make sure you review the minutes of recent municipal council meetings for discussions about proposed infrastructure projects in the area of your prospective property.

Do not forget to ask the seller or their legal representative for any notifications or past payments of valorización for the property.

Finally, consider consulting with a local tax advisor to understand the potential future charges that could arise and factor these into your financial planning.

Restitución de tierras or land restitution issues

Another pitfall in the Colombian property market is related to "restitución de tierras" or land restitution issues.

This is a unique concern in Colombia due to its historical context of internal conflict and displacement.

The Land Restitution Law, or Law 1448 of 2011, was enacted to restore land to those who were forcibly dispossessed or coerced into selling their property during the armed conflict.

As a potential property buyer in Colombia, especially in rural areas, you may encounter properties that are subject to restitution claims.

Purchasing such a property can result in legal challenges, as the rightful owners or their heirs may come forward with claims that supersede your ownership, even after the transaction has been completed.

To navigate this pitfall, you should conduct a thorough review of the property's history and title to check for any irregularities that could indicate dispossession or forced sale.

Also, consult with the local land office and the "Unidad de Restitución de Tierras" (Land Restitution Unit) to verify if the property is under a restitution claim or is located in an area with a high incidence of land restitution cases.

You may inquire with the community and local authorities to gather information about any past conflicts or disputes regarding land ownership in the area.

Finally, have your legal advisor pay particular attention to the provenance of the property and the history of the sellers to ensure there are no pending claims or potential future claims.

While the process of land restitution is an essential component of ensuring justice and peace in Colombia, it can be complex and problematic for unwary property buyers.

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