An in-depth journalistic investigation by prominent news daily La Nacion sent seven Ministers rushing to update the value of their properties with the Ministry of the Treasury, the national revenue collection institution. One of the Ministers who scrambled to correct the value of the real estate he owns was the Minister of the Treasury himself, Fernando Herrero.

The extremely detailed multimedia report by La Nacion includes photographs, public records and even a satellite map of the properties in question.

In the case of Treasury Minister Herrero, La Nacion offered as an example a property that was leased to Fuerza Publica for more than a decade. The property in question is located in Escazu and is owned by the Minister and his wife, who is a Presidential aide. The amount of the lease agreement calls for 1.5 million colones as monthly payment (about $3,000).

To calculate the value of the lease agreement, Fuerza Publica and the owners of the property estimated its value at more than $575,000 -six times higher than the declared value. Neither the owners nor the municipality had bothered to update the value of the property in the last 12 years, an omission that -according to estimates by La Nacion- translates into $7,200 of uncollected revenue over the years.

The other Ministers who rushed to update records after they found out about the investigation include Agriculture, Culture, Labor, Foreign Affairs, and even Economy.

The real estate holdings of other public officials were also investigated by La Nacion. In the case of President Laura Chinchilla and Vice President Liberman, the value of their homes was found to be compliant and up-to-date. Refreshingly, the same goes for Irene Campos, our Minister of Housing.

The Applicable Law and the Appraisal Enforcement Process

Article 16 of the Ley 7509 de Impuestos sobre Bienes Inmuebles (the Law of Real Estate Taxation – MS DOC), states that whoever owns real property in Costa Rica -whether it is registered in the name of a business entity or an individual- must declare the appraised value every five years.

There are three main categories of appraisal. The one questioned by La Nacion is an appraisal for reason of compliance. There are also appraisals performed for the purpose of selling real estate, and those performed for revenue collection purposes.

Each Municipality is also tasked with conducting their own property assessments in an effort to calculate the amount of tax due. In Costa Rica, as in many other places around the world, the values of real property are often under-reported at the closing table.

According to La Nacion, appraisal enforcement is conducted mostly by municipalities in the Greater San Jose Metropolitan Area (GAM in Spanish). Outside of the GAM, enforcement is questionable except in certain areas where there are more resort communities and luxury homes.

For the municipalities, the cost of each appraisal is about $40. This makes it cost-ineffective to enforce in cantons where landlords parcel out their properties and farmland into $20,000 chunks in order to dissuade property assessments.

There is also wide opposition to the property assessment methods in places like Liberia and Perez Zeledon; two places where foreigners have been accumulating land in the last few years. It is important to note, however, that opposition against property assessment methods comes mainly from owners of vast farmlands rather than foreigners.