Real Estate Lawyer in Colombia

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• Pros and Cons of living in Medellin, Colombia

Transcript of “Tips for Colombia Property Transactions from a Knowledgeable Real Estate Lawyer“

LADISLAS MAURICE: Hello, everyone. Ladislas Maurice from thewanderinginvestor.com. So I’m spending a month in Colombia looking at real estate investments and immigration opportunities. And today, I’m sitting down with Alan, an American lawyer based here in Medellin with a law firm. How are you?

ALAN: I’m good, I’m good.

LADISLAS MAURICE: Good. So how long have you been here in Colombia?

ALAN: So I first came to Colombia as an adult back in 2009-ish, 2010-ish, just as the market exploded. For a long time, Colombia had a very well-deserved reputation for a lot of conflict and issues, and so forth. But by 2009-ish, it was very obvious the country was exploding. Just a ton of business, the country was opening up to the rest of the world. And part of that included, for example, the real estate development component. And it’s grown and grown and grown. I think, normally, I would say annual growth is around 7% to 8% in terms of value, and it’s still going strong, particularly during the pandemic.

LADISLAS MAURICE: So tell me when people come for the first time and invest in real estate in a foreign country, especially in Colombia that has from far away not necessarily the best reputation, what are some of the things that foreign buyers should look out for, especially from a legal point of view? What must they be careful about?

ALAN: What I would say is the biggest issue a lot of foreigners see when they come to Colombia, when they’re buying property, is that everything’s a whole lot more informal. So the process is informal, the due diligence process, in particular, can be very informal. When Colombians buy from each other, they don’t do everything the way it should be done. Their focus is not always on protecting the investment. It’s basically ease of use. It’s a way to do things in a way that actually is done as fast as possible. The least complicated possible way is what usually wins out. It’s not usually the most risk-free option. So what I tell clients is, they should probably watch out a little bit for that, they should take the time to do a proper title analysis. That’s a big deal.

LADISLAS MAURICE: So you do all of that?

ALAN: Absolutely. What we see in the market really is you have an agent, maybe the seller’s agent. And they’ll go to the foreigner and say, “Here’s the contract.” And the foreigner goes, “Okay, I’ll sign it.” But they’re signing a contract without even doing a due diligence process on the property. And a lot of foreigners, they’re led a little bit into doing that because, A, that’s pretty standard, and, B, they don’t really know better to not do it. So the first thing I would say is be careful with the informality aspect. The second thing is, and I think Colombia still has a very bad reputation. I think, statistically, people shouldn’t feel that the market is rife with fraud, because that’s not the case. I think there are a lot of things in the market, which you have to contend with, that you don’t have to contend with in places like the US and Europe.

For example, number one, there is no escrow process in Colombia. So if I’m in France, and I’m buying property, I’m putting my money into an escrow account. And it’s out of that account that any prior debt, existing debt, any liabilities are paid off along the way. In Colombia, it doesn’t work that way. In Colombia, you’re literally, as a purchaser, you’re pre-paying any debts, any back taxes, anything weeks, maybe months before you actually get title to your property. That’s unexpected for a lot of people but it’s just the way the market works.

LADISLAS MAURICE: Interesting.

ALAN: Yeah.

LADISLAS MAURICE: And I agree. I’ve done real estate deals in Africa, in the Middle East, all over Eastern Europe, the Balkans, places that people are typically scared of doing business in. And the reality is that as long as you follow the proper process, you use a good lawyer, in other countries, it’s more the notary public that you have to choose a good one, there are no problems. Personally, I’ve never had any issues because I make sure I do not cut corners.

ALAN: Exactly. And then what I would add to that is you’re making an investment in a foreign country. The rules are different. You want to be as protected as possible. You don’t want to be in a situation where you spent hundreds of thousands of dollars in an investment where you might not be able to secure legal protections down the line because what you did was done incorrectly. So you really want to invest in doing the process correctly from the very first get-go.

LADISLAS MAURICE: And also one of the most important aspects where one cannot cut corners is how you bring money into the country. This applies to a lot of emerging markets that have partial capital controls, whereby if you do not bring the money in through the proper channels, and with the proper forms, then it’s fine, they’ll let you get the money in. But once you try to get the money out in a few years’ time, suddenly, that won’t be possible anymore.

ALAN: That’s a big deal. Keep in mind that Colombia is still one of these places where a good percentage of the money coming in is illegal money. Okay? So the process to transfer funds in and out of the country is almost as important as getting clean title to your property. Because it governs any number of things. It’s going to impact your tax situation, it’s going to impact the repatriation process, as you just mentioned. So you want to make sure it’s done correctly from the start. It’s not rocket science but it needs to be done just right, because it has such a huge impact, for sure.

And we continue to see people, they’re coming to us, they’re selling a property, we’re assisting them with the sale, for example. And part of the process is the repatriation process. But when they purchased the property, they didn’t transfer the funds into the country correctly. And it’s complicated. And sometimes, it’s almost impossible to transfer the funds outside. Unless certain things are done, which aren’t easy, they’re not fast, and sometimes, not even very inexpensive. You actually have to spend money that you weren’t thinking needed to spend to make that happen. And so you want to do that right the first time.

LADISLAS MAURICE: Yeah. Next thing you know, you’re giving cash minus 5% to a guy on motorcycle to give you Bitcoin. [laughs]

ALAN: [laughs] That’s exactly right. Good point. Good point.

LADISLAS MAURICE: Great. So fantastic. So if you are about to purchase real estate in Colombia, do get in touch with Alan. His email is below. There’s also a link with more information on his services, including prices and processes. So Alan, thank you very much for your time today. Really appreciate it. Cheers.

ALAN: Absolutely.