Author: J. Andrew Saxton, Founder & Managing Partner, Nosara Design and Build
Most foreign investors who decide to build in Costa Rica without owner representation arrive with high hopes and a lot of good intentions. They've done their best to research the market. They've found land they believe in. They've identified an architect and a contractor. They're ready to move forward.
What most of them haven't mapped out is where projects go wrong and why they go wrong at predictable, preventable points.
After overseeing over one hundred luxury construction projects in Nosara, I've seen the same financial risks appear across projects of every size and budget. None of them are the result of bad luck. All of them have warning signs and all of them are avoidable with the right oversight in place.
These are the five I consider most critical:
Risk 1: Contractor Insolvency Mid-Project
This is the risk that surprises investors most, and it shouldn't.
Construction contractors in Costa Rica, including experienced ones, often operate with thin reserves. They depend on incoming milestone payments from active projects to fund ongoing work. When a contractor is managing multiple projects simultaneously, a cash flow problem on one can cascade directly into yours. We learned this lesson the hard way when our first water moratorium hit, and solid builders we could always rely on started having trouble. When they couldn’t get new projects going, they ran out of cash they had mismanaged. Instead of raising their hand, they hoped for the best, which of course doesn’t work in situations like this. Our big take away from this: being a good builder doesn’t make you a good business manager or accountant. Having a back office team and support staff as a builder is critical.
How to avoid it: Our team has requirements with new builders, and we are slow to introduce new builders to our clients until they have a certain established track record in town which can be verified with architect teams or independent suppliers who have worked with them. We also have some methods in place leveraging relationships with legal teams to also research builders for asset holdings, loans with creditors, and any pending or past legal actions against them. Contractual structure, as well as payment structure inside of the contract is also a key element to add protection for our owners.
Risk 2: Poorly Written Contracts
A contract that doesn't protect you is worse than people assume.
Construction contracts in Costa Rica vary enormously in quality. Many standard contractor agreements are written to protect the builder's interests, not the owner's. Scope of work is often vague. Change order procedures are undefined or absent. Penalty clauses for delays are missing or unenforceable. Omissions in areas of worker/contractor relationship, or how to deal with Act’s of God are common. Currency volatility is also often excluded, which is more important than ever at the time of writing this.
The result: when a disagreement arises about cost, timeline, quality, or responsibility, the investor has no contractual foundation to stand on. Every negotiation happens from a position of weakness.
How to avoid it: Before signing any construction agreement, have it reviewed by a legal professional experienced in Costa Rican construction law. More importantly, ensure the contract defines scope precisely, ties every payment to a specific verified milestone, includes documented change order procedures, and establishes a clear dispute resolution process. A well-written contract is not adversarial — it protects all parties and removes ambiguity before it becomes conflict.
It is also important to know that legal proceedings in Costa Rica are long, arduous, and expensive. Knowing you are working with a solvent and reputable builder in the first place is just as important as the contract. If you have an excellent contract, but the builder has all of his assets in his mother’s name (an old trick), you may win in court, but easily be left empty handed on damages.
Risk 3: No Confirmation of Payment Request Milestones
Milestone based payment is standard in Costa Rican construction. In theory, it protects the investment, as you pay when a phase is complete. In practice, it only works if there is an independent process to confirm that the milestone has actually been met before the payment is released.
Most foreign investors are not physically present at their project. They receive updates by phone, email, and photos from their builder. When a contractor submits a payment request stating that the foundation phase is complete, the typical response is to review the photos and approve the payment.
That is not confirmation. That is trust without verification, and there are many things to check beyond sending some photos or a video.
How to avoid it: Payment requests should trigger an independent site inspection conducted by someone with no financial relationship with the contractor. The inspection confirms both visually and in writing that the work described in the payment request was completed to the specified standard. Only then does payment release.
Risk 4: No Confirmation of Cohesion of Engineering Disciplines
This is one of the most technically complex risks, and one of the least discussed.
A luxury construction project involves multiple independent engineering disciplines: structural, architectural, mechanical, electrical, plumbing, and often civil and geotechnical. Each discipline produces its own drawings and specifications. In a well coordinated project, those documents are reconciled against each other before construction begins and reviewed continuously as the project evolves.
In practice, this coordination often doesn't happen systematically. The structural engineer produces drawings based on one version of the architectural plans. The MEP engineer works from another. Usually these engineers are subcontracted by the architect team and not working under the same roof. Modifications are made in the field or behind a desk hundreds of miles away, and without notice to the other disciplines. The result is a set of engineering deliverables that don't align with each other and a construction team that resolves the conflicts in the field, on the fly, without documentation and often without the owner's knowledge.
Also, field improvised solutions to engineering conflicts are rarely optimal. They can affect structural integrity, system performance, longterm maintenance costs, and resale value. They will also almost always incur change orders, cost, and possibly cause delays.
How to avoid it: Require a formal coordination review of all engineering disciplines before construction begins, and at each major phase transition. Any conflicts between disciplines should be resolved through a documented design decision, not a field improvisation. An independent oversight team can manage this process and ensure that what gets built reflects what was designed. It takes extra time, but most architect offices have software that facilitates this. While it may be tough to catch every little thing, it’s not hard to catch 99% of it.
Risk 5: Poor Accounting Practices
The financial management of a construction project is as important as its technical management and it receives far less attention.
Many construction projects in Costa Rica operate without rigorous accounting standards. Budgets are tracked loosely. Change orders are approved verbally and never formally accounted for. Contingency funds are drawn without documentation of what they covered. The gap between the approved budget and actual expenditure accumulates quietly until it becomes impossible to ignore.
For foreign investors, this problem is compounded by distance. Without structured financial reporting, investors lose visibility into where their money is going and by the time the picture becomes clear, the options for course correction are limited. You already overpaid compared to what you have sitting on your build site.
It is also important to have your build set up and connected with Costa Rican accounting for tax purposes and invoice harvesting in Costa Rica, and also in the US or home country. There are time limits on this in Costa Rica due the digital invoices, and nobody wants trouble with tax authorities in either country.
How to avoid it: Require structured financial reporting from the start, in the contract. Line item accounting of every expenditure against the approved budget should be available upon request, and checked by an independent team who then has that information transferred directly to appropriate accountants. Change orders should be formally processed, documented, and reflected in an updated budget before work begins on them.
The Common Thread
Each of these five risks shares something important: none of them are caused by dishonesty. Most contractors, architects, and engineers operating in Costa Rica are competent professionals doing their jobs. The risks above emerge from structural gaps and the absence of independent oversight between the investor and the people executing the project.
The construction industry here, as in most markets, is built around the contractor architect relationship. The investor's interests are assumed to be aligned with the people they hired. In most cases, that works well enough. In high value projects with foreign investors who are not physically present, the absence of an independent representative creates systematic exposure that can compound over time.
That's what independent owner representation addresses. Not replacing the essential people doing the work, but ensuring that someone at the table has the job of protecting your capital and ensuring that what gets built reflects what you approved, at the cost you agreed to, on a timeline that gets monitored.
If You're Evaluating a Project in Costa Rica
Whether you're still in the planning phase or already underway, an initial consultation with our team costs nothing and commits you to nothing.
It's a direct conversation about your specific situation. What you're building, where you are in the process, and what independent oversight would look like for your project.
J. Andrew Saxton is the Founder & Managing Partner of Nosara Design and Build, providing independent owner representation for foreign investors building luxury residences and commercial projects in Costa Rica. Nosara Design and Build operates exclusively on the owner's side, with no financial relationship with contractors, architects, or builders.