REAL ESTATE INSIGHTS · COSTA RICA
Can a seller change their mind after signing a purchase option agreement and sell the property to someone else? A case decided by Costa Rica's First Chamber shows that breaching a real estate contract can have significant financial consequences.
Buying a property is one of the most important financial decisions many families will ever make. That is why, when a buyer and seller sign a purchase option agreement, both parties must understand the obligations they are undertaking.
A case in San Carlos, Costa Rica, reached the First Chamber of the Supreme Court of Justice after a woman attempted to purchase a lot and discovered that the owner had transferred the real estate development.
The proceedings resulted in a judgment upholding the original seller's liability and establishing compensation for the buyer.
📌 In this article, you will learn:
- What a purchase option agreement is.
- What happened in the case that reached the First Chamber.
- What compensation was awarded.
- What happens when the seller or buyer breaches an agreement.
- How to reduce risks when signing a real estate contract.
What Is a Purchase Option Agreement?
A purchase option agreement is a contract in which one party agrees to keep an offer to sell a property open at a specified price and for a defined period, allowing the other party to decide whether to exercise the right to purchase.
In real estate transactions, this agreement gives prospective buyers time to arrange financing, verify the property's legal status, or complete other necessary procedures before finalizing the purchase.
KEY CONCEPT
A purchase option agreement is more than an informal reservation. It may create enforceable contractual obligations for the seller and additional commitments depending on the agreed terms.
It is important to distinguish between a unilateral purchase option, in which the prospective buyer has the right to decide whether to purchase, and a bilateral promise of sale, in which both parties assume specific contractual obligations.
The legal consequences depend on the nature of the agreement and its particular provisions.
The Real Case: A Buyer Who Could Not Purchase Her Lot
In June 2005, a woman signed a purchase option agreement to acquire a lot in a real estate development located in Ciudad Quesada, San Carlos, Costa Rica.
The agreed purchase price was CRC 2,200,000. The contract established that, once municipal approval of the survey plan was obtained, she would have one month to arrange financing and three months to complete the transaction.
Timeline of Events
JUNE 2005
Purchase Option Agreement Signed
The buyer signed the agreement to acquire a lot for CRC 2,200,000, subject to deadlines triggered by municipal approval.
JANUARY 2007
The Seller Transfers the Development
Before the contractual deadlines began, the owner transferred the real estate development to the attorney who had participated in preparing the purchase option agreement.
FEBRUARY 2008
Municipal Approval Is Issued
Approval was issued on February 1. According to the proceedings, the buyer claimed that she had not been properly notified and had learned about it through third parties.
MARCH 2008
The Buyer Attempts to Complete the Purchase
On March 12, she attempted to finalize the transaction and offered to pay the agreed price. The original owner refused the payment because he had already transferred the development.
2008
The Lot Is Sold to Someone Else
The new owner granted an option to a third party and subsequently sold the lot. The original buyer filed a lawsuit in July.
JANUARY 2025
The First Chamber Upholds the Judgment
The Court rejected the cassation appeal and upheld the decision finding that the original owner had breached the agreement.
What Did Costa Rica's First Chamber Decide?
According to the decision described in the news report, the seller frustrated the possibility of completing the purchase by transferring the development before the condition that triggered the buyer's contractual deadlines had been fulfilled.
The Court also determined that the purchase option's lack of registration in the National Registry did not release the original seller from liability under the particular circumstances of the case.
Because the original owner passed away during the proceedings, the financial judgment was imposed on his estate.
⚖️ An Important Legal Consideration
An unregistered purchase option does not necessarily allow a seller to breach the agreement without consequences. However, its effects on third parties and the protection provided by registration must be considered separately.
How Much Compensation Must the Seller Pay?
The upheld judgment established several financial consequences. Although the total amount was not determined in the news report, the following components were identified:
FINANCIAL COMPENSATION
Updated Value − CRC 2,200,000
The difference between the updated value of the lot and the originally agreed price, to be determined during judgment enforcement.
NON-MATERIAL DAMAGES
CRC 1,000,000
Compensation awarded to the buyer for non-material damages.
LEGAL COSTS
Additional Amount
The judgment also included payment of the applicable court costs.
This case illustrates that the financial consequences of breaching a real estate agreement may substantially exceed any deposit or advance payment received when the contract was signed.
Practical Example: Selling a House to Someone Else
Consider the following situation:
HYPOTHETICAL CASE
One House, Two Purchase Offers
AGREED PURCHASE PRICE
CRC 50,000,000
NEW OFFER FROM A THIRD PARTY
CRC 55,000,000
The owner accepts the second offer and sells the house even though the original purchase option remains valid, making it impossible to fulfill the first agreement.
In this situation, the affected buyer could examine the possibility of seeking contractual enforcement or financial compensation, depending on the circumstances, third-party rights, and applicable legislation.
Important: compensation is not automatic. Liability and the amount of any award depend on the agreement's terms, evidence of the breach, proven damages, and the court's assessment.
What Happens if the Buyer Breaches the Agreement?
Contractual consequences may also affect the prospective buyer, although it is essential to distinguish between different types of agreements.
Unilateral Purchase Option
The buyer may have the right to decide not to exercise the option within the agreed period without that decision necessarily constituting a breach.
Bilateral Promise of Sale
When both parties assume specific obligations, the contract must be reviewed to determine the consequences of failing to fulfill them.
If money was paid as a deposit, penalties were agreed upon, or additional obligations exist, the contractual provisions must be carefully reviewed.
Whether an advance payment can be retained or compensation can be claimed depends on the validly agreed terms, applicable legislation, and particular facts.
10 Things to Review Before Signing
Before signing a purchase option agreement, buyers and sellers should carefully review the following elements with professional assistance.
- Identification of the parties: complete information about the buyer, seller, and representatives.
- Property identification: registration number, cadastral survey plan, location, and relevant characteristics.
- Purchase price: total amount, currency, and payment method.
- Agreement validity: exact dates and conditions that may affect deadlines.
- Financing: what happens if the bank rejects the buyer's mortgage application.
- Deposits and advance payments: amounts paid and conditions for refunding, retaining, or applying them to the price.
- Seller's obligations: property availability and conditions for completing the transaction.
- Breach of contract: contractual consequences and appropriate dispute resolution mechanisms.
- Notifications: verifiable methods for communicating approvals, decisions, and important dates.
- Property's legal status: ownership, liens, registered annotations, and relevant restrictions.
Must a Purchase Option Be Registered in Costa Rica's National Registry?
A purchase option agreement may create contractual obligations between the parties even when it has not been registered in the National Registry.
However, a lack of registration may have important consequences regarding third-party rights and the legal protection provided by the property registration system.
Recommendation: before signing, consult a Costa Rican notary public to determine whether the instrument can be registered, which requirements apply, and what registration protection would be appropriate for the transaction.
In the San Carlos case, the First Chamber concluded that the lack of registration did not exempt the original seller from liability. This does not mean that registration produces the same legal effects in every agreement.
The Importance of Responsible Real Estate Brokerage
A real estate negotiation does not end when the parties verbally agree on a purchase price. Proper documentation, clear deadlines, and consistent follow-up are essential throughout the transaction.
Communication between the buyer, seller, real estate agent, financial institution, and notary public can help identify potential problems before they develop into disputes.
A Well-Organized Real Estate Transaction Requires:
- Clear information about the property.
- Timely review of documentation.
- Well-defined deadlines and conditions.
- Communication between all parties.
- Legal advice when appropriate.
Conclusion: A Purchase Option Agreement Is More Than Just a Piece of Paper
The case decided by Costa Rica's First Chamber demonstrates that a purchase option agreement may create enforceable obligations and that breaching those obligations can result in significant financial consequences.
For sellers, this means respecting the conditions they accepted during the agreement's validity. For buyers, it means understanding their rights, contractual deadlines, and the obligations they have actually agreed to undertake.
Properly documenting the negotiation, verifying the property's legal status, and obtaining professional advice before signing can help reduce the risks associated with a real estate transaction.
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- La Nación, September 19, 2026. Report on the breach of a purchase option agreement in San Carlos, Costa Rica. Read the original article (Spanish).
- Costa Rican Judiciary. Legal Dictionary: Purchase Option Contract. Consult the legal definition (Spanish).
Legal disclaimer: this article is provided for informational purposes only and does not constitute legal advice. Every real estate agreement and contractual dispute must be evaluated according to its specific circumstances and applicable legislation. The judicial case discussed here is based on the report published by La Nación.