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The acquisition of real estate is one of the most significant investments a person makes during his or her lifetime. It can also be one of the most stressful. In foreign countries, such as Costa Rica, the normal stress of the purchasing process can be compounded with other risk factors, such as language barriers and unfamiliarity with local laws and procedures. That said, foreigners can and do legally and successfully purchase property in Costa Rica. In fact, Costa Rica offers potential buyers many types of real estate products including houses, condominiums, time-shares, farms, finished lots and beachfront property. The following guide is designed to help buyers navigate their way through the real estate buying process for all types of purchases. The guide is divided into three main sections covering:

Just like in the US, Canada, and Europe, there are different types of property available to buyers. Understanding the various types that are available for purchase is critical in the evaluation process. This section highlights the property types that can be purchased in Costa Rica and the implications of each type of ownership for the buyer.

The most comprehensive form of property ownership in Costa Rica is fee simple
Ownership. Fortunately for foreigners, the conditions for this type of ownership are the same for Costa Rican nationals as they are for foreigners. The concept of fee simple ownership is the same in Costa Rica s as in the US. Basically fee simple ownership gives the owner of the property the absolute right to materially own the property, use it, enjoy it (i.e. usufruct) sell it, lease it, improve it (i.e. transformation), etc., subject only to obstructed from enjoying any of his/her rights to the property, he/she has the right to be made whole, in other words, have the property restored in its original condition. Buyers who purchase fee simple title have the most rights under to law to enjoy and use the property as they see fit.

Concession property is more commonly known as beachfront property. In Costa Rica,
95% of beachfront property is considered concession property and is governed by the Maritime Zone Law and other specific regulations including but not limited to special dispositions stated by municipalities and the ICT (Costa Rican Institute of Tourism). These legal dispositions set forth the conditions under which foreigners and local residents can own concession property. A concession in Costa Rica is defined as the right to use and enjoy a specific property located on the maritime zone for a predetermined period of time. The state, through its respective municipality, grants this right. Note that the first 200 meters measured horizontally from the high tide line defines the boundary of the maritime zone. This zone also includes islands, pinnacles of rock, mangroves, estuaries, small islands and any small natural formation that overcome the level of the ocean. This 200 meter zone is divided into two areas:

Restricted/Concession Area: The next 150 meters. This area I available for concessions to be granted. A concession is in essence a “lease” on the property granted to the lessee for a specific period of time. Normally the concession period is granted for 20 years. An owner of a concession may build on that concession, subdivide the concession and perform other acts to the property. However, appropriate permits from the local municipality must be obtained.

Ownership Limitation: Unlike fee simple property, foreigners do not have the same rights as citizens when it comes to purchasing concession property. The law establishes that foreigners cannot be majority owners of a concession property. A foreigner can, however, enter into a partnership with a Costa Rican citizen where the ownership is divided 49% /51% between the foreigner has resided in Costa Rica for at least five years, then they may be majority owners of a concession. Both foreigners and Costa Ricans alike are required to purchase all Maritime Zone property through concession

When US citizen think of Condominiums, they normally think of large apartments or townhouses. In Costa Rica, however, there is a specific law called “Condominium Law” that provides certain benefits to developers of many different types of properties, Including single family residence projects, finished lot projects, condos, etc. This set of laws allows a developer to restrict and regulate certain aspects of the restrictions, limitations and privileges that can be enjoyed by individuals who purchase a property in such a development . Ownership of property “in condominium” is fee simple ownership but usually carries with it a few additional restrictions set forth by the developer. It is advised that you require the owner of the property to give you a copy of the by-laws to check for architectural guidelines, land use restrictions, and other limitations that may be placed on your property. Most often, developers use the condominium laws to allow them to build private roads in a development and set architectural guidelines. For the most part, condominium laws are designed to protect the integrity of a development and maintain the “look and feel” of the project.

There are properties in Costa Rica that are not recorded at the Public Registry of Properties. Families have inhabited some properties of this type for generations while others have never been occupied. In either case, it is possible that someone claims that they “own” the property and may put it up for sale. They may even have fence lines or other boundary markers that separate “their” property from a neighbor’s. Regardless of the time that an inhabitant has lived on the property is registered at the Public Registry, there is no official owner i.e. the title is unclear. It is strongly recommended that they type of property be avoided at all costs because there is no way to prove that the “owner” has the right to transfer the property, or even worse, what the dimensions of the property really are.

This option allows an owner the right to use a property for certain weeks of the year. In most cases the time-share ownership grants similar rights as implied in the condominium regulation except that in the time-share it is limited to certain weeks during the year. In this manner one single unit is subdivided into parts and sold individually. Time-share resorts are not common in Costa Rica.

Feeling comfortable with the purchase process begins with understanding the most common terminology. While the purchase process may seem very simple, there are some keys ideas with which a buyer should be familiar. The following defines the most common vocabulary used in real estate transactions in Costa Rica.

Transfer or Conveyance Deed: (escritura de traspaso): This document contains all of the stipulations regarding the transfer of real estate including basic information about the buyer, seller, the property, and any special terms of sale, such as easements or mortgages. An attorney who is also a Public Notary must prepare this document and the deed must be recorded in his/her Notary Book as well as at the Public Registry of Property. Once the deed has been prepared and signed at the close, it is the attorney’s responsibility to record the deed immediately at the Public Registry. The recording process consists of two phases. In the first phase, the notary presents the deed to the public registry for its annotation; from this moment the property is protected against any third party interest. After the registry verifies the deed is structurally correct, the second phase of registration begins and the property is recorded in the name of the new owner. Because Costa Rica operates on a “first in time, first in right” system, registering the deed immediately is critical to ensuring that the new buyer’s rights to the property are ahead of any other claims by third parties.
Public Registry of Properties

Notary Public: Attorney licensed by law to perform legal acts with Public Faith. All transactions performed by a Notary are recorded in his/her Notary Book. A public notary is necessary in order to purchase a property. Most attorneys in Costa Rica are also Public Notaries.

Power of Attorney (Poder)

This document authorizes a person to act on behalf of another to perform specific actions such as the purchase of a property . This tool is especially useful for clients that wish to close on their property without returning to Costa Rica. It is best to sign the power of attorney before leaving the country because the law requires that the power of attorney be signed in the presence of a Costa Rican notary. Thus, a visit to a Costa Rican consulate in the US is necessary. One exception to this rule, however, is it if the property is being purchased through a corporation. In this case, a signed proxy letter will suffice and there is no need to visit a consulate.

Powers of Attorneys come in two forms, general and special. General power of attorney allows a representative to sign on behalf of an individual for multiple tranactions and must be recorded at the Public Registry. A specific or special power of attorney allows the representative to sign ONLY for the item specified in the power of attorney contract and under the conditions specified there. It is highly recommended that on a specific power of attorney be granted for property purchases to limit the rights of the representative to sign only for the property in question and nothing else. Additionally, the specific power of attorney does not have to be recorded at the Public Registry, however it should be granted before a Notary Public.
Survey Plan (Cadastral Department): In addition to the Public Registry of Properties, which holds all property deeds, Costa Rica also has a Cadastral Office that holds all of the property surveys. In order to transfer, mortgage or acquire a property, a survey must be recorded at the Public Registry. When dealing with property segregations, a municipality authorization is also required on the survey. The official drawing of the property is validated through an approval process by the Public Registry of Properties as well as by the municipality in which the property is located. Because the Public Registry and Cadastral Office are separate entities, it is not uncommon for old property surveys to be on file at the Cadastral Office. If this is the case, it is recommended that a new survey plan be registered with the Cadastral Office so that there can be dispute over boundary lines.

B. Purchasing Methodologies
1. Acquiring Properties through direct transfer: A purchase process whereby one or more physical individuals acquire a property in their personal name.

Acquiring Properties through corporations: A common practice in Costa Rica is to acquire properties through a new corporation or through an existing corporation that currently owns the property of interest. The process of setting up a corporation is not complicated, but does require a knowledgeable attorney who understands the exact protocols and procedures necessary to properly setup the corporation. The advantage of this system is that it allows a buyer to protect their asset anonymously. Further, if a purchaser acquires a property through an existing corporation that already owns the property, there are no government transfer taxes and stamps to pay. The reason is that transfer taxes and stamps must be paid anytime that there is a change in the ownership of the property. If a buyer acquires the shares of an existing corporation, technically there is no change in the recorded owner of the property (i.e. the corporation still owns property). However, if a property is acquired through forming a new corporation to duty the property, the transfer taxes and stamps must be paid because the name of the property owner has changed. The risk for the buyer in acquiring an existing corporation is that the corporation might have other liabilities and there is no way to verify 100% that the corporation is clean. When buying a Costa Rican corporation, it is important to keep in mind that there are other obligations and responsibilities that must be addressed. Examples include yearly tax declarations (even if the corporation is inactive), payement of income taxes if any, and keeping the legal books of the corporation up to date and in order.

C Step –by-step through the purchase process:
1. Once a buyer has seen a property of interest, the next step is to understand what the process of acquiring the property may entail. The following are the basic steps that a purchaser follows when buying a property.

-Step 1: Sign an Option to Purchase/Sale with seller.
-Step 2: Deposit funds into escrow (if available).
-Step 3: Title research performed by the Notary Public/Lawyers (review if property is free and clear of defects).
-Step 4: Closing-Execution of Transfer Deed, Endorsement of Shares and/or Mortgage Deed and disburse funds
-Step 5: Register new owner with Public Registry

D. Fee Structure
1. Transfer taxes, stamps and other charges: In order to record the transfer of the property , the government charges 1.5% of the purchase price and an additional 1% is charged for other stamps at the Public Registry.

2. Notary Fees: Notaries are required by law to charge 1.25% as their legal fees.
3. Survey fees: If you require or demand a new survey for your property, there are qualified surveyors available to perform this function. Pricing depends on the location and size of the property.
4. Mortgage registration fees: The government charges 0.6% of the mortgage value to register the mortgage deed on the property.
5. Escrow Fees: Fees are dependant on the escrow provider.
6. Incorporation: Fees for purchasing a corporation typically run between $500-$1000 or + .

One of the greatest concerns of foreigners purchasing real estate in a foreign country is to ensure that the transaction will be executed legally and if the system can ensure a lifetime of enjoyment of the property. The Costa Rican legal system, if followed correctly, does give + ample protection to investors, but if the transaction is not executed properly, loss can and does occur. To guarantee the security of any real estate investment, there are three tools that should be present in any real estate transaction.

Escrow-Most buyers from the US understand service to include not only the managing of funds for a property purchase, but all of the administrative work required to execute a closing. In fact in states where an attorney is not required for a real estate documentation is in order before the close. In Costa Rica, the escrow agent performs many of the same duties. The primary function is the financial service to prevent manipulation or mishandling of funds prior to closing. The escrow agent is a neutral third party with responsibility for issuing checks and executing payments. This system gives confidence to all interested parties (e.g. attorneys, brokers, seller, buyer) that funds are protected during the buying process and that all funds will be disbursed appropriately to all parties at closing.

Title Guaranty:

When you decide to buy a property, you must be certain that after the sale has been completed you will be the true owner of the property. You need to be confident that no liens, encumbrances or other impediments will prevent your free use and enjoyment of the property.

The same way you purchase life insurance to protect your interests, a Title Guaranty should be purchased to protect your property title interests. Your real estate investment will probably be the biggest investment you will ever make and loss of this investment can be financially devastating. You need to be certain that you are financially protected from potential losses.

-Protection against monetary losses, brought about by hidden ownership claims that may be made against the property title;

-Payment of legal expenses if the company must defend your property title against a claim covered by the Title Guaranty in the local courts.

-Payment of valid claims against your property title, up to the amount of the Title Guaranty.

            -Invalid documents executed under expired or no existent power
            -False assumption of identity of legitimate property owner
-Falsification of documents, legal power, and other papers related to the transfer of property title.
            -Liens or other financial burdens charged to the previous property owner.
            -Non-registered property easements.
            -Hidden heirs of previous property owners.
            -Documents executed by minors of age.
            -Invalid Documents delivered after death of previous owner.

Once acquired, a Title Guaranty remains in place as long as you own the property, giving you a lifetime of security and peace of mind backed not by a promise but by a companys financial stability. Because only one payment is required a Title Guarantee is a cost effective method of protecting your real estate investment and enhancing the value of your property.

The good news is that foreigners have the same absolute right to own real property in Costa Rica, as do citizens. Many countries have restrictions or otherwise have the same legal rights, which are protected by the Constitution and reflected in the laws.

The legal system in Costa Rica is based in the so-called civil law system, which is derived through the Spanish Civil Code with roots in the Napoleanic Code. Property transaction
Under the civil law system differ considerably from those under the common law system, also called the Anglo-American system. For this reason, it is crucial for the foreigner to have competent advice thought the course a transaction. Only after the procedures have been done properly and the title has been cleared of any liens or encumbrances and the chain of title has been traced to the actual seller, can the buyer be assured of Good Title. If for any reason good title is not assured, the buyer should step away from the transaction. For this reason a buyer must be sure that they have good, honest legal advice. The best way to be absolutely sure that the advice that they are relying on is reliable is to work thorough an exclusive buyers agent, who will monitor the whole transaction and who has access to competent and reliable lawyers, surveyors, engineers, etc. Up until recently, buyers had to rely strictly on their attorney do the title search and no insurance was available. Within the last year or so, title insurance has become available. Rates for title insurance are 1-1.5% of purchase price, which is comparable to rates in the United States. It is still advisable to have a good lawyer for the contracts involved. Lets face it, the purchase of real estate is a major financial transaction and there is no sense in pinching dollars, thereby creating the possibility that all the bases were not covered. Why gamble with such an investment when a few more dollars will virtually eliminate any risk. Words of advice-before hiring a lawyer, make sure he/she comes highly recommended by someone who has used him/her and in whom you have complete trust.
Never, ever rely on advice given you, by the seller or agents or employees of the seller or rely on experts recommended by them.

All titled property in Costa Rica is registered in the National Registry. If a property is not registered, It is untitled and should be strictly avoided. Almost all legal liens and encumbrances will also be on file in the Registry. After properly researching, a lawyer or title company will uncover all registered liens and encumbrances which can be eliminated before closing or can be lived with in the case of easement such as rights of way or construction restrictions etc. If you decide that any easements or restrictions are going to ruin or interfere with your intended usage of the property, you can back away. Some factors, which will not show up in the Registry, do exist. One of these is squattters. Squatters have legal rights and legally ousting them takes judicial intervention. Without going into details of the law, suffice it say that , under most circumstances, one does not want to purchase property with a squatter problem. The longer the squatters have been there, the harder it is to get rid of them and the process could take years. If the squatters have been in possession of the property for 10 years or more they have untitled ownership which can be titled by the course. Prior to the ten years, an owner can be
Compelled to reimburse squatters for any improvements they made to the property. Do not buy into a problem. Thoroughly inspect your property for squatters prior to purchase
And be sure your lawyer includes an anti-squatter clause in the agreement of sale. Once you purchase a property, especially a large rural tract, it is advisable to “contract” a caretaker to guard against encroachments. This is not that expensive especially if caretakers contract allows him to partially farm the property. It is important to have a written contract with the caretaker in order to prevent him from ever asserting squatters rights himself. For homes, lots and urban land, squatters are less of a problem. However the property should be inspected regularly either by the owner or an agent if the owner is unavailable. Getting rid of squatters in easiest if action is taken within the first three months.

One other encumbrance, which can only be detected by a visual inspection of the property, is the case of unregistered leases. Leases can be registered but most are not, especially in the case of residential ones. Make sure your lawyer guards against unwanted tenants with an appropriate clause in the agreement of sale. Inspect the property as immediately prior to closing as possible.

Hopefully, we have not presented a negative picture about purchasing and owning property in Costa Rica. Our purpose here is to advise perspective buyers how to avoid problems, not to discourage anyone from buying. All in all, Costa Rica is a wonderful, fund and enjoyable place to live. Just make sure you have competent and trustworthy advisors.

PRACTICAL ASPECTS
Just as anywhere, you want to be sure that the property you see is the property you are getting. If there is a question at all, you should have a survey done. Likewise, you may want to have an engineer check buildings for defects.

A buyer’s agent will be happy to arrange for competent and trustworthy experts, as would a good lawyer. Do not accept any experts referred to you by the seller or agents of the seller.

In the United States, it seems that, no matter where you live or how remote, utilities are readily quickly available. This is not always so in Costa Rica. Most towns of any size will have electricity and water available. However , in more remote areas you may have to drill a well and , if you are not located near a main road, you may have to rely on a generator for electricity. Cities are larger towns will have sewage systems but in other areas you will have to depend on a septic system.

Phones can take months to years to obtain, even in the cities. You should buy a home or business with and existing phone. If you are planning to build on vacant land you should apply for a phone line with ICE (Costa Rica Institute of Electricity) as soon as possible.
A faster way to obtain phone service is by purchasing a cellular exchange privately. A n umber of beeper and pager services also are available.

At the closing various documents must be presented. In addition to the new deed, these documents include proof that territorial and municipal taxes and fees have been paid to date. The deed must be prepared by a notary. Since almost all lawyers in Costa Rica are also notaries, most likely your lawyer will be the one who prepares the deed. Each party pays its own attorney. The standard closing costs are generally split 50%/50% by the buyer and seller. Including a 3% transfer tax and other fees, one can calculate total cost by multiplying the sale price of the property by 5.28% and adding 3,195 colones. Each party will pay half. It a mortgage is involved, additional costs to the buyer amount to about 1.405% of the mortgage total.

Taxes and fees are paid both to the municipality and the federal government. Amounts vary from place to place but are considerably less than one would pay in the U.S.A. Currently the property tax system is in a state of flux. The government is attempting to implement a system based on appraised value. Whether “appraised value” is actual market value or some percentage thereof, as in the U.S., is unclear. The primary proposal was for owners to pay 0.8% of appraised value yearly but this amount is expected to be reduced by the legislature.

The law concerning the Shore line-Terrestre or Shoreline Zone Law states that the first 50 meters above the high tide line is public property and nothing can be built on it. The next 150 meters can be leased for private use. All leasing is done through the municipality. Certain construction is allowed in this zone but at the termination of the lease ownership of any improvements reverts to the municipality. In most cases, some payment is made for the improvements. This law applies to islands also. The only exceptions to this law, where land within the so-called “maritime zone” is titled, date back to colonial times or can be found with certain urban property next to the sea.

Leases of land within the maritime zone are granted for from 5 to 20 years. The lease is registered in a special Concession Registry in the Public Registry and a yearly fee must
Be paid to the municipality for the duration of the lease to keep it valid. They are renewable through negotiation or as the parties may stipulate in the original agreement.

Leases in the maritime zone have certain restrictions concerning foreigners. To hold a lease personally, a foreigner must have lived in Costa Rica for at least 5 years. For a company to have title to a lease, it cannot have more than 50% foreign ownership.

Condominiums, although relatively new to Costa Rica, abound throughout the Central Valley and certain beach areas. In addition to new units being built, conversations of older existing buildings from rental apartments to condominiums are taking place. Condominiums are very practical for someone who plans to spend only part of the year in Costa Rica or for someone booking to be an absentee owner of income producing property. On site security protects the property and its contents. Most condominium projects will also offer to rent units, with the owners consent, during the time they are vacant.

Condominium law in Costa Rica grants this type of property special status. A special Horizontal Property Section of the Public Registry exists for registering condos. Just as in the case of any type of property, condominiums must be title searched for any liens or encumbrances. The buyer should also become thoroughly familiar with the condominium regulations, which are in the deed. These regulations set forth the rules of condominium management and procedures for handling relations between the unit owners. They also set forth any restrictions to which the units, thus the owners, are subject to. For example, they may restrict pets or business activities or the number of occupants. There will also be a maintenance fee, usually monthly, as well as procedure for increasing the fee. Since unpaid fees are collateralized by the unit itself, a buyer must be sure that all such debt exits is to obtain a certificate from the condominium manager that no past fees are unpaid and all are current.

As most everywhere, condominiums in Costa Rica are treated as real property and can be mortgaged.

We hope that the foregoing information helps you understand how to invest in real estate in Costa Rica and what to expect after investing. It is not meant to be exhaustive and we stand ready to answer and further questions you may have. We also are here to help you find the property of your dreams and to assist you throughout the process. Let our Exclusive Buyer’s Agents work for you. We want to make you happy.

The list of properties on our web site are not our exclusive listings and we have no greater interest in selling them over any others. They are included because they are properties which we know are currently for sale. We will continue adding to the list and will search diligently for other properties that suit a particular client’s desires.

If you have any questions, please do not hesitate to contact us. We will answer any and all such inquiries and look forward to serving you in all ways possible.

Costa Rica ranks in fourth place at the world level as an ideal environment for foreign investment, because there are very few restrictions on foreigners owning land in Costa Rica., they enjoy the same rights as Costa Ricans and do not require any special conditions to purchase property within Costa Rica.

In Costa Rica, there are some restrictions for land use, it’s the same whether you are Costa Rican or foreign., it is for this reason that we recommend each property must be
Carefully researched., to determine whether the location, ground conditions, ecological problems., etc, are appropriate for the use we require. Advice from professionals on these subjects is a must, experts such as Engineers, Real Estate Brokers, and different Governmental Entities, depending on the location and use they are: MAG (Ministry of Agriculture and Cattle), INVU (National Institute of Housing and Development),
Ministry of Health, Ministry of Energy and Environment, MIVAH (Ministry of Housing
And Human Resources), AyA (Water and Sewage Authority), MOPT (Ministry of Public Works and Transportation), (IDA) Institute of Farming Development, and the corresponding municipality.

Likewise, it is important to know if there are declared zones such as “reserve” (forestry,
Ecology, etc), which impose restrictions on the land use. For example there are water reserve ones where only 10% of the land can be used for construction or “Agricultural Vocation”, where it is prohibited to construct buildings and yet others of the forestry reserve which limits cutting of trees.

Present before a notary public legal identification documents: Cedula Identification card for Costa Ricans and Passport or Proof of Residency Card for Foreigners. In the case of

Since the promulgation of the Maritime Zoning Law number 6043 and its reforms, of March 1977 properties that are located within this zone but were not registered in the Public Registry. The law allows the government to grant leases called Concessions for the occupation and use of this area for terms that range from five to twenty years.
For clarifications references are found in “THE LAW OF TERRESTRE MARITIME ZONE”.

“The maritime zone encompasses two hundred meters of beach frontage which is owned by the Costa Rican Government. The 200 meters regulated by the Maritime Law extend all over the Pacific and Atlantic Coasts of the Republic and any of its nature, terrains, rocks that are exposed at low tide.” (Article 9)

“The maritime zone is composed of two sections: The PUBLIC ZONE which is the first 50 meters of tideland and the areas that are left exposed during the low tide, the RESTRICTED ZONE is the remaining 150 meters inland.” (Article 10)

“In the case of properties properly registered in the Public Registry, that are located wholly or partially in the public zone, the use of the same will be allowed to confirm with agreements from the corresponding municipality, the Costa Rican Institute of Tourism and the National Institute of Housing and Development” (Article 25)

“All plans of urban or tourist development which affect the maritime zone, should be approved by the Costa Rican Institute of Tourism, as well as all the official organizations that have the authority to revue these plans, according to the law. These authorities can intervene in any tourists activities and development in the Maritime Zone or access those persons or companies that can have an concessions. In the same way, these authorities can intervene when foreign entities are involved in tourist related enterprises whose
Capital for the development remains more than 50% Costa Rican ownership…”(Article 31)

“ Only in the RESTRICTED ZONE can concessions be given when referring to the maritime zone, unless there are special dispositions of this Law…(Article 39)

“The concessions will be for the use and enjoyment of the particular areas in the restricted zone, under the terms and conditions that this Law establishes…” (Article 41)

“It is prohibited to give or compromise, in any way or to transfer or sublet totally or partially, the concessions or the rights derived from them, without the express consent of the corresponding municipality and the Costa Rican Institute of Tourism or the Institute of Land and Colonization, depending on the case, the contracts or acts will lack authenticity those who violate this disposition…”(Article 45)

Purchasing Property in Costa Rica

A Guide to Understanding
the Real Estate System
and Buying Process

Purchasing Property in Costa Rica

A Guide to Understanding the Real Estate System and Buying Process

A Guide to Understanding
the Real Estate System
and Buying Process