Once You Have Decided Where In Costa Rica You Would Like
To Own Property And Build A HouseOr Business, The Work Begins.
Can I as a foreigner own property in Costa Rica?
How is Title transferred?
How can I ensure I have clear title to a property?
Do properties change hands without title & how dangerous is that?
What about closing costs?
Do I need to worry about Squatters?
Is there a Government Transfer Tax and Registration Fees?
Can I own Beach Front Property?
What do I need before building?
Real Estate Agents in Costa Rica
Buying property and the construction of buildings in Costa Rica can be a trying experience, particularly for those who strike out on their own with little knowledge and help. A good, reliable and knowledgeable real estate agent can save you a great deal of aggravation in the process. Having a good Lawyer who you trust and is looking out for your best interest is also a very good idea. The process for purchasing property in Costa Rica is a defined process and if followed carefully with common sense using the help available from a reliable real estate agent should be rewarding and fairly easy procedure.
Looking for the right property for you in the right price range with the things that are important to you should be a fun and interesting process. The more you know about the countries climates, culture, terrain and people the easier it will be to decide what part of the country you will want to concentrate your search. There are tremendous differences in climates in Costa Rica ranging from mountains where a fireplace is a necessity to plains where heat and humidity can be intense. The North can be very dry and near desert conditions and the South humid and lush with forests. There is, of course, the Pacific Ocean as well as the Caribbean Sea. The first thing to decide is where you want to look. The next step is to decide what type of property you are interested in. There are lots, small farms, big farms, ocean view ocean front, Mountain, river, stream and forest. The choices in Costa Rica are very diverse and myself, I could enjoy living in any of them.
CAN I, AS A FOREIGNER, OWN PROPERTY IN COSTA RICA?Foreigners share the same rights as Costa Rican Citizens do in the ownership of properties in Costa Rica. Foreigners have been successfully buying properties in Costa Rica for many years through many thousands of successful transactions. When visiting Costa Rica, many (including myself 30 years ago) get caught up in the romance, tranquility and breath taking beauty of this tiny country known as the Switzerland of Central America. Many have, in the heat of their passion, attempted to purchase property with out the knowledge and representation that all but eliminates the pitfalls. If you take the time, use common sense and connect with the right people you will have a pleasant experience and own a piece of this paradise with all the proper documentation. (top)
HOW IS TITLE TRANSFERRED?
In the case of titled land, the property is transferred from seller to buyer by executing a transfer deed which is called Escritura in the presence of an attorney who is also a Notary Public. An attorney who is not a Notary cannot represent the state and therefore cannot authenticate documents in behalf of the State. (top)
Unlike in the United States, it is actually common to use the same Notary /Attorney to represent both the seller and buyer. The Notary/Attorney selected by both will draft the transfer deed and register the transaction in the Public Registry (Registro National). If the buyer is paying cash it is the custom that they choose the notary/attorney. If the seller will be holding a mortgage larger than 50% of the purchase price they would customarily choose the notary/attorney who would draft both the transfer deed and the mortgage. If the seller will be holding a 50% or less mortgage the buyer and seller may desire to have their attorneys jointly draft the documents. In the case where the seller is holding a mortgage on more than 50% of the purchase price and the buyers insists on their attorney drafting the transfer documents, it is common for the seller to have their attorney draft a separate mortgage agreement. (top)
HOW CAN I ENSURE I HAVE CLEAR TITLE TO A PROPERTY?
In order to be assured of clear title your attorney/notary must present you with a registered copy of the title he will be registering in the public registry. As a notary he/she has the right to represent the State and provide you with this copy at closing. Each property has a registration number (even if not titled) that can be searched through a data base. It is required for any lien holders, mortgages, delinquent taxes, recorded easements as well as the property owner to register their interests with the public registry. The numbers of the title must correspond with the numbers on the Plano Catastrado although the Plano need not be transferred to the new owners name. (top)
HOW IS NON-TITLED PROPERTY TRANSFERRED?
Much of the private lands of the OSA Peninsula, as well as all of Costa Rica, are privately owned but not titled. This is the most common way of transferring ownership of properties in Costa Rica. Many people, who are familiar with titled property in their own country and may have heard stories of swindlers in foreign countries, insist on looking only at titled property. Some even believe that squatters cannot squat titled property not true. It is perfectly legal and safe to transfer the ownership of untitled property. It does, however, require legal documentation and inspection to insure that all of the essential documents are in order. If you are searching for property you may not want to rule out untitled property as it will eliminate a large portion of available properties that can either be titled or possessed legally and safely.
The transfer of untitled property is done by hiring an attorney, who is also a Notary, to research the passed ownership by means of obtaining the history of the property called a Carta Venta. This in conjunction with a registered survey, called a Plano Catastrado will provide the attorney with the information he or she needs to search the registry for leans, judgments and proper ownership by the seller. A physical inspection of the property at the time of purchase is also a very good idea to insure there are no inhabitants in possession of all or part of the property. Your attorney/notary will be able to register the transfer of ownership in the national registry from his/her protocol book. Your attorney will also be able to give you an opinion on the probability of titling the property and an approximate cost. (top)
WHAT ABOUT CLOSING COSTS?
It is customary for the buyer and seller to split the closing costs equally. This can be modified by agreement between buyer and seller and depends on the terms of the transaction. Closing costs consist of three things: mortgage fee (if mortgage is needed), government taxes and the fees charged by the attorney/notary.
Mortgage fee: In order to insure proper documentation for the person who is offering the terms, they would normally have the mortgage drafted by their attorney. The person receiving financing would normally pay the cost of drafting the mortgage. The mortgage document can either be a clause in the transfer deed or a separate mortgage instrument depending on the agreement of the buyer and seller. There is a fee of 1 Colone per 1000 colones to register the mortgage. There is also a fee for the documentation stamps. The fees charged by the notary to draft a mortgage vary but is generally in a range from .6 percent to 1.25 percent of the amount of the mortgage.
Transfer Tax and Registration fee: The government collects a tax when property is transferred of 1.5 percent of the registered value of the property. This number is usually considerably lower than the actual price being paid for the property. Registration of the transfer deed requires documentation of the payment of transfer taxes and documentary stamps.
There are a number of documentary stamps required to be present on the transfer deed. They are from different levels and branches of the government including: The municipality, Legal community of Costa Rica, Department of Agriculture, National archives, Fiscal stamp plus a .05% fee to register documents in the public registry. The costs of these stamps vary and are not extremely expensive. Consult your notary for the cost of these stamps prior to closing.
Notary/Attorney Fees: The fee that the notary is entitled to for the drafting of the contract for sale and the registration of the transfer deed is set by the government. The schedule is 1.5% of the first million Colones of the actual selling price and 1.25% of the balance. It is not necessary to disclose to the notary the actual selling price therefore setting the fee schedule at the recorded value which is generally considerably lower. (top)
DO I NEED TO WORRY ABOUT SQUATTERS?
Costa Rica has a homesteading law which is out dated and could use revision. Squatters are still a fact and need to be considered when buying property in Costa Rica. There is a simple and effective way in which you can protect your investment if you are an absentee owner. The word is caretaker who is a person of responsibility who is hired by you to watch over your property. I like a two layered system if feasible. You hire someone to watch your property and you hire someone to watch the caretaker as well as pay them and collect signed receipts for payment. This is an area where you do not want to take short cuts in your documentation. You should have a notary draft an agreement between you and your caretaker clearly spelling out his duties and the nature of the relationship. Have him/her sign the document IN FRONT of the notary. The payment to the caretaker if you are not available should be done by a third party who will require a signature verifying receipt and the nature of the payment when payment is made. The person making the payment to the caretaker should physically inspect the property no less than every two months.
In simple terms; squatters who have been on a property for less than three months which you can prove you have ownership, can be removed by having the police evict them. After three months you may be required to prove your case in court and have a judge order the eviction. After a year you may need to have the judge order the eviction and may also have to reimburse the squatter for the cost of improvements on the property even if you do not see them as improvements. They may have cut your precious trees in belief they were improving the property and you may have to pay them for having done it. This is true on titled land as well as untitled land and the process for recovering the property can be equally as difficult. (top)
CAN I OWN BEACH FRONT PROPERTY?
This is a subject which is confusing to just about everyone you talk to and I suggest that if you are interested in purchasing beach front you have an attorney/notary research the laws as they pertain to that particular municipality. The Milla Marina or maritime zone is the first 200 meters of the beachfront measured from the average high tide mark. The zone is in two parts as follows: The first 50 meters is public domain and cannot be developed or claimed by private persons. The next 150 meters is a restricted zone and can be claimed by and developed within the restrictions of the municipality once concession rights have been secured. The laws seem to change in different municipalities, provinces and properties. It is too broad of a subject to cover by someone who is not an attorney. Many people have homes and businesses on beachfront property and there are many properties for sale within the 200 meter mark (Maritime Zone). Spend the time researching these properties at each government level if they are what you are looking for and, BE CAUTIOUS. (top)
WHAT DO I NEED BEFORE BUILDING?
Building in Costa Rica is generally governed by the Municipality and will be regulated by the same. It is not that much different from other countries which all seem to have many hoops to jump through in order to build your structure. It is advisable to meet with the person in the individual municipality prior to buying your property to ask what building, dividing, water, sewer etc restrictions are in force. Have them reply in writing with their answers and keep them in your records. They will most likely charge a fee for this which will vary and may not be a specified amount, leaving you the option. Depending on the Municipality you may be required to hire an Architect and or an Engineer before building. You may also be required to obtain a building or construction permit. Because this varies from municipality to municipality it is important that you contact the authority in the community you intend to build in. This is a structured process in most municipalities and will take time and money to complete. However difficult it may seem, with the right help you will be able to follow the rules and build your building to the codes set forth by the municipality. (top)
REAL ESTATE AGENTS IN COSTA RICA
Real Estate Agents in Costa Rica are loosely regulated and can be the difference between a great experience and a disaster. Never take the word of people off the street or in positions where you are having contact. Boat captains, bartenders, waiters, hotel staff, taxi drivers and the like, are generally not good sources for properties. A knowledgeable and competent real estate agent will be an invaluable asset in your search for property in Costa Rica. Take the time to ask others in the community where you are looking for a recommendation of a reliable agent. Ask other foreign property owners who they would recommend or if the agent you are considering is trust worthy. Go the extra step and ask the agent for references AND CHECK THEM. There are a number of agents who have come from foreign countries to set up shop as real estate agents in Costa Rica hoping to capitalize on the growing interest in this peaceful and beautiful country. Having an agent who is well connected in a certain area with people who know properties, boundaries, local ordinances, and people of the community who have good relationships with the notaries is paramount. Your real estate agent can be more important than your lawyer in their efforts to field check the property, know the boundaries and any potential problems. They often do the work of mortgage companies, escrow companies, banks and represent both the buyer and seller. Choose your agent carefully; it will make a very big difference on how your experience turns out. (top)
This is written to give you an over simplified view of the process of buying and owning property in Costa Rica. It is not, and should not be construed as, legal advice or legal documentation. Laws change from year to year, community to community and city to rural area. This is just a general overview. Contact you real estate agent and notary/lawyer for more detailed information regarding the purchase and ownership of properties in Costa Rica. (top)