BUYING PROPERTY 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.
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 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.
REGULATIONS ABOUT LAND USE IN 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 you require.
Advice from professionals on these subjects is a must, experts such as Lawyers, Engineers, Real Estate Brokers, and different Governmental Entities depending on the location and use: MAG (Ministry of Agriculture and Cattle), INVU (National Institute of Housing and Development), Ministry of Health, MINAE (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 zones 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.
GENERAL ISSUE FOR BUYING REAL ESTATE IN COSTA RICA
IDENTIFICATION DOCUMENT
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 corporations the company ID and the authorized legal representative holding a current (30 days) Personeria Juridica.
OTHER DOCUMENTS:
MUNICIPAL CLEARANCE-from the corresponding municipality according to the location of the property:
a) That the owner has paid municipal and property taxes.
b) That the Buyer does not have any debts within that municipality.
PLAN OF SURVEY
An updated Survey of the property.
PUBLIC REGISTRY
Free of all liens and encumbrances.
POWER OF ATTORNEY
If one of the parties is not present, he/she can give an authority to another so that he/she can be represented before the notary public. The special and general authorities are signed before a notary public or before a Costa Rican Consul, if it is outside of Costa Rica and it should be in the record book.
The "special authorities" are not registered in the Mercantile Registry, because they are granted for a specific use which expires when a certain condition is met i.e. the sale or purchase of property.
REGISTRATION OF PROPERTY
Ninety percent (90%) of the properties in Costa Rica are registered in the "Public Property Registry " these registrations are made by a notary public. The system is fully computerized and indexed with 80% of the properties identified by a title registration number known as the "Folio Real". In this way one can be obtain a complete study of the property or "Registral Inform", indispensable today for any type of transactions: sales, mortgages, rents, liens. The registry report provides detailed information on a particular property including the name of the title holder, the boundary lines of the property, liens, annotations, declared value of the property and other recorded documents which affect title. The Public Registry can issue certificates of title or provide a registry report on a particular property. Some properties are still found registered in the ¨tomos¨ and we should be able to find them in the Registry by tomo, page, number of the property.
RIGHT OF WAY.
A right of way is the right of a party to pass over a property. These rights of way can be for air, water and much more. Nevertheless, it is important to note that when a property shows a right of way, it may not be valid any longer , which is shown as a "transferred right of way". The main property and all the sub divided lots will appear with the same note, but in reality it has no effect on them. It is prudent to have a professional review the property before making any buying decision.
NATIONAL SURVEY
Another important document we should get is the "Survey", which can be obtained in the same building as the "Public Registry", in the "National Survey" section. The Survey map will indicate the exact location of the boundaries of the property.
Notes:
It is possible that sometimes important differences can be found between the "Survey" and the "Registry Report ". This is because the property is recorded in the Registry by a notary and this represents true right of possession. With regards to the survey , an owner may make modifications to the property and forgets to update it in the registry thereby creating the difference.
1) NAME: Incorrect name, as a consequence of an owner not registering in his own name.
2) MEASUREMENTS: In general the most accurate measurements is the one on the survey map, since it is always more recent that the one of the Registry, but is important that it be updated.
(a) Deed
(b) New measurement of survey map
(c) Administrative correction by the input individual.
(d) Owner information.
3) PATHWAYS
4) FOLIO REAL or REGISTRY DATA: Incorrect number of the folio real, tomo, number of property and site. Usually occurs when the survey was submitted before the segregation and the number appears on the main property.
5) LOCATION: Another province (almost never), district, etc; caused by human error and it is easy to correct , which should be done before transferring any property.
CORRECTION OF MISTAKES IN THE PUBLIC REGISTRY AND NATIONAL SURVEY
These mistakes can be made by:
1) Mistakes by the person who inputs the information in the system. To correct them it must be done by showing the original deed.
2) Notary mistakes, at the time of writing the deed in the record book. They can be corrected by changing the deed.
3) Mistakes in the survey map, corrected by having an updated survey completed by an authorized Topographer/Engineer.
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.
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.
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 owner’s name.
HOW IS NON-TITLED PROPERTY TRANSFERRED?
Some of the private land in Costa Rica is privately owned but not titled. This is the another 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 de 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.
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 Colon 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.
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.
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.
For a better understanding of these restrictions, they are found in "THE LAW OF MARITIME LAND ZONE" :
"The maritime zone encompasses two hundred meters of beach frontage which is owned by the Costa Rica 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 conform 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 tourist activity and development in the Maritime Zone or access those persons or companies that can have any 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)
Concessions would not be granted to:
a) Foreigners who have not resided in the country for a minimum of 5 years
b) Corporations with shareholders
c) To companies that are domiciled outside the country
d) To companies made up of only foreigners
e) Companies whose shares or investment capital, are made up of more than 50% by foreigners…" (Article 47)
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.
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.
DISCLAIMER
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.
