Buying Property in Costa Rica

Costa Rica is a beautiful and peaceful place where you can enjoy a great vacation at the beach or at the mountains; let yourself go with extraordinary views, sunsets and beaches of white sand, as well as great weather. If you have the opportunity to come and see what this small paradise can offer you, then you will probably want to further think about investing in a place of your own; a little piece of paradise where you can feel at home.

Time to Make Some Decisions

So now that you have decided where to invest, you must decide what to invest in. If you want to find a plot of land on which to build your dream home, be ready to be patient; it can take some time between the design phase, permitting and construction process. We at Costa Rica Discovered can recommend some excellent builders who will be at your side throughout the process.   Fear not these builders can complete the job on time and on budget while you are back in the USA or Canada.  We have had several clients build homes via email and Facetime. 

If you decide to buy a house or a condo already built, it will alleviate the worry of dealing with anything that has to do with permits, construction contracts and time issues. 

Can a Foreigner Own Property in Costa Rica?

For most people looking to purchase property in a foreign country, the first and foremost question to answer is: “Can I as a foreigner own land in Costa Rica?” One of the great aspects of property ownership for foreigners in Costa Rica, and perhaps one of the most important of the mitigating factors for the attractiveness of Costa Rica to foreigners, is the security of land ownership.

Foreigners’ rights of land ownership are documented in the constitution of Costa Rica. The rights of a foreigner to land ownership are equal to that of a Costa Rican. Unlike other countries, Costa Rican law makes no substantial differences between its citizens and foreigners with regards to rights of ownership of any kind. This means that it doesn’t matter where you come from. If you have a valid passport with you, you can purchase a car, a boat or a piece of land just like a Costa Rican citizen. 

The National Registry

All legally transferable properties in Costa Rica are registered in the public National Registry (similar to Land Titles Offices in Canada & the US). If the property cannot be found in the public national registry then it is not a legally registered property. The National Registry can be accessed via the Internet. Anyone with a computer and an Internet connection can enter the public national registry and review a property. You can quickly find out whether there is a registered lien, encumbrance, mortgage or annotation on any specific property. If it is not noted in the National Registry, then it does not exist. However, the National Registry alone does not provide you with any guarantee that no defects or recording errors have occurred during the registration process related to the transfer history of a particular property.  All the more reason for you to work with a good real estate agent and lawyer. 

Costa Rican Companies

In the past many purchasers of Costa Rican property chose to take title of their property in the name of a Costa Rican S.A. (Sociedad Anonima) created for the sole purpose of owning the property.  Recent changes in laws in Costa Rica have made this option expensive and at times confusing.   Annual corporation taxes, registration annually of shareholders, storage of books in lawyer’s offices in Costa Rica have all made this option less attractive.   Previously anonymity was a reason to own property in a corporation.   However, with the changes in laws, privacy will no longer be a feature of holding property in a corporation. There may be advantages to holding your property in a corporation for succession planning. Discuss the option of holding a property in a corporation with your lawyer and make your decision based upon your personal situation. 

Understanding Fee Simple Ownership

Purchasing property in Costa Rica is basically the same as buying property in the U.S. or Canada, i.e., it is considered fee simple ownership. Fee simple ownership conveys the absolute right to own the property, and or sell the property, lease it, improve it, etc. Fee simple also means that if the owner is obstructed from his or her rights to the property, he or she has the right to be made whole, meaning to have the property restored in its original condition. Fee simple title owners enjoy the most rights under the law to use the property at their discretion.

Understanding Properties in Condominium

In the U.S. and Canada, condominium refers to residences in multi-tenant buildings. In Costa Rica, the Condominium Law benefits developers responsible for building many types of properties, including single-family homes, finished lot projects, and condos. The law allows developers to regulate the development with By-Laws that can be registered in the National Registry to the individual lot, home or condo. The By-Laws outline the restrictions and benefits placed on individuals who purchase these properties and as well possibly the property itself. This is still fee simple ownership, but properties "en condominium" come with additional restrictions that are generally intended to protect the integrity of the development’s physical ambiance. If you are considering purchasing a property that is “en condominium”, read the by-laws before you buy or have a professional do so for you.

Understanding Concessions in the Maritime Zone – Coastal or Beachfront Property

Concession property in Costa Rica is approximately 85% of all the coastal or beachfront property. It is owned by the government and is governed by the Maritime Zone Law and other regulations imposed by municipalities and the Costa Rican Institute of Tourism. A concession is defined as the right to use a property located in the maritime zone for a pre-determined period of time, typically 20 years. The first 200 meters measured horizontally from the median tide line defines the boundary of the maritime zone. 

The first 50 meters from the median tide line is considered public area and is not available for any type of ownership. Because this area is public, all people have the right to use it. Basically, there are no privately owned beaches in Costa Rica.

The next 150 meters is available for concessions to be granted. A concession is essentially a lease on the property with a 20 year concession period. The concession owner may build on the concession only what is permitted as per the zoning plan. All Maritime Zone property will be governed by a “Plano Regulador”, a Zoning Plan. New 20 year concession terms are granted so long as the Zoning Plan and all of its requirements have been observed.

Unlike fee simple property, foreigners cannot be majority owners of a concession property. However, if a foreigner wishes to have a concession property, this is easily and legally done through the establishment of a Costa Rican S.A. (corporation) and the appropriate structuring of the ownership of shares of the company.

Reputable Realtor

The first thing that you should consider is who you should work with to help assist you in finding and purchasing your property in Costa Rica. Like any other investment you make involving a significant sum of your money, the first thing you would do is look to get the advice and assistance from an experienced professional in the chosen field with a proven track record. You look for an expert that you can trust to give you accurate information, as well as all the information, good or bad, so that you can make informed decisions. You should not approach purchasing property in Costa Rica in any other way. Get the results you want - work with proven professionals.

Are Real Estate Agents Licensed in Costa Rica?

As we are working closely with individuals who have been serving the local community for 15 plus years and have worked to assist more buyers in more transactions than any other real estate agency in our area, we feel TRES AMIGOS REALTY has the expertise to assist you. We are here to protect your interests.

Legal Advice: Don’t Leave It To Chance

Once you have pinpointed a property, it’s time to get legal advice for your investment to be a success. The only way to avoid unpleasant and/or costly situations with regards to a property purchase is through proper and thorough Due Diligence. Between your broker and your attorney, this process should uncover any/all issues with a property. Ideally, it will be completely free and clear of any liens, encumbrances, or annotations and all taxes should be paid up to date. It is also advisable to review the survey and property boundaries.

Finding the right legal counsel is as important as choosing the land you want to invest in. You will want to be certain that your legal professional will look after your best interests. It is best to seek the services of an expert team of real estate lawyers; a firm with the name and the right people ready to provide to you the legal advice you require for your investment to be a complete success.

Your Real Estate Lawyer will conduct a Due Diligence of the property you are interested in. This usually includes: 

• A complete study of the land based on the National Registry information.
• A verification of the due title of the Seller to sell.
• Determination of any limitations with regards to the intended end use for the property. These may be environmental or other.
• Restrictions on the property such as public road restrictions, water easements, utilities restrictions, among others.
• Information about mortgages, liens and encumbrances.
• All types of annotations the property may have, advising you about its importance or potential for future repercussions.
• Property taxes due to date, such as municipal taxes.
• Check if the survey plan refers to the exact property you intend to acquire.
• Search in the National Registry

Most Costa Rica properties are registered in the National Registry with their own Folio Real (registration number) in a centralized database at the offices of the Public National Registry in San José. The Folio Real is a unique number to each property for identification. A title search in the National Registry with the property’s Folio Real should be performed for any property under consideration. A search will show you the property area, ownership, boundaries, location, mortgages, liens, encumbrances and any annotation. 

 Escritura de Traspaso (Transfer of Deed)

The Escritura de Traspaso contains all important information regarding the real estate transfer, including information about the buyer and seller, the property and any terms of sale, including contingencies, easements or financing. A Public Notary (attorney) prepares this document and records it at the Public Registry of Property and in his/her Notary Book (Protocolo). After the deed is signed at the closing, the attorney immediately records the deed at the Public Registry for annotation, which protects the property against any third parties. Secondly, the property is recorded under the name of the new owner.

Plano Catastrato (Survey Plan)

The Cadastral Office holds all Costa Rica property surveys, and it operates separately from the Public Registry. Every property must show a survey recorded at the Public Registry for successful ownership transfer. Because the Cadastral Office often has outdated surveys on file, we recommend obtaining a new independent survey plan and registering it with the Cadastral Office before purchasing the property to eliminate potential disputes about property boundary lines at closing time.

Purchasing a Property In Your Name

This process occurs when an individual or group of people acquire a property in their personal name(s). The property will be re-registered in the National Registry in the name(s) given.

Purchasing a Property In a Corporation

It is common practice to purchase property in Costa Rica through a newly formed corporation or by changing the ownership of an existing corporation. Establishing a corporation in Costa Rica is not complicated, but does require the advice of an experienced real estate agent and attorney who are knowledgeable of the protocols and requirements involved. There are some obligations such as annual tax declarations  and other corporate responsibilities including annual fees and reporting that can be explained by your real estate professional and or attorney.

In the future if you decide to sell the property, you need not transfer the title to the land - you can simply sell the company with all its registered assets, i.e. the land. 

Mortgage Financing

Please check out our Financing in Costa Rica page for great information on financing options in Costa Rica

Money

The most common means of getting the initial deposit and the balance of the money into Costa Rica to purchase a property is by wire transfer. Typically, the Buyer through the advice of their real estate professional will use the services of an Escrow Agent and Escrow Account.

Standard Closing Procedures

There are three standard procedures for closing on a property being purchased in Costa Rica.

(1) Buyer and Seller Present:

The most common procedure for closing on a property is that both the Buyer and Seller are in the country and have decided on an agreeable location to meet and close. Typically, the Buyer’s lawyer will have prepared the transfer deed and it will have been reviewed by the Seller’s lawyer. The deed will be read to and explained to the Buyer in their language of choice. Both Buyer and Seller will sign the deed. The Buyer will make payment via wire transfer performed by the Escrow Company. The notary will then register the changes to the property ownership in the National Registry.

 (2) Power of Attorney:

If a person is to leave Costa Rica for some reason and has investments or interests of any kind in the country, it is recommend leaving a person of trust in charge of those interests for as long as he/she is away. The legal procedure to do so is by granting a Power of Attorney. The Power of Attorney is a legal instrument by which a person (the principal) gives another (the agent) the legal capacity to act on his/her behalf according to the extension that the Power itself allows him/her. There are different kinds of Powers of Attorney:  

Full Power of Attorney: This Power allows buying and selling any goods, accepting mortgages on properties, acquiring debts, giving any good as warranty, signing checks, etc. It is a Power of Attorney in which the agent can appear before almost any authority on behalf of the principal and act in almost any kind of situation in his name. 

General Power of Attorney: This Power of Attorney is to be used for administrative purposes. It’s the power given usually when you have a business and you need someone to manage that business on your behalf, allows hiring help, signing invoices and, if not limited to the contrary, performing any activity considered normal for the business or company. 

Special Power of Attorney: It allows the agent to perform only a specific act or sequence of acts, each one specifically described in the Power. Any other act that is not enclosed in the Power itself cannot be performed legally. 

As a general note to powers of attorney it is important to emphasize that when a principal gives the power, he/she can state any limitations he/she will consider appropriate, depending on the needs and trust he/she has in the agent. 

 (3) Out of Costa Rica:

Though not a very common practice it is possible to close on a Costa Rican property outside of Costa Rica. If either the Buyer or Seller is unable to be in Costa Rica to close, and have not left a Power of Attorney, they can have a Costa Rican notary come to where they are and sign the transfer deed in the notary’s protocol book in the presence of the notary. The cost to have the notary perform this service is born 100% by the party that requires this service. 

Closing Costs

As briefly mentioned above, the closing costs to purchase a property in Costa Rica varies depending if you are purchasing a property by way of purchasing a Costa Rican S.A. with the property as an asset of the company, or a straight transfer of ownership from the Seller to the Buyer as an individual.

Standard closing cost for the transfer of ownership from the Seller to the Buyer as an individual or corporation will be approximately 4.2% of the actual purchase price of the property. This fee is a combination of legal and notary service fees, as well as land transfer taxes and government stamp fees.

Who Pays for the Closing Costs?

The property buyer pays closing costs while the seller looks after real estate fees and taxes. 

Additional Observations Related to the Closing

Sometimes the property you are purchasing has been mortgaged previously by the Seller. This situation usually doesn’t represent any problem and your lawyer will inform you of it at the time he does the Due Diligence. Sometimes, when there’s a mortgage on the property, it is cleared prior to the Closing; in some cases it is paid/removed at the same time and even in the same Deed as the Transfer Deed. Either scenario represents no problem because your lawyer will insure against any complications. The cost to remove the mortgage is paid by the Seller, and the Purchaser has the right to choose the lawyer.

Annual Land Taxes

Presently in Costa Rica annual land taxes are 0.25% of the registered land value of your property. Annual land taxes are paid to the local municipality.

Insurance

Insurance in Costa Rica is a government monopoly. All policies are offered by the Institute Nacional de Seguros (INS). There are a number of private entities that sell INS policies. A standard “All Risk” policy will cost 0.28% of the construction cost of the home. Additionally, both Liable Insurance and Home Owners Insurance are available and costs vary depending on the amount of coverage required.

Property Management

As you may not be here to enjoy your home full time, you may wish to employ a property management company to pay your monthly bills; water, electricity, phone, Internet, cable or satellite TV. Additionally, you may require the services of a property management company to clean your home, maintain your gardens, cut your grass, clean your pool, and fumigate. We can recommend proven professionals for this service. As you may also wish to generate income from your home while you are not in residence, both long term and short term rentals can be obtained through the property management company.

Costa Rica Residency

Laws regarding residency and immigration in Costa Rica have had some recent important changes. And they will continue to change as more and more people consider Costa Rica as their permanent residence.  For the most up-to-date information on residency laws and processes as well as assistance with acquiring residency, relocation and much more, please see our Residency & Immigration page.