Let us help you make the process easy!

If this is your first time buying real estate in Costa Rica don't feel overwhelmed by the process - simplify it by getting the right advice up front. The two biggest issues most foreign buyers face when they buy property in Costa Rica are: Language barrier and unfamiliarity with Costa Rica real estate laws. Both of these factors are quickly dealt with by having an experienced Costa Rica real estate agent on your team.

The Essentials

Good legal counsel and notary services: in Costa Rica there are many property restrictions and specialized laws related to maritime zones, environmental concerns and squatters. Ignorance of these laws can result in the purchase of a property with many legal problems if you do not do a thorough legal audit prior to purchase. Good legal counsel is essential to making sure you are protected from a Seller wanting to unload a property that may appear to be cheap but could have a lot of legal encumbrances that might not be obvious from a simple review of the registry.

Title Guaranty: a legal document granting the buyer free and clear title to the property in the event of a defect.

Escrow: unlike in the US, in Costa Rica escrow is defined as a simple financial service that prevents the 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 that they will receive funds at the closing.

Legal Issues and The Process

In addition to having the right legal advice and property buying protection, there are a number of real estate terms you should be familiar with before delving in to the Costa Rica real estate market.

Titled Property: The most comprehensive form of property ownership in Costa Rica is titled property. 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 titled property is very similar to the concept of fee simple title in the US. Basically, titled property gives the owner of that property the absolute right to materially own the property, use it, enjoy it sell it, lease it, improve it, etc., subject only to conditions outlined in the Costa Rican Laws. Buyers who purchase fee simple title have the most rights under to law to enjoy and use the property as they see fit.

Concessions in the Maritime Zone: 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 pre-determined period of time. The Estate through the respective municipality grants this right. 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:

Public Area: The first 50 meters measured horizontally from the high tide line. This zone is not available for ownership of any kind. No kind of development is allowed except for constructions approved by governmental entities.

Restricted/Concession Area: The next 150 meters. This area is 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.

Property under Condominium Regime: When US citizens think of Condominiums, they normally think of large apartments or townhouses. In Costa Rica, there is a specific law that in combination with other legal dispositions regulates al conditions required in order to set up a condominium. Each Condominium developments has its own bylaw containing all of the restrictions, limitations and privileges that can be enjoyed by individuals who purchase a property is such development." Ownership of property "in condominium" is fee simple ownership but specifically restricted to secure the interest of the condominium community set initially by the Developer and later by the Home Owners Association. 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 and others.

The Sale/Purchase Process

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 must follows when buying a property.

Step 1: Sign a Purchase/Sale Contract with seller

Step 2: Contact the Escrow Agent to protect the funds.

Step 3: Title research performed and Title Commitment issued (review if property is free and clear of defects)

Step 4: Closing - Execution of Transfer Deed or Endorsement of Shares.

Step 5: Record new transfer deed with the Public Registry

Step 6: Receive official Title Guaranty

Basic Terminology

While the purchase process may seem fairly straight-forward, there are some key words which a buyer should be familiar with. The following are the most common terms used in real estate transactions in Costa Rica:

Folio Real: This is the property´s identification number. It is a unique number assigned to each recorded property to identify it and distinguish it from others. This number is comprised of three parts where the first number indicates the province, the second is the number of the property itself and the last group of numbers indicates how many owners the property has or has had. Properties with folio real numbers are recorded at the Public Registry but should be checked for recorded and un recorded, liens, annotations, encumbrances and others, but most importantly hidden liens or vices in the chain of title.

Transfer Deed: (escritura de traspaso): This is the document that contains all of the stipulations regarding the transfer of real estate. This document must be prepared and by a Public Notary in his or her´s official Notary Book and then submitted by the Notary to the Public Registry to record the transfser of ownership of the property.

Power of Attorney (Poder): This document authorizes a person to act on behalf of another to perform specific actions such as the purchase of property. This is especially useful for clients that wish to close on their property without returning to Costa Rica. There are several aspects involved and should ask Stewart Title and[/or your real estate attorney.

Survey Plan (Plano Catastro): Except for certain minor exceptions, each recorded and titled property has a survey plan outlining the property and showing boundaries, size and ownership of the property. This survey must be validated through an approval process at the Public Registry as well as by the municipality in which the property is located in order for it to be valid and binding.

Structuring your transaction

There are different ways to purchase property, but must take in consideration the following in order to make the optimum decision for your particular scenario.

Acquiring Property directly: This is the normal and typical purchase process in which one or more individuals or entities acquire property directly and record the transfer deed at the Public Registry showing current and new ownership.

Acquiring Property through the purchase of a corporations: A common practice in Costa Rica is to acquire property through the purchase of an existing corporation that owns the property being purchased. There are several advantages as well as risks involved that you should go over with your real estate attorney in order to understand the potential risk/reward this transfer has.

Purchasing Through a Corporation: There are certain advantages of purchasing properties with controlled corporations instead of purchasing in your personal behalf. Again, you should confirm with your real estate attorney in order to put together the structure that best suits your personal needs.

The Costs (Closing and Ongoing)

Transfer taxes and stamps: In order to record the transfer of the property a 1.5% transfer tax shall be paid and an extra 1% for other stamps at the Public Registry.

Notary Fees: Notaries are required by law to charge a 1.25% fee to draft the transfer deed.

Property Taxes: Property taxes in Costa Rica are a 0.25% of the declared purchase price and must be paid quarterly or yearly at the local Municipality.

Title Insurance & Escrow: Ask Stewart Title or your Costa Rica real estate attorney about these services.

We hope this information has helped you to understand a little more about buying real estate in Costa Rica. We thank Stewart Title Costa Rica for providing much of the information this page was based on.