Saturday, 04 May 2013 20:40

Buyers Guide to Real Estate in Costa Rica

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Introduction

The acquisition of real estate is one of the most significant investments a person makes during his or her lifetime. During the due diligence process care and patience must be used in order to avoid common mistakes.  Language barriers, unfamiliarity with local laws and procedures and lack of a true Multiple Listing Service are among the reasons why you should get proper and trustworthy counsel during your real estate transaction. This means you should deal with both an experienced professional Realtor and a seasoned Real Estate Attorney.  

Property Types

Titled Property - The most comprehensive form of property ownership in Costa Rica is titled property.  Fortunately for foreigners, ownership rights and responsibilities 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.

Property under Condominium Regime – Property can be owned in either a horizontal condominium (subdivision) or a vertical condominium (multi-family housing).  In Costa Rica, there is a specific law that in combination with other legal dispositions regulates all conditions required in order to set up a condominium.  Each Condominium development has its own bylaws containing all of the restrictions, limitations and privileges that can be enjoyed by individuals who purchase a property in 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.

Concession Property in the Maritime Zone - 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 Maritime Zone is divided into two areas:  

Public Area - The first 50 meters 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.  It is considered the Public portion of the beach.

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.

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 Sale/Purchase Process

Once the Buyer has identified a property they wish to purchase, 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.  This is most likely negotiated with the professional help of your Realtor.  In some cases the parties choose to go further and have their Attorney’s prepare The Purchase and Sale Contract.

Step 2: Engage the services of an Escrow Agent who will hold all funds deposited by the Buyer and remit the proceeds of the Sale to the Seller at the closing date in accordance with the Purchase and Sale Agreement.  All Costa Rican real estate transactions are required to be handled through a government sanctioned Escrow agent.  

Step 3:  A Title search is performed and the due diligence is performed to ensure all requirements of the Purchase and Sale Contract are fulfilled and the property is received free and clear of defects, liens and encumbrances.

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

Step 5: Record new transfer deed with the Public Registry

Basic Terminology

Here are some common terms used in real estate transactions in Costa Rica:

Folio Real - This is the property´s identification number as recorded in the National Registry of Real Property.  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; 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 had.  Properties with folio real numbers are recorded at the Public Registry where the chain of title from the properties inception to the current time is kept.

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 the official Notary Book and then submitted by the Notary to the Public Registry to record the transfer of ownership  of the property.

 

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 location in relation to know landmarks.  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 property ownership

For the majority of Real Estate transactions in Costa Rica the ownership is structured in the following 2 ways:

 

Ownership in your personal name and/or the name of your spouse or partner(s).  In Costa Rica you can own property in your own name or jointly own property with one of more person in their own names.  Easch individual will appear in the Public Registry of Properties as owners.

 

Ownership in a corporation – Many foriegners Acquire Property either through the purchase of the shares of the corporation who owns the property or by forming a new corporation and transferring the property ownership into the new corporation at the time of closing.

Costs Associated with Purchasing process

Transfer taxes and stamps: In order to record the transfer of the property a 1.5% shall be paid for transfer taxes and .84% for other stamps at the Public Registry.

Attorney’s Notary Fees:  1.25% 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.  Property taxes should be paid in full and pro-rated on the closing statement to the closing date.

Escrow Services:  $400

New Corporation set up:  $550

Conclusion

The real estate buying process in Costa Rica should be stress free and your time should be spent on making sure you find and choose the property that is going to best fit your personal needs.  By insisting on working with professionals you will have the confidence you need to make a well informed and safe investment that will give you years of enjoyment to you and your family.

Read 93794 times Last modified on Tuesday, 15 October 2013 21:49

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