Costa Rica Real Estate Law
Real Estate Law
Costa Rica Real Estate Law: Equitable Ownership and Public Property Records
Costa Rica Real Estate Law recognizes the full right to ownership of the real property to nationals and foreigners equally. With a centralized property recording system, the government operates a public National Registry which provides a clear view of the exact status of specific properties, including details such as ownership of Costa Rican title to land, existing liens, annotations, and/or mortgages among others; which might exist against the property.
Steps to Purchase a Property in Costa Rica
Even though it is a must to consult a qualified Costa Rican real estate lawyer, the following basic step-by-step procedure towards purchasing property in Costa Rica will allow you to better understand the details involved:
I. Costa Rica Title Search
Once you have identified a specific piece of property of your interest, please request the seller to provide all the basic information of the property including the complete name of the registered owner, property title number, and copy of the registered survey map. With that information, your specialized Real Estate Attorney and Notary Public should carefully review and analyze the results retrieved from the initial Costa Rica title search in order to clearly establish the status of the property towards a possible purchase.
II. Purchase Offer or Option to Buy
In most cases, if the title search results are positive, it is suggested to have your Costa Rican real estate attorney draft an Option to Buy to place an earnest money deposit. The Option to Buy will set forth the conditions and the terms of the offer to the seller. If the parties agree mainly on a specific price and on a timeframe to achieve this, the agreement will be signed, a deposit will be made with a Costa Rican escrow or with the seller, and once the obligations are reached, the parties will be ready for the next step.
The buyer’s Real Estate Lawyer who is also a Notary Public is normally responsible for drafting a public deed acting on behalf of the State. Even though Notaries are supposed to be impartial, and in that sense, you could have the seller’s Notary conduct the closing in practice, it is safer to have your own Costa Rica real estate attorney protecting your interests and reviewing all the certifications, deeds, and other necessary documents required for the transfer to take place.
In our opinion, it just does not make any sense to purchase any property directly under your name if instead you can, for asset protection purposes, transfer it to a Costa Rican limited liability corporation under your control. In this sense, take into consideration that currently the minimum processing time for a Costa Rican corporation is between 2-3 weeks, so if you know that it is just a matter of time and finding the right property for you to invest in Costa Rican real estate, please proceed to incorporate prior to signing any document. We normally have Costa Rican companies in stock so that our clients can purchase property directly under a Costa Rican shelf company; however, if you plan with time, you can avoid higher fees and start your own new Costa Rican entity which will give you many regulatory advantages following proper Costa Rican real estate law considerations.
Once the public transfer deed is properly signed by both parties, the acting Notary will submit the document for registration in the National Registry and, normally within a period of two weeks, will provide an official registered title to the new owner.
- Closing costs: real estate transfer tax, stamps, and legal fees.
- Special regimes exist for certain beach properties located in the Maritime Zone
- It is important for you and your lawyer to have a clear understanding of existing easements in selected properties.
- Develop a clear understanding of the entire Costa Rican real estate law process with your Costa Rican real estate attorney to avoid inconsistencies.
- Costa Rican Title Insurance is available through us from recognized US American Title companies.
Our firm has extensive experience and understanding of the existing risks in real estate investment, a combination of Costa Rica’s safe and respected registry with a professional Costa Rican real estate attorney will ensure your interests are protected.
Basic Checklist towards Purchasing Property in accordance with Costa Rican Real Estate Law
Request the property number along with the survey map number.
- Have your Costa Rican real estate lawyer conduct a Costa Rican title search.
- Check the status of property taxes and municipal taxes.
- Arrange property inspection by a qualified engineer or specialist.
- Follow the instructions of your trusted Costa Rica Real Estate attorney.
Get Professional Legal Advice on Costa Rica Real Estate Law!
Costa Rica Real Estate Frequently Asked Questions (FAQs)
Disclaimer: The following questions are a collection of real questions formulated to GLC over the years; which we believe represent some of the most common questions that individuals interested in purchasing real estate in Costa Rica normally have. Our answers ARE NOT in any way legal advice, they are just general information provided as a reference so that the general public might obtain a better understanding of the process of buying property in Costa Rica. Any unauthorized copying, alteration, distribution, transmission, performance, display or other use of this material is prohibited. As Costa Rican lawyers, we are not allowed by the Costa Rican Bar Association to provide legal advice without the prior existence of a client/attorney relationship. In order to obtain legal advice for your specific case, we encourage you to seek specialized legal advice. After the Title Search results positive, we proceed to draft the Property Transfer Public Deed so that both parties can agree on the exact acquisition terms and conditions. After the execution of the public deed, we file a testimony or official copy of the transfer at the National Registry for it to have public effects. Depending on the exact transaction the National Registry should record the changes and issue a new property title in approximately 1 week.
1. I am interested in purchasing a house in Costa Rica in a Condominium in Guanacaste. I need assistance with the formation of an LLC and with the purchase of land/house. Could you help?
- Property Number
- Rightful Owner
- The existence of Liens/Encumbrances
- Pending Lawsuits or Disputes
- Declared Value of the Property
- Transactional History of the Property and Origins of the land
An experienced Real Estate attorney will be able to review all that information and properly assess the exact status of the land.
In GLC we provide our clients with a written legal opinion as a result of the Title Search which indicates if we advise our client to proceed and purchase the property and/or if certain adjustments are necessary prior to payment.
After the Title Search results positive we proceed to draft the Property Transfer Public Deed so that both parties can agree on the exact acquisition terms and conditions. After the execution of the public deed, we file a testimony or official copy of the transfer at the National Registry for it to have public effects. Depending on the exact transaction the National Registry should record the changes and issue a new property title in approximately 1 week.
It is also very common for buyers to previously form a local corporation or company, normally due to its simplicity the recommended type of entity is called an SRL (Sociedad de Responsabilidad Limitada). The SRL has been compared to an LLC (Limited Liability Company) in Common Law. The SRL offers all the advantages of the more traditional SA (Sociedad Anónima) of the limited liability, asset protection from personal claims and/or lawsuits plus the fact that an SRL can be entirely managed by a single Manager or Director instead of appointing a full Board of Directors that normally for such transactions is not necessary. Foreigners are allowed to control 100% of the stock with no need for Costa Rican citizens to be part of the company except for the inclusion of a Resident Agent, who is normally the Notary Public that formed the company for the client. The Resident Agent’s sole role is to receive legal notices on the absence of the Manager of the company, in that sense the Resident Agent does not have any power over the company.
The company formation process is very straightforward and with GLC it’s entirely conducted via email and the registration is achieved in a record time of 24-72 hours after filing. The client is not required to visit the country for the initial formation and it’s highly advised to form the entity prior to visiting the country so that it can be ready to open a bank account or to purchase the asset.
2. My husband and I hope to purchase a property in Costa Rica which we would like to finalize in the next month. The current owners have an attorney helping them where they live. They are selling it to us for US$200,000.00. Can you please provide information regarding how this transaction would work? We will be starting a corporation to purchase it and already have a local who lives in the area who has agreed to be on our corporation. Also, is there a way to make payments instead of sending the money in full and if so, what do we need to do to proceed in that direction? Lastly, what would the cost be for your firm to handle the sale of the property?
Answer: All Real Estate Closings in Costa Rica have to be handled by a specialized Real Estate Law attorney who has to be a Notary Public.
Having said that, it’s customary in such transactions that the Buyer’s attorney will handle the transaction in order to protect the interests of his client as he or she will be the paying party. So normally the Buyer will have to pay the legal fees and the registry expenses of the transaction, at times the Seller will hire his attorney in order to supervise the transaction.
The first step in a real estate transaction is to obtain the property number or to have your attorney look for it in the National Registry by conducting a Search with the complete name or identification number of the Seller or the cadastral plan number.
Parallel to the Title Search on the property, the client decides with the advice of the attorney if it is convenient to purchase the land under his name or if it is better to form a local company. It is important to clarify that there is no need to have a Costa Rican as part of your corporation that is a Myth. Foreigners are allowed to control 100% of the stock with no need for Costa Rican citizens to be part of the company except for the inclusion of a Resident Agent, who is normally the Notary Public that formed the company for the client. The Resident Agent’s sole role is to receive legal notices on the absence of the Manager of the company, in that sense the Resident Agent does not have any power over the company.
The Buyer can assess the option of opening a Corporate Bank Account with his newly formed SRL or SA in Costa Rica so that he or she can wire the funds from his country of origin to the country so that payment for closing can occur. In transactions for significant amounts such procedure might result cumbersome as local banks are hesitant of receiving large sums in new accounts for nonresidents with no history at the bank, such situation is normally solved by using a local registered escrow agent. Contrary to countries like the United States in which attorneys can act as escrow agents, in Costa Rica formal registration is necessary to accept funds from third parties in a bank account.
Using an Escrow Agent and in coordination with your attorney, you will be able to safely send the funds and their disbursement to the Seller will only take place simultaneously to the signature of the public deed prepared by your attorney confirming that the land has now been transferred under your control.
If the purchase requires financing, a mortgage can be registered in favor of the Seller and that normally implies that for such deals it is the Seller’s attorney who directs the transaction and the Buyer’s attorney plays a secondary role of supervision and vigilance.
Legal fees for Real Estate Transactions are established at 1.25% approximately of the total cost of the transaction and Registry Expenses account to 2.4% approximately of the total cost of the transaction, so it is safe to say that the total cost of the closing is around 3.65% of the total cost of the transaction.
3. I am looking into buying property in Costa Rica and having a house built on it. Please contact me.
Answer: Part of the Title Search that we conduct at GLC is directed towards the specific existing zoning regulations that apply to the property of our client’s interest. It is important to understand what percentage of the land is buildable and what other restrictions could affect the plans of the Buyer prior to purchasing the land. Costa Rica has a centralized National Registry in which a very high percentage of the properties are registered and their title is public, our real estate attorneys visit the National Registry in order to study the history of the property so that we can adequately assess its status and provide a written legal opinion about it.
Besides conducting the search at the National Registry, it’s also mandatory to visit the corresponding Municipality where the property is located to analyze their Regulatory Plan which is supposed to specify the allowed use of each property located in that jurisdiction.
4. I placed a deposit on a villa which was to be completed Aug 2015, but it wasn’t and I’ve been trying to get my deposit back ever since. The developer is telling me its nonrefundable. Is this something your firm can advise me on or help me get my money back?
Answer: GLC has more than 20 years of experience in Real Estate Law in Costa Rica including the correct handling of legal claims and disputes that arise in this field. It is important to understand the difference between a contract breach and fraud. The Costa Rican legal system separates Criminal Action from Civil Action, so it is mandatory to evaluate the exact legal nature of the specific case.
If the client can demonstrate that the developer and/or seller deliberately deceived him or her intending to obtain financial gain then the claim can be accepted at the corresponding Prosecutor’s Office and then treated like a felony in relation to the Costa Rican Criminal Code which clearly determines which actions and/or omissions can be considered crimes with all their implications including jail time.
However, most real estate deals in Costa Rica that go wrong are not considered fraud, they are just a breach of contract in which one of the parties did not honor his or her obligations. If this is the case then the innocent party is entitled to file a civil lawsuit at the corresponding court to claim damages. GLC highly recommends not signing any Option to Purchase Agreement or putting down a deposit before a specialized real estate attorney can carefully review the scenario of what would happen in a possible breach. It is important to determine the credibility of the developer and to protect your interests in purchasing real estate.
5. We have located property in Costa Rica. Owner is willing to finance. He gave us the following two options to purchase. A) By means of a sale option (Promise of Sale) recorded in the Registry, until the interested party cancels the entire amount, then they would perform the corresponding transfer. B) Transfer of real property with mortgage. How should I proceed?
The other and more secure possibility is to transfer the property to the Buyer and simultaneously record a mortgage in favor of the Seller. This is the safest method for the Buyer as now he or she is the rightful owner of the property and at the same time, the Seller/Creditor is protected by the guarantee of the mortgage in the event of a default in payment from the Buyer.
6. I want to start an ATV tour business so do I need to get a company setup along with the banking infrastructure required?
Answer: Yes, the article #8 of the Costa Rican Commerce Code establishes that for foreigners to be able to conduct business in our territory. It is necessary for them to be residents for at least 10 years, so the legal way to do it is by incorporating a local company as it is authorized to conduct business in Costa Rica and beyond.
7. Should I put the land purchase under the company or personal?
If the client decides to use a company for multiple purposes, he or she will be expanding the liability of one activity to all the assets owned by such company.
8. My wife and I are looking into purchasing 1/10 fractional ownership of a new villa that is part of a luxury retirement community in Costa Rica. We have the contract and are looking for a Costa Rican lawyer who can examine the contract and give us advice on any issues you might see. We want a lawyer to examine the contract before we purchase the real property. Can you help?
Answer: Costa Rica does not have a specific law for Fractional Ownership, that type of ownership is not common among Costa Ricans; however, it has become relatively popular among the expat community and specifically for second homes.
Having said that, it is possible to become a fractional owner in Costa Rica for that it’s necessary to retain the services of a specialized real estate attorney to carefully review the fractional ownership contract and determine its adjustment to the local Costa Rican real estate laws.
One important aspect that we highly recommend in order to prevent losing money is to first hire your real estate attorney to review the legalities and only after he or she has conducted the necessary title search and due diligence sign any agreements or make any payments.