Real Estate Investment Information for Costa Rica
The Law
Practical Aspects
Closing and Costs
Property Taxes
Beach Front Property
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Most visitors to Costa Rica fall in love with this beautiful country and its friendly people. Lets face it, from idyllic tropical beaches, verdant mountains where the climate is always spring-like, to tropical rain forests with abundant flora and fauna, there is a lot to love. For some people the main attraction is the world class sport fishing. For others it is the numerous national parks and/or the numerous species of birds found here. Maybe its just the ideal climate and the slower pace of life.

Whatever the reasons are, many foreigners decide that they want to own a piece of Costa Rica. Those who are able may want to buy property and live here. Others may want a vacation property or a place for eventual retirement. Yet others may want to farm the rich land. The following is information meant to enlighten anyone seeking to purchase real estate in Costa Rica. If a buyer follows the proper procedures and uses honest and reliable agents and counselors they will have no difficulty in attaining their dream.

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The good news is that foreigners have the same absolute right to own real property in Costa Rica, as do citizens. Many countries have restrictions on foreign ownership of real estate but not Costa Rica. Here all people, Costa Rican or otherwise have the same legal rights, which are protected by the Constitution and reflected in the laws.

The legal system in Costa Rica is based in the so-called civil law system, which is derived through the Spanish Civil Code with roots in the Napoleanic Code. Property transactions under the civil law system differ considerably from those under the common law system, also called the Anglo-American system. For this season, it is crucial for a foreigner to have competent advice thought the course a transaction. Only after the procedures have been done properly and the title has been cleared of any liens or encumbrances and the chain of title has been traced to the actual seller, can the buyer can be assured of Good Title. If for any reason good title is not assured, the buyer should step away from the transaction. For this reason a buyer must be sure that they have good, honest legal advice. The best way to be absolutely sure that the advice that they are relying on is reliable is to work thorough an exclusive buyers agent, who will monitor the whole transaction and who has access to competent and reliable lawyers, surveyors, engineers, etc. Up until recently, buyers had to rely strictly on their attorney do the title search and no insurance was available. Within the last year or so, title insurance has become available. Rates for title insurance are 1-11/2% of purchase price, which is comparable to rates in the United States. It is still advisable to have a good lawyer for the contracts involved. Lets face it, the purchase of real estate is a major financial transaction and there is no sense in pinching dollars, thereby creating the possibility that all the bases were not covered. Why gamble with such an investment when a few more dollars will virtually eliminate any risk. A word of advice-before hiring a lawyer, make sure he/she comes highly recommended by someone who has used him/her and in whom you have complete trust. Never, ever rely on advice given you, by the seller or agents or employees of the seller or rely on experts recommended by them.

All titled property in Costa Rica is registered in the National Registry. If a property is not registered, it is untitled and should be strictly avoided. Almost all legal liens and encumbrances will also be on file in the Registry. After properly researching, a lawyer or title company will uncover all registered liens and encumbrances which can be eliminated before closing or can be lived with in the case of easements such as rights of way or construction restrictions, etc. If you decide that any easements or restrictions are going to ruin or interfere with your intended usage of the property, you can back away. Some factors, which will not show up in the Registry, do exist. One of these is squatters. Squatters have legal rights and legally ousting them takes judicial intervention. Without going into details of the law, suffice it to say that, under most circumstances, one does not want to purchase property with a squatter problem. The longer the squatters have been there, the harder it is to get rid of them and the process could take years. If the squatters have been in possession of the property for 10 years or more they have untitled ownership which can be titled by the Courts. Prior to the ten years, an owner can be compelled to reimburse squatters for any improvements they made to the property. Do not buy into a problem. Thoroughly inspect your property for squatters prior to purchase and be sure your lawyer includes an anti-squatter clause in the agreement of sale. Once you purchase a property, especially a large rural tract, it is advisable to "contract" a caretaker to guard against encroachments. This is not that expensive, especially if the caretaker's contract allows him to partially farm the property. It is important to have a written contract with the caretaker in order to prevent him from ever asserting squatters rights himself. For homes, lots, and urban land, squatters are less of a problem. However the property should be inspected regularly either by the owner or an agent if the owner is unavailable. Getting rid of squatters in easiest if action is taken within the first three months.

One other encumbrance, which can only be detected by a visual inspection of the property, is the case of unregistered leases. Leases can be registered but most are not, especially in the case of residential ones. Make sure your lawyer guards against unwanted tenants with an appropriate clause in the agreement of sale. Inspect the property as immediately prior to closing as possible.

Hopefully, we have not presented a negative a picture about purchasing and owning property in Costa Rica. Our purpose here is to advise prospective buyers how to avoid problems, not to discourage anyone from buying. All in all, Costa Rica is a wonderful, fun and enjoyable place to live. Just make sure you have competent and trustworthy advisors.

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Just as anywhere, you want to be sure that the property you see is the property you are getting. If there is a question at all, you should have a survey done. Likewise, you may want to have an engineer check buildings for defects.

A buyers agent will be happy to arrange for competent and trustworthy experts, as would a good lawyer. Do not accept any experts referred to you by the seller or agents of the seller.

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In the United States, it seems that, no matter where you live or how remote, utilities are readily and quickly available. This is not always so in Costa Rica. Most towns of any size will have electricity and water available. However, in more remote areas you may have to drill a well and, if you are not located near a main road, you may have to rely on a generator for electricity. Cities and larger towns will have sewage systems but in other areas you will have to depend on a septic system.

Phones can take months to years to obtain, even in the cities. You should buy a home or business with an existing phone. If you are planning to build on vacant land you should apply for a phone line with ICE (Costa Rica Institute of Electricity) as soon as possible. A faster way to obtain phone service is by purchasing a cellular exchange privately. A number of beeper and pager services also are available.

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C L O S I N G & C O S T S

At the closing various documents must be presented. In addition to the new deed, these documents include proof that territorial and municipal taxes and fees have been paid to date. The deed must be prepared by a notary. Since almost all lawyers in Costa Rica are also notaries, most likely your lawyer will be the one who prepares the deed. Each party pays its own attorney. The standard closing costs are generally split 50%/50% by the buyer and seller. Including a 3% transfer tax and other fees, one can calculate total cost by multiplying the sale price of the property by 5.28% and adding 3,195 colones. Each party will pay half. If a mortgage is involved, additional costs to the buyer amount to about 1.405% of the mortgage total.

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Taxes and fees are paid both to the municipality and the federal government. The amounts vary from place to place but are considerably less than one would pay in the U.S.A. Currently the property tax system is in a state of flux. The government is attempting to implement a system based on appraised value. Whether "appraised value" is actual market value or some percentage thereof, as in the U.S., is unclear. The primary proposal was for owners to pay 0.8% of appraised value yearly but this amount is expected to be reduced by the legislature.

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The Law concerning the Shore line – Terrestre or Shoreline Zone Law states that the first 50 meters above the high tide line is public property and nothing can be built on it. The next 150 meters can be leased for private use. All leasing is done through the municipality. Certain construction is allowed in this zone but at the termination of the lease ownership of any improvements reverts to the municipality. In most cases, some payment is made for the improvements. This law applies to islands also. The only exceptions to this law, where land within the so-called "maritime zone" is titled, date back to colonial times or can be found with certain urban property next to the sea.

Leases of land within the maritime zone are granted for from 5 to 20 years. The lease is registered in a special Concession Registry in the Public Registry and a yearly fee must be paid to the municipality for the duration of the lease to keep it valid. They are renewable through negotiation or as the parties may stipulate in the original agreement.

Leases in the maritime zone have certain restrictions concerning foreigners. To hold a lease personally, a foreigner must have lived in Costa Rica for at least 5 years. For a company to have title to a lease, it cannot have more than 50% foreign ownership.

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Condominiums, although relatively new to Costa Rica, abound throughout the Central Valley and certain beach areas. In addition to new units being built, conversions of older existing buildings from rental apartments to condominiums are taking place. Condominiums are very practical for someone who plans to spend only part of the year in Costa Rica or for someone booking to be an absentee owner of income producing property. On site security protects the property and its contents. Most condominium projects will also offer to rent units, with the owners consent, during the time they are vacant.

Condominium law in Costa Rica grants this type of property special status. A special Horizontal Property Section of the Public Registry exists for registering condos. Just as in the case of any type of property, condominiums must be title searched for any liens or encumbrances. The buyer should also become thoroughly familiar with the condominium regulations, which are in the deed. These regulations set forth the rules of condominium management and procedures for handling relations between the unit owners. They also set forth any restrictions to which the units, thus the owners, are subject to. For example, they may restrict pets or business activities or the number of occupants. There will also be a maintenance fee, usually monthly, as well as a procedure for increasing the fee. Since unpaid fees are collateralized by the unit itself, a buyer must be sure that all such fees are paid prior to purchase. The best way to insure that no such debt exists is to obtain a certificate from the condominium manager that no past fees are unpaid and all are current.

As most everywhere, condominiums in Costa Rica are treated as real property and can be mortgaged.

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We hope that the foregoing information helps you understand how to invest in real estate in Costa Rica and what to expect after investing. It is not meant to be exhaustive and we stand ready to answer any further questions you may have. We also are here to help you find the property of your dreams and to assist you throughout the process. Let our Exclusive Buyer's Agents work for you. We want to make you happy.

The list of properties on our web site are not our exclusive listings and we have no greater interest in selling them over any others. They are included because they are properties which we know are currently for sale. We will continue adding to the list and will search diligently for other properties that suit a particular client's desires.

If you have any questions, please do not hesitate to contact us. We will answer any and all such inquiries and look forward to serving you in all ways possible.

Contact David Stokem or William McClure at:
Phone / Fax: (506) 290-7430
Address: Apdo. 11682-1000
San Josť, Costa Rica, Central America
P.O. Box 25216-3088, Miami, Fl. USA 33102-5216
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