Navigating property ownership in Costa Rica, especially along the Caribbean coast, can be complex. While relying on legal guidance is crucial, it’s equally important to understand local regulations and potential risks. Our guide addresses common concerns, empowering you to make informed decisions and safeguard your investment. With Costa Rica’s functional system, many foreigners have successfully invested here, and you can too with the right knowledge. Educate yourself to streamline your property for sale and ensure your investment aligns with your needs. Embark on your real estate journey with confidence along Costa Rica’s vibrant Caribbean coast.
In Costa Rica, foreign nationals have the right to own titled property under their own names, enjoying equal rights to Costa Rican citizens. Titled property, similar to fee simple ownership elsewhere, is documented through two key instruments: the “escritura” (title deed) and the registered survey map, or “plano catastrado.” These documents are recorded in the national registry, or Registro Nacional, and outline ownership details alongside any encumbrances like liens, mortgages, or judgments.
The escritura confirms ownership and is accompanied by the plano catastrado, which delineates the property’s measurements, dimensions, and geographical coordinates. Additionally, the plano catastrado provides relevant information regarding any restrictions, such as designation within IDA Land or protected areas like national parks and reserves. It’s important to note that while the escritura and plano may differ, they pertain to the same property. The plano, however, does not establish ownership and may reference a previous owner’s name. Ownership records are maintained separately in the national registry, necessitating a thorough examination of both documents to ensure alignment between ownership and mapping.
Efforts are ongoing within the registry to streamline these processes. Upon initial titling (original inscription) of a property, a three-year “incubation period” follows during which third parties can assert claims. However, any such claims require substantial evidence to challenge the title. Beyond this period, claims are subject to rigorous scrutiny and must demonstrate extraordinary circumstances. Claims must be filed within a ten-year statute of limitations.
Also known as “possession” land, unregistered land is prevalent in Costa Rica, particularly along its Caribbean coast. While many parcels remain untitled, this status doesn’t necessarily negate their eligibility for formal title. Some qualify, while others do not. In possession scenarios, it’s the legal recording of transactions that establishes ownership or possession rights, rather than a formal title. Historically, farmers and settlers held such lands without pursuing formal titles, instead relying on private documentation to assert their rights, delineate boundaries, and transfer ownership.
Properly recorded, these rights hold legal validity, are fully transferable, and can be inscribed in the national registry as fee simple title. Legitimate possession rights are often evidenced through a documented history of ownership, typically traced through private records such as a duly recorded bill of sale in a lawyer’s protocol book. Such documentation describes the property in relation to adjacent plots and identifiable landmarks, with pages from the lawyer’s protocol book subsequently registered in the national registry.
Conversely, there are cases of lands occupied and claimed by unauthorized settlers or “squatters,” individuals asserting ownership without formal documentation, merely based on occupancy. While Costa Rica’s homestead or precario laws provide some guidelines, distinguishing between legitimate and illegitimate possession can be challenging. In some instances, clear distinctions exist, while in others, they do not. Caution is advised.
In 1941, the government introduced the Ley de Informacion Posesoria, a titling procedure enabling landholders to register their possession lands. Many parcels have undergone registration via this process. Minimum requirements for obtaining registered title to possession land include a surveyed plot and a verifiable history of legitimate, uninterrupted possession for at least 10 years, with no disputes. Additional steps involve notarized statements from neighboring property owners and a judicial inspection, which, when facilitated by a lawyer, may take up to a year and cost between $1,500 and $3,000, depending on land size.
It’s important to note that unregistered possession lands cannot be subjected to liens or mortgages until recorded in the national registry. Some buyers may opt to initiate the titling process post-sale or make it a condition of sale or escrow. However, each case varies, necessitating a thorough understanding of property ownership history. While caution is warranted, numerous individuals, including foreigners in the Caribbean region, have safely purchased possession land.
Maritime Zone (ZMT) lands, are governed by distinct regulations. The Maritime Zone Law, officially known as Ley Zona Maritima Terestre 6043 or the “Concession Law,” was enacted in 1977. This law delineates the Maritime Zone as the 200-meter strip of land along the shoreline, measured from the average high tide mark. Owned by the state, the ZMT is jointly managed by local municipalities and the federal institution, ICT (Costa Rican Tourist Institute). The ZMT comprises two segments: the initial 50 meters, designated as the public domain or “public zone,” cannot be developed or claimed by private individuals, while the subsequent 150 meters, known as the “restricted zone,” can be legally claimed and occupied by private citizens through a concession application submitted to the Municipality.
Initially, the legal instrument granting the right of occupation is a “Permiso de Uso,” akin to a lease or “Arriendo,” which is registered with the Municipality via a concession application. In our Canton, the Municipality resides in Talamanca. Contrary to popular belief, these leases do not have a predetermined time limit; they are designed as an interim right of ownership until formal zoning and concessions are processed and registered. Claims of 99-year leases are inaccurate. As per the law, leaseholders have the right to occupy the land and construct temporary structures. However, building regulations vary among Municipalities. While constructions of various sizes and types have been permitted, certain risks are associated depending on the approach taken. Each occupant pays an annual “occupation tax” or “canon” to maintain their Permiso de Uso. Traditionally, these taxes have been relatively low, often less than $30 for a few acres. Nevertheless, many Municipalities are revising guidelines and increasing taxes.
Registered occupants can transfer their rights through a “Cesion de Derechos,” where the registered occupant relinquishes their rights to another person. Although the law does not mandate legal representation for lease transfers and concessions, most individuals purchasing land within the ZMT engage attorneys for assistance. While it’s possible to process paperwork independently and have attorneys notarize essential documents, understanding the process and ensuring follow-through until the transfer is recorded is crucial. The approval and recording phase often demands the most attention. Currently, there are over 800 pending transfers in the Talamanca Municipality, many of which have been pending for several years, primarily processed by attorneys.
Zoning and concessions involve the declaration of shoreline property sections as having “touristic aptitude,” rendering them eligible for traditional zoning facilitated through a Regulatory Plan or “Plan Regulador.” Once approved by corresponding institutions such as ICT, INVU, and the Municipality, occupants within the newly zoned areas can activate their concession applications and convert their Permiso de Uso into a Concesion—a permanent form of ownership outlined in the ZMT Law. While the land remains technically owned by the state, the Concession Contract, detailing the terms of the Concesion, is registered in the National Registry, affording the Concession holder more security with explicit rights for development, transfer, or mortgage. Concessions for residential and tourist projects are automatically renewable every 20 years, contingent upon adherence to the terms outlined in the Concession Contract—namely, respecting the public zone, fulfilling tax obligations, and developing in accordance with zoning regulations specified in the Regulatory Plan. New taxes are levied for each Concession, substantially higher than previous occupation taxes.
Despite considerable development within the ZMT, approximately 95% of coastal lands in the country lack approved zoning or Concessions. Since development is contingent upon property zoning, the majority of development within the ZMT is technically unauthorized. Additionally, since Concessions are only granted post zoning approval, the majority of leaseholders possess a Permiso de Uso rather than a Concesion. The central government acknowledges that zoning along the coastline has not kept pace with actual development permitted by local governments. In most cases, existing developments will be grandfathered in once zoning is eventually established.
The acquisition of rights to beach property entails a private agreement between the buyer and seller. Technically, the law prohibits the direct “buying and selling” of state domain. Hence, public transfer documents denote a nominal value instead of the actual purchase price. Costa Ricans or foreign residents with five years of residency can register beach property in their name. Conversely, other foreign citizens must register rights to their beach parcel through a Costa Rican corporation established by an attorney, a process typically completed within 45 days at a cost of approximately $600. While the corporate board of directors may include foreign residents, at least fifty percent of the corporation’s shares must be held by a Costa Rican resident. The commonly used corporation type is “Sociadad Anonima” or “anonymous society,” providing shareholders with anonymity. Typically, a prearranged agreement facilitates the transfer of shares to the foreign shareholder during property sale closure, resulting in the foreign shareholder holding 100% of the shares. These “bearer shares” are registered in a private registry, the corporate books. Although this procedure is widespread, some attorneys have devised alternative methods, such as holding shares in a legal trust instead of endorsing shares during closing. Most attorneys accommodate clients’ preferences, but it’s essential to comprehend the process before proceeding.
In 1992, The Ministry of Environment and Energy (MINAE) introduced a groundbreaking legislation known as The Law for Conservation of Wildlife No. 7317. This decree, enacted by the central government, provides landowners with the opportunity to designate their land as a “protected zone” while retaining ownership rights and permitting certain development and activities. This initiative extends to coastal lands, including the Maritime Zone. Under this arrangement, the administration of the permiso de uso shifts from the local municipality to the national government. While the usage rights resemble those outlined in Maritime Law, they are somewhat less restrictive in certain aspects. Unlike traditional zoning, which necessitates a Plan Regulador, this program requires a simpler instrument known as a Plan de Manejo or management plan for declaration and rights solicitation. The Plan de Manejo delineates the intended project and land usage, whether it be residential, tourism-oriented, agricultural, or serving other public and social interests. The designated land or protected zone is classified as a wildlife refuge or refugio. While the new law outlines basic guidelines for environmental impact and sustainable development, larger projects are mandated to submit more comprehensive studies. The objective of these refugios is to expand state protection over more lands while permitting low-impact development. Unlike maritime properties subject to concessions, refugios in the Maritime Zone operate under registered usage contracts with 10-year permisos de uso. These contracts are renewable every term by applying to the ministry every ninth year. Landowners are required to pay an annual fixed occupation tax or canon to MINAE, although refugios are exempt from the vienes imuebles tax on improvements such as constructions. This alternative has gained popularity among maritime property owners nationwide. Refugio rights can be fully owned by foreigners. However, it’s essential to assess the suitability of this option on a case-by-case basis and compare its benefits accordingly.
In certain scenarios, a prospective buyer may wish to secure a piece of land by making a down payment or acquiring an “option.” The finalization of the transaction may hinge upon the resolution of certain outstanding details or the fulfillment of obligations, yet both parties, the buyer and the seller, seek to formalize a tentative agreement. For instance, this could entail the need to re-measure the land to validate its boundaries or the seller’s commitment to carry out improvements before the closing. The option funds may either be remitted directly to the seller or entrusted to a neutral third party, contingent upon the specific circumstances of the agreement. It is imperative that option contracts be notarized by a qualified attorney, although they are typically not registered in the National Registry. Consequently, it is advisable for the buyer to provide a minimum deposit to safeguard against potential deviations from the agreement. Should the transaction fail to materialize, recovering the funds expended can prove to be challenging. Pursuing legal recourse through the courts is often a protracted endeavor and may not be worthwhile unless substantial sums are at stake. It is essential for the terms of the sale to be delineated within the option contract, including provisions for settlement in the event that the transaction falls through. Typically, if the buyer withdraws from the agreement without justifiable cause, they forfeit the option funds.
(Titled Land For Sale) In many land transactions, it is common practice not to disclose the actual sale price, but to declare a lower value in order to reduce taxes and registration fees. However, such a decision may not always be prudent. If there are any future claims against the seller or the government, or if you intend to mortgage the property, the recorded value will be the reference, not the actual price paid. Additionally, when reselling a property, explaining the significant difference between the asking price and the purchase price can be difficult. It’s also worth noting that if you intend to obtain an investor’s residence, which typically requires an investment property valued at $150,000, seeking legal advice before making a decision is advisable.
In Costa Rica, governmental oversight of the real estate industry is minimal. Nevertheless, the guidance of a seasoned real estate professional is indispensable for navigating various facets of your property acquisition. Consult with other expatriates and get a qualified answer for buying a plot on the Caribbean Side. Unlike their counterparts in more developed markets, agents in Costa Rica play a significantly larger role due to the less sophisticated nature of the system. With the absence of formal escrow companies, mortgage lenders, or banks facilitating transactions, agents shoulder increased responsibility. For instance, comprehensive research is imperative for all listings, particularly in rural locales, before properties are even considered viable options. In certain instances, field agents not only facilitate property viewings but also liaise directly with legal professionals, surveyors, property owners, registries, and oversee various intricacies until the transaction is successfully concluded. Acting as intermediaries between buyers and sellers, agents ensure that all pertinent issues are addressed and agreed upon prior to finalizing sale documents. Competence is paramount in all aspects of real estate transactions, especially in the context of Costa Rica. While the seller typically covers agent commissions, arrangements may vary, with buyers and sellers agreeing to split commissions in advance.
Note: Exercise caution when dealing with individuals encountered casually, such as bartenders, taxi drivers, or hotel owners—both Costa Ricans and foreigners—who offer property for sale. These individuals often lack the expertise and ethical considerations associated with real estate professionals and may prioritize securing a commission over safeguarding the buyer’s interests. Numerous properties in Costa Rica present challenges such as unclear ownership rights, undefined borders, or latent conflicts. Merely retaining legal representation may not suffice. A knowledgeable field agent well-versed in the area’s dynamics and property histories not only presents qualified options but also aids in resolving potential issues before legal proceedings. A reputable agent also serves as an educator, empowering clients to make informed decisions. Whether engaging a licensed agent or a casual intermediary, commission rates remain consistent. However, licensed agents uphold professional standards and reputations, whereas informal agents may be inclined to embellish facts to secure a sale.
Once you’ve identified the property you wish to purchase, engaging the services of an attorney or notary is crucial for executing the transaction. Similar to real estate agents, it’s customary for an attorney to represent both the buyer and seller. Selecting the right attorney is paramount, and it’s the buyer’s prerogative to make this choice. Just as important as selecting your agent! Seek recommendations from others who have had positive experiences and consider requesting client references. Since documents are typically in Spanish, ensuring your attorney can proficiently translate them is essential if you’re not fluent in the language. Only a state-certified Notary can authenticate a real estate transaction in Costa Rica. It’s worth noting that in Costa Rica, a Notary must also be a lawyer. However, some lawyers may not be Notaries themselves but work in conjunction with a partner who holds the official Notary status. This arrangement is common, but it’s crucial to clarify that all documents will be certified by your attorney or their partner.
The attorney’s primary responsibility is to draft the contract or “carta de venta.” However, before finalizing the sale document, the attorney must conduct due diligence to verify the property’s current registration status, including any existing liens, mortgages, and ensure all taxes and government fees are up to date.
IMPORTANT: It’s essential to understand that a lawyer may not address all issues in certain land transactions, whether they involve titled, untitled, or beachfront properties. Some issues may need to be addressed in the sales contract. In many cases, the lawyer may not physically inspect the property and may not be able to provide guidance on matters such as accurately describing physical access (which may differ from what is indicated on the survey map), verifying that the survey map aligns with physical boundaries like fence lines, or handling boundary disputes or usage agreements with third parties (particularly relevant for possession property). Additionally, addressing and guaranteeing water rights, managing existing tenants or crops, or transferring beach leases may require attention. The lawyer’s role typically concludes upon submitting the documents to the local municipality. However, who ensures that the transfer is approved? A competent agent will. Your agent plays a pivotal role throughout the entire process. Choose wisely, and remember, simply hiring a lawyer may not suffice!
Unless otherwise specified, it is customary for the purchaser to bear the closing expenses and transfer fees. Should the seller opt to engage their own legal representation, these fees become the responsibility of the seller. Below are the standard costs involved:
The state establishes a national fee, which is generally adhered to by most lawyers. However, fees may vary depending on whether you’re working with a lawyer in San Jose or a lawyer in a smaller town, and they may also reflect additional services provided by the lawyer outside of a typical transaction. The established fees are structured as follows: 1.5% of the sale price for the first million colones, 1.25% for amounts between one and ten million colones, and 1% for amounts exceeding 10 million colones. It’s important to note that one million colones is approximately equivalent to $2,000 US dollars.
The following fees specifically apply to titled property and its subsequent registration at the national registry. They do not apply to untitled or beachfront properties:
TRANSFER TAX: This is calculated at 1.5% of the declared value.
PUBLIC REGISTRY FEE: A fee of 0.50% of the declared value is paid to the registry for recording the necessary documents.
DOCUMENTARY STAMPS: Approximately 0.55% of the declared value is allocated for the purchase of stamps affixed to the documents.
The responsibility for collecting land taxes was transferred to local municipalities several years ago. Previously, under Tax Law No. 7509, property taxes, known as “vienes imuebles,” were levied at a rate of 6% of the declared value for private land, both titled and untitled. However, in May of 1995, this legislation underwent amendments resulting in a reduction of the tax. According to the updated law, No. 7729, property taxes are now assessed at a rate of 0.25% of the declared value. It’s worth noting that in many cases, lower values are declared than the actual selling price.
For maritime property or properties with “permisos de uso,” an “occupation tax” known as a “canon” is imposed, which is typically very nominal. For example, a one-acre beach lot with no structures may incur an annual tax of less than $50. Additionally, improvements such as houses are subject to property taxes based on the value of the construction, in addition to the canon. A medium-sized house on a small beach lot generally incurs an annual tax of less than $100.
Once a beach property has been granted a concession, which is only possible after an approved zoning plan is in place, the tax liability increases significantly. The amount payable largely depends on how the property was declared, such as residential or commercial.
Obtaining permission for construction (outside the beach zone) can be intricate and varies significantly depending on the property’s location. Development regulations for beachfront properties differ from those for private land (refer to the section on the Maritime Zone). While national building codes govern construction, their practical application differs notably between densely populated areas like San Jose and rural regions such as the Caribbean coast. Compared to the United States, building codes in Costa Rica are less stringent, particularly in rural areas where the process is relatively straightforward.
To initiate construction, property owners typically need to provide proof of ownership and a set of building plans endorsed by a Costa Rican architect. The architect conducts a preliminary study and develops an “anteproyecto” (preliminary project). Architectural fees generally range from 6% to 10% of the construction’s value. For larger projects, an environmental impact assessment may be required, along with studies for supporting infrastructure, which are at the owner’s expense.
For residential construction, a single permit is issued by the local municipality, with a one-time inspection conducted before commencing construction. In rural areas, follow-up inspections are infrequent. The architect assumes responsibility for ensuring adherence to approved plans. Additionally, property owners must install a proper septic system and arrange for a water supply. The permit application process typically takes a couple of weeks, excluding the time required to draft building plans.
In terms of cost, a moderately sized, furnished two-bedroom house can be constructed for approximately $50,000. Although simpler in design, these houses maintain decent quality. While some materials such as cement and wood are priced similarly to those in the United States, labor costs are notably lower.
The intention of the author is to provide insight into important considerations before contemplating a property purchase, whether it involves titled land, possession land, or beach land. It is imperative to note that this information should not be construed as a recommendation to invest in any specific category of land. While the content is thoroughly researched, the author does not claim it to be the sole source of information. It is crucial to understand that ownership rights are governed by Costa Rican law, and there are no guarantees implied regarding the risk-free nature of your investment. Additionally, this writing may not encompass subsequent changes in laws or regulations. Therefore, it is strongly advised to seek competent legal counsel in all cases. Find land for sale.
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