Property Ownership, Costa Rica, Overview
To download an Adobe PDF file that includes most of this information, click here. Used with permission of the Casa Canada Group, the Copyright holder.
1.Fifty-Meter Zone
The first 50 meters from high tide at the beach is public property. No permanent structure may be placed on this land, however it can be landscaped and temporary structures can be erected, for example in front of a hotel.
2.Municipal lease land – 150-meter zone
In the majority of the country, the next 150 meters from the 50-meter zone is owned by the municipality, and can only be leased. For a foreigner to lease this land, a Costa Rican must own more than 50% of the company doing the leasing. A foreigner cannot lease this land personally. A good lawyer can set up a company that will serve the investor’s purpose, and meet the law. There may be restrictions or zoning on the leased land. Ensure you have a lawyer check this before buying the rights to leased land. Leases are usually inexpensive, and the renewal fairly automatic provided the lessor keeps the lease in good standing.
3.Frontiers
Only Costa Rican citizens can purchase land within two kilometres of the national frontiers.
4.Title
Most land in Costa Rica is titled. Good lawyers will quickly check to ensure it has good title, or for a minimal fee it can be checked in the ARCR office where computers are connected to the land registry computers. Land that has not changed hands for many years may not be titled. If the title to the property is not registered, registration is difficult, complicated and expensive. The buyer may spend years in the court system sorting out other claims to the land.
If a piece of land is titled and registered for the first time (this includes a previous undivided interest registered as a separate parcel for the first time) claims may be made against the title for ten years. It is therefore dangerous to purchase or to accept as security land that has been registered for less than ten years.
The Central Registry for land in Costa Rica is computerized and similar to most places in North America. Top law firms and the Casa Canada Group have computers connected directly to the Central Registry and can search the title of land instantly from their office. Registry of mortgages and liens are much the same as in North America.
Title insurance to guarantee the title of properties can be arranged with Stewart title at a special price through the Association of Residents of Costa Rica.
5.Deposits
Deposits are not common in Costa Rica, as there are few trust accounts. When a deposit is given to a lawyer or realtor, the money usually goes into his or her personal account. If the completion of the property purchase is to be on an agreed date in the future, an option can be taken which gives the vendor a sum of money for which he guarantees a right to purchase for a certain period of time. The Canada Costa Rica Trust Company Limited in Casa Canada will hold funds in a trust account for a real estate, business or other purchase.
6.Options and contracts
Option and contracts to sell properties are legal, but cannot be registered at the Registry of Properties as a real right affecting a property. It is, therefore, possible that even if you have an option, a disreputable person could sell the land to someone else, leaving only the courts as recourse to recover the deposit.
7.Property transfer
There is a tax of 1.5% of registered value for the transfer of property. Total government tax, registration and stamp fees will run about 3.5% of the registered value of the property. When a property is purchased, unless specified otherwise, it is assumed the buyer and seller will split the cost of legal and transfer fees. If the purchase is cash, the purchaser has the right to choose the lawyer. If the vendor holds a mortgage on the property he has the right to choose the lawyer.
Legal fees and costs will be around 2% of the property-selling price bringing the total transfer cost to approximately 5.5% of the price.
8.Property tax
The municipality collects municipal government property tax. It is 0.25% of the registered value of the property. Houses with a registered value of less than ¢6,147,000 are exempt. There is also a local community government charge. This is based on the frontage of the property and varies in each area, but is not to be over $10 per month per residence.
9.Leases and Rental of Property
Great care must be taken when entering into a lease agreement in Costa Rica, as improperly drafted agreements may make it difficult or impossible to increase rents, and it can be very difficult to remove tenants from a property.
Regardless of the term specified on a rental or lease agreement, the terms and conditions will apply for a minimum of three years. If rental increases are not specified in the agreement it will not be possible to raise rents without the agreement of the tenant.
Rental increases may be included in a lease agreement, and may take place every six months. Rental increases of more than 10% in U.S. dollars each 6-month period may not hold up in court as legal.
10.Squatters
People who move onto a piece of property which they do not own, live there for a year and who improve the property by working the land and/or constructing a dwelling, may have a legal right to live there since they may have acquired a “right of possession”. Once acquired, this right of possession can be sold to others.
If a large piece of property is purchased it is essential that a watchman be hired to report any squatters to the police before they become settled. An employee hired to guard a property cannot become a squatter, but an employment agreement with the watchman is a good idea.
Information used on this page may contain data provided by ARCR and is used with their kind permission